Dream11, the popular fantasy cricket gaming platform backed by Tiger Global, is in a heated tax dispute with the Income Tax Department of India. The tax authorities have demanded a staggering Rs 1,210 crore ($150 million) from the company, alleging underpayment of taxes between 2017 and 2019. Dream11 vehemently disputes these claims, setting the stage for a high-stakes legal showdown.
At the heart of this dispute lies the question of which tax rates should apply to gaming platforms like Dream11, which have witnessed immense popularity for their fantasy cricket games. Dream11 contends that it should be taxed based on the fees it charges its customers. However, Indian authorities are pushing for a higher 28% tax rate on the total gaming revenue generated from players.
Tax Notice Showdown
On September 12, tax authorities issued a stern ultimatum to Dream11, giving them a 30-day window to provide a compelling explanation for why they should not be liable for a shortfall of Rs 210 crore for 2017-18 and a whopping Rs 1,000 crore for 2018-19. These amounts, interest, and penalties were detailed in government notices.
Legal Battle Commences
In response to the tax notices, Dream11 swiftly filed a lawsuit in the Bombay High Court to challenge the authorities’ claims. The legal battle is set to unfold in the coming days, also with high stakes for both sides. In a twist, tax authorities have also extended their scrutiny to cover Dream11’s tax payments for an additional four years, reaching up until March 2023. Thus, they assert that Dream11’s services fall under the category of betting, gambling, or wagering.
Skill Vs. Luck
Dream11 vehemently argues that its gaming platform is a “game of skill” rather than a game of luck. And, therefore, should be subject to a lower tax rate. They contend that taxes should be levied on their earnings. Hence, specifically platform fees, and not on the prize pool. The outcome of this legal battle will have far-reaching implications, not only for Dream11 but for the broader landscape of fantasy gaming in India as the courtroom drama unfolds. Thus, industry observers eagerly await the resolution of this high-stakes dispute that could reshape the taxation of online gaming platforms in the country.