Dream11 Withdraws Challenge Against Rs 1,221-Crore GST Notice

Fantasy sports platform Dream11 Fantasy Pvt. has opted to withdraw its challenge against a Rs 1,221-crore GST show cause notice, issued by the Maharashtra state GST department.

This was after the state informed the division bench of the Bombay High Court that the tax department has withdrawn the demand notice with the intention of issuing a fresh show cause notice.

The notice asserted tax dues for FY2018 and FY2019 at a rate of 28%. The 28% GST rate was only implemented starting Oct. 1, creating a discrepancy. In response, Dream11 initially filed a plea with the Bombay High Court, seeking to quash the show cause notice.

Dream11 had contended that the games on its platform are games of skill, a classification upheld by the Supreme Court. However, the Maharashtra state GST department argued that the Supreme Court ruling was under review, justifying the tax demand to protect government revenue.

The department alleged that Dream11 misclassified its services for taxation, asserting that the platform should fall under 'online gambling services' with a 28% GST rate, instead of the current 18%.

Users pay a contest entry fee on Dream11, with 15% allocated to the platform fee and the rest to the contest's prize pool. Dream11 insisted that tax should only apply to the platform fee, as the prize pool contribution doesn't represent consideration for its services.

The withdrawal of the notice by the Maharashtra state GST department to Dream11 does not signify the abandonment of the government's intent to impose a 28% GST on online money gaming companies for the preceding period, said Payal Thaker, partner at BDO India.