Directorate General of GST Intelligence (DGGI) is in the news a lot. A day earlier, DGGI had sent a tax notice of about Rs 17 thousand crore to casino operator Delta Corp. Now DGGI has its eyes on online gaming companies. According to the information, a dozen pre-show cause notices have been sent to online real money gaming (RMG) companies regarding GST dues of Rs 55,000 crore. According to the information, a GST notice of more than Rs 25,000 crore has been issued to fantasy sports platform Dream 11, which will be the largest indirect tax notice ever given in the country.
The special thing is that the government has made a plan of Rs 1 lakh crore to earn money from online real money gaming companies. Industry officials said more notices are expected in the coming weeks. DGGI can demand a total of GST up to Rs 1 lakh crore from online real money gaming companies. Payable tax intimation is issued by the authorities through form DRC-01A. In the language of GST it is called pre-show cause notice. This is issued by the department before issuing the show cause notice.
Dream11 moved the High Court
Those served pre-show cause notice include Play Games24×7 and its associates and Head Digital Works. Dream11 and Head Digital Works declined to comment on the matter. No official statement has come from other related companies either. According to industry sources, Dream11 has moved the Bombay High Court against the pre-show cause notice issued to it. The notices were issued following the recent change in GST rates for real money games increasing the levy on total bets placed at the entry level of each gaming session on RMG platforms to 28 per cent.
To which companies the notice was sent?
People with knowledge on the condition of anonymity said that Dream 11 has been sent a pre-show cause of more than Rs 25,000 crore on Monday, Play Games 24×7 and other partners including RummyCircle and My11Circle have been sent a pre-show cause of Rs 20,000 crore. A similar notice demanding GST dues has been issued. A pre-show cause notice demanding more than Rs 5,000 crore has been sent to Head Digital Works.
Earlier, the largest such tax notice was of Rs 21,000 crore, which was sent to Gamescraft. Against which the company had approached the Supreme Court. On September 6, the Supreme Court stayed the High Court order canceling the GST demand. The next hearing is expected to be held by the end of this month. On September 16, Gamescraft has shut down its superapp GameG.
This is just the beginning
According to the information, DGGI's Mumbai unit issued about 7 show cause notices between Friday and Monday, in which companies were asked why the demand for GST should not be made. According to the information, this is just the beginning. Pre-show cause notices are also to be issued by Delhi, Hyderabad and Bengaluru units. These companies now have five to seven days to respond to the notice. Once their responses are studied, a show cause notice will be issued along with the GST demand.
The investigation was going on for a year
Mumbai DGGI has been investigating RMG apps for more than a year and has sent notices to them during the investigation. The companies have also given representations to the authorities opposing the imposed GST. However, notices have been given after the recent GST notification, which has fixed 28 percent GST on the full face value of bets placed on online games. Companies have the option to appeal before the adjudicating authority in case a show cause notice is issued.
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