Harsh Jain-led Dream11 has reportedly become the latest gaming startup, after Gameskraft, to take the legal route against a show cause notice issued by the tax authorities for alleged goods and services tax (GST) evasion.
The startup’s parent Dream Sports has filed a writ petition in the Bombay High Court challenging the show cause notice issued by the authorities for alleged GST evasion and not paying 28% GST on the face value of bets, Moneycontrol reported.
The report, citing sources, said that the tax claims against Dream11 amount to a whopping INR 40,000 Cr, which would make it the biggest such claim in the history of indirect taxation in the country. Currently, the INR 21,000 Cr show cause notice issued to Bengaluru-based Gameskraft is said to be the biggest such claim.
Dream11 declined to comment on Inc42’s queries on the matter.
Dream11 is the biggest player, both in terms of valuation and user base, in the fantasy gaming industry in the country. The startup was last valued at over $8 Bn and has over 180 Mn users on its sports fantasy platform.
It reported a net profit of INR 142 Cr in the financial year ended March 31, 2022 on an operating revenue of INR 3,840.7 Cr.
It must be noted that the Directorate General of GST Intelligence (DGGI) issued the INR 21,000 Cr show cause notice to Gameskraft last year for alleged indirect tax evasion on a betting amount of INR 77,000 Cr between 2017 and June 2022. Following this, the company approached the Karnataka High Court, which quashed the notice.
However, the Supreme Court stayed the Karnataka HC’s ruling earlier this month on a petition filed by the tax department.
The top court’s ruling was also said to have paved the way for the GST department to send such show cause notices to about 40 gaming companies. Dream11 seems to be one of the companies on this list.
The gaming industry has been hit hard by the GST Council’s decision earlier this year to levy 28% GST on full face value for real money gaming.
Soon after the announcement of the GST Council’s decision, gaming unicorn MPL laid off around 350 employees. Kavin Mittal-led web3 gaming startup Hike followed suit, slashing its workforce by 25%. The company attributed the layoffs to the government’s move to impose a 28% GST due to which it was staring at a 400% increase in tax burden.
Last month, Spartan Poker laid off 125 employees, or 40% of its total workforce. Besides these, real money gaming companies Quizy and Fantok shut and halted their operations, respectively.
Earlier this month, Inc42 exclusively reported that Gameskraft has decided to discontinue its fantasy offering, Gamezy Fantasy.
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