Unicorn fantasy gaming operator Dream11 challenged the validity of certain provisions of GST Law before the Bombay High Court after it received a tax notice of Rs 1221 crores for the financial years 2017-18 and 2018-19. While proceedings against GamesKraft for Rs 21,000 crore tax dues were initiated by DGGI which is under the central government, the present tax notice to Dream11 is by Maharashtra state GST department.

The recent reports have indicated the total tax amounts as close to Rs 40,000 crores against Dream11 but the court filings accessed by G2G only relate to two financial years for a much lesser value.

Excessive delegation under CGST Act

Dream11 said the fresh notices infringe the rights under Article 14, Article 19(1(g) and Article 21 of the Constitution of India and referred to its earlier cases where Rule 31A of CGST Rules was dealt with. The unicorn fantasy gaming operator said Rule 31A of the CGST Rules dealing with valuation of gambling / betting supplies and Section 15(5) of the CGST Act pursuant to which Rule 31A was notified suffers from excessive delegation and imposes unreasonable basis for determination of value of supply.

No reason for extension of time period

Orders under Section 73 of the CGST Act dealing with determination of tax shortfall by a taxpayer must be passed within three (3) years from due date of annual return. This timeline was supposed to expiry on 31 January 2023  for financial year 2017-18 and was extended in June 2022 to 31 December 2023. Dream11 said the extension notification is ultra vires as there is no force majeure event that necessitated such an extension.

Dream11 also referred to an order by a tax commissioner from pre-GST era which said service tax is to be discharged only on platform fees and not on the prize pool which is an actionable claim.

The GST Council, headed by Finance Minister Nirmala Sitharaman on July 11 and August 2 decided to revise the taxation regime for online gaming to 28% rate on entire deposit amount. States were directed to amend respective GST Laws which is currently under process for the changes to be effective.