Recently, the Directorate General of GST Intelligence (DGGI) issued pre-show cause notices to twelve online real money gaming companies, with the overall tax demand amounting to Rs.55,000 Crores. Dream 11, the fantasy sports platform valued at over $8 Billion, has received notice for Rs.25,000 Crores, which will be the highest indirect tax demand made in the country to date if confirmed by the issue of a corresponding show cause notice. The parent company of the online gaming unicorn, Dream Sports is said to have promptly challenged the notice via a writ petition filed before the Bombay High Court.
Similar notices have been issued to Head Digital Works, Play Games24*7 and its affiliates, including RummyCircle and My 11 Circle, etc.
The decision of the GST Authority follows the Apex Court’s interim order dated September 6, 2023, wherein a stay was issued on the Karnataka High Court judgment setting aside the GST show cause notice issued against the online gaming company, M/s. Gameskraft Technologies Private Limited pertaining to tax evasion on betting amount of Rs.77,000 Crores from 2017 to June 2022. This matter is set to be heard next on October 10, 2023.
Last month, the Parliament amended the GST laws, thereby levying a tax of 28% on the full face value of bets in online gaming, casinos and horse race clubs. The amendments effectively remove the distinction between games of skill and chance. Following this, the states of Haryana, Goa and Arunachal Pradesh passed amendments to their GST laws. Similarly, the other states are also expected to give effect to the new tax rates on online gaming.
The Central Board of Indirect Taxes and Customs (CBIC) provided the methodology to compute the value of online gaming supply through a notification dated September 6, 2023. Under this amendment, Rules 31B and 31C were introduced in the Central Goods and Services Tax Rules, 2017. Rule 31B specifies that “the value of supply of online gaming, including supply of actionable claims involved in online money gaming, shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player”. Likewise, Rule 31C provides for the methodology to calculate the value of the supply of actionable claims when it comes to casinos.
 Directorate General of Goods and Services Tax Intelligence (HQS) & Ors. v. Gameskraft Technologies Private Limited & Ors. [SLP(C) Nos. 19366-19369/2023]