Dream11, headed by Harsh Jain, has apparently followed in the footsteps of Gameskraft by resorting to legal action in response to a show cause notice from tax authorities.
Dream11, headed by Harsh Jain, has apparently followed in the footsteps of Gameskraft by resorting to legal action in response to a show cause notice from tax authorities.
This notice pertains to allegations of evading goods and services tax (GST).
According to a report by Moneycontrol, Dream Sports, the parent company of the startup, has lodged a writ petition in the Bombay High Court. This petition aims to contest the show cause notice issued by authorities, which accuses them of evading GST and failing to pay the 28% GST on the nominal value of bets.
The report noted citing sources that the tax allegations against Dream11 are staggering, totaling a massive INR 40,000 Crores. If confirmed, this would constitute the largest-ever claim in the history of indirect taxation in India.
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For context, the largest claim thus far was the INR 21,000 Crores show cause notice issued to Gameskraft, a Bengaluru-based company.
Dream11 holds the leading position in the fantasy gaming sector in India, both in terms of its valuation and the number of users. The company's most recent valuation surpassed $8 billion, and it boasts a user base of over 180 million individuals on its sports fantasy platform.
In the fiscal year concluding on March 31, 2022, Dream11 disclosed a net profit of INR 142 crores, generated from an operating revenue of INR 3,840.7 crores.
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It is to be further noted that that the Directorate General of GST Intelligence (DGGI) issued a show cause notice of INR 21,000 Crores to Gameskraft last year. This notice pertained to alleged indirect tax evasion on a betting amount totaling INR 77,000 Crores, covering the period from 2017 to June 2022. In response, Gameskraft took the matter to the Karnataka High Court, which subsequently dismissed the notice.
The decision by the highest court was reportedly seen as setting a precedent, allowing the GST department to issue similar show-cause notices to approximately 40 gaming companies. Dream11 appears to be among the companies potentially targeted.
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Furthermore, the gaming sector faced a significant challenge when, earlier in the year, the GST Council decided to impose a 28% GST rate on the entire nominal value for real-money gaming transactions, which had a considerable impact on the industry.