Fantasy e-sports giant Dream11 has retracted its appeal filed with the Bombay High Court challenging show cause notices issued by authorities, accusing the platform of evading Goods and Services Tax (GST) totaling more than ₹1,200 crore, excluding interest and penalties.
In September, Sporta Technologies, an online fantasy sports gaming company operating under the Dream11 brand, approached the Bombay High Court to request the annulment of show cause notices issued to it concerning a substantial GST liability. The company is confronted with a 28% tax on the gross value, as tax authorities assert that it provides “gambling” services. Contrarily, Sporta contends that the notices are without jurisdiction.
The notices alleged that Dream11 had skirted paying the 28% GST imposed on providing gambling services to users during the fiscal years 2017-18 and 2018-19. Despite initially contesting the notices in court, the company opted to withdraw its petition after the Deputy Commissioner of the State tax department withdrew the show cause notice. However, the Directorate General of GST (DGGST) is set to issue a fresh notice, prompting Dream11 to withdraw its plea.
A parallel case involving online gaming company Playerzpot Media witnessed similar legal developments, as the company contested notices demanding ₹532 crore as GST along with interest and penalties.
Represented by Khaitan & Co, Playerzpot argued that the notices retroactively applied amendments to the GST Act, imposing a 28% tax rate on online fantasy sports services effective from October 1, 2023. The company asserted that retrospective application of this amendment was inappropriate.
Additionally, Playerzpot challenged Section 15(5) of the Central GST Act, asserting that it suffered from excessive delegation and was arbitrary. This section empowers officers to determine the value of supplies for taxation purposes based on GST Council recommendations.
In response, a bench of Justices GS Kulkarni and Jitendra Jain issued a notice to Attorney General R Venkataramani regarding the constitutional validity of Section 15(5) of the CGST Act. Advocate Jitendra Mishra, representing the DGGST, assured the court that the department would refrain from taking any action on the demand notices if the petitioners actively participated in the proceedings. The court had recorded this assurance and scheduled the next hearing for six weeks later.
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