DGGI Drops Rs 55,000 Crore Tax Bombshell On Real Money Gaming Platforms: Report

The Directorate General of GST Intelligence (DGGI) has issued around a dozen pre-show cause notices to online real money gaming (RMG) companies for outstanding goods and services tax (GST) dues of about Rs 55,000 crore.

Among these notices is a GST demand of over Rs 25,000 crore to Dream11, a fantasy sports platform, making it possibly the largest indirect tax notice ever served in the country.

Industry executives anticipate that more notices will be sent out in the coming weeks, and the total GST demand from RMG companies could reach Rs 1 lakh crore.

Authorities issue an intimation of tax ascertained as payable through the DRC-01 A form, which is referred to as a pre-show cause notice in GST terminology. This notice is issued prior to the department serving a formal show cause notice.

The companies that have received the pre-show cause notices include Play Games24x7 and its affiliates, as well as Head Digital Works, Economic Times reported citing sources.

Dream11 has reportedly taken the matter to the Bombay High Court in response to the pre-show cause notice it received.

Dream11 has reportedly taken the matter to the Bombay High Court in response to the pre-show cause notice it received.

The issuance of these notices came after the recent change in GST rates for real money games, which increased the levy to 28 per cent on the total bet placed at the 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 source was quoted as saying by ET.

Play Games24x7 operates various online games where users can bet on the outcomes. Their major products include the fantasy game My11Circle, which competes with Dream11, and the online platform RummyCircle, which competes with RummyCulture, a game by Gameskraft.

Head Digital Works, based in Hyderabad, offers several real money games, including A23 Rummy, as well as poker, pool, and fantasy sports.

These notices require companies to explain why a GST demand should not be raised.

More pre-show cause notices are expected to be issued by units in Delhi, Hyderabad, and Bengaluru.

The companies have a deadline of five to seven days to respond to the notices.

Once their replies have been reviewed, show cause notices with GST demands will be issued.

For over a year, the Mumbai DGGI has been investigating RMG apps and has previously sent them notices during the course of the probe.

The companies have contested the GST levied through representations made before the authorities.

However, following a recent GST notification that set the GST at 28 per cent on the full face value of bets placed on online games, the new notices have been served.

If show cause notices are issued and the companies do not agree with the demands raised, they have the option to appeal before the adjudicating authority.

On 6 September, the Supreme Court stayed a previous Karnataka High Court judgement regarding a Rs 21,000 crore GST demand against Gameskraft.

The court has scheduled the matter for further hearing in three weeks and has requested the parties to submit compilations of judgements and related documents.

On 16 September, Gameskraft decided to shut down its super app product, Gamezy.