DGGI Demands Rs 55,OOO Crore Tax From Online Gaming Companies: Report

The Directorate General of GST Intelligence (DGGI) sent out a dozen pre-show cause notices to online real money gaming (RMG) companies over goods and services tax dues of about Rs 55,000 crore. These include a GST notice of over Rs 25,000 crore to fantasy sports platform Dream11, possibly the largest indirect tax notice served in the country.

With more notices expected in the coming weeks, the total GST demand raised by DGGI from RMG companies might touch Rs 1 lakh crore, industry executives told ET.

Dream11 has moved the Bombay High Court against the pre-show cause notice issued to it.

The notices were issued after the increase in levy to 28 per cent on the total bet placed at entry level of each gaming session on RMG platforms.

“While Dream11 has been served a pre-show cause of over Rs 25,000 crore on Monday, a similar notice seeking GST dues of Rs 20,000 crore has been issued to Play Games24x7 and its affiliates, including RummyCircle and My11Circle. A pre-show cause notice raising a demand of over Rs 5,000 crore has been served to Head Digital Works,” one of the persons told ET.

“While Dream11 has been served a pre-show cause of over Rs 25,000 crore on Monday, a similar notice seeking GST dues of Rs 20,000 crore has been issued to Play Games24x7 and its affiliates, including RummyCircle and My 11 Circle. In the case of Head Digital Works a pre-show cause notice raising a demand of over Rs 5,000 crore has been served,” another person told ET.

Play Games24x7 runs a variety of online games where users can wager on the outcome. Among the company’s major products are fantasy game My11Circle, a competitor of Dream11, and online platform RummyCircle, a competitor of Gameskraft game RummyCulture.

Hyderabad-based Head Digital Works runs a number of real money games, including A23 Rummy as well as poker, pool and fantasy sports.

The DGGI’s Mumbai unit alone is said to have issued around seven pre-show cause notices between Friday and Monday, asking the companies why a GST demand shouldn’t be raised. “More pre-show cause notices will follow suit, including from Delhi, Hyderabad and Bengaluru units. These companies now have five to seven days to reply to the notices. Once their replies are studied, show cause notices with GST demand will be raised,” said one of the person cited above.

The Mumbai DGGI has been investigating RMG apps for more than a year and has sent them notices during the course of the probe. The companies have made representations before the authorities, contesting the GST levied. “However, notices have been served after the recent GST notification, which fixed the GST at 28% on the full face value of bets placed on online games,” said the person.