Projections of such taxation notices come a day after Mumbai-based Sporta Technologies, which runs the popular fantasy gaming platform Dream11, filed a writ petition in the Bombay High Court appealing retrospective show-cause notices by the DGGI for FY18 and FY19.

Three senior lawyers who represent top online gaming firms said the DGGI is preparing notices across various firms in the industry, which include Games24x7, Head Digital Works, Junglee Games, Baazi Games and Mobile Premier League. Smaller firms such as WinZO are also on the list of firms that are likely to receive goods and services tax (GST) demand notices from the DGGI in the coming weeks, they said.

"Dream11 is in the process of receiving intimations for FY20 to FY22, which are likely to see compounding tax claims from the DGGI. The tax claim for the final year is likely to reach ₹40,000 crore, with a cumulative tax claim for these years amounting to ₹55,000 crore," one of the lawyers said, requesting anonymity.

A senior government official said that alleged short-payment of taxes, along with penalties, works out to around ₹55,000 crore in these cases, as the penalty applicable is 100% of the due taxes. However, the official underlined that it remains to be seen how far the government will go to recover the alleged tax dues, given the matter is making its way through the judiciary.

One of the lawyers cited above also said that a similar notice, to the tune of ₹19,000 crore, is expected to be received by Mumbai-based Games24x7 as well.

A third lawyer added that future tranches of intimations and subsequent notices to be sent by the DGGI are likely to add up to a cumulative tax demand figure of nearly ₹1.5 trillion, including the claim of ₹21,000 crore from Gameskraft last year, which amounts to around three times the revenue of the entire sector.

Dream11 declined to comment on the matter, while Games24x7 did not respond until press time.

Firms, however, are approaching courts to appeal these notices. The petition by Dream11, a copy of which was seen by Mint, said the DGGI claimed a total tax of ₹216.94 crore from Dream11 for FY18 and ₹1,005.77 crore for FY19. The DGGI, in its notices sent to Dream11 on 12 September, said that "there is no dispute that the amounts pooled in the escrow account is an actionable claim." The notice refers to the total amount collected by a company or its gross revenue as eligible for tax at a rate of 28%.

"The taxation issue in online gaming presently threatens to remind you of Vodafone's acquisition tax case against the Centre in 2012. There is no provision for retrospective claims on the new GST rate applied at the 51st GST Council meeting on 2 August, and the DGGI's filings are in violation of legal precedent wherein the Supreme Court itself has ruled in favour of fantasy and real-money games qualifying as games of skill. It is therefore unreasonable to club them under the same bracket as gambling and lottery, and subsequently charge them tax retrospectively—and most companies in the industry will seek judicial avenues with petitions, as and when their notices are served," a senior lawyer representing a top gaming firm said, requesting anonymity.

However, industry stakeholders said that companies are not contemplating seeking ministerial intervention in this matter, at least for now. A senior consultant for the sector said that most legal precedents point in favour of companies in regard to taxation claims, and the industry remains hopeful of negating such a tax burden.

Dream11's petition said the notices by the DGGI "are in infringement of Article 19(1)(g) read with Article 21 of the Constitution of India… and proposes to re-agitate the issue." The petition further said, "Rule 31A of the CGST Rules read with Section 15(5) of the Act suffers from excessive delegation, and imposes unreasonable basis for determination of value of supply, which is against the principle of Section 15 of the CGST Act… (and) would also constitute an unreasonable restriction upon the right of (Dream11) to carry on trade."

The DGGI's assessment is against what online gaming firms have paid as tax so far. Until FY23, the online gaming sector, which includes companies offering real-money games to users, paid GST at 18% of its net earnings. The DGGI, in its own notice, pegged the earnings of a firm, also referred to as 'platform fee', at 15% of the total amount collected by a platform. Most industry estimates peg this figure at around 10%. This suggests that while firms have so far paid around ₹1.8 as GST for every ₹100 earned, the DGGI's claim suggests that firms should pay ₹28 for similar earnings—an exponentially higher figure