In a significant legal move, Dream11, the prominent fantasy sports platform and current sponsor of the Indian national cricket team, has taken the matter to the Bombay High Court to challenge show cause notices over alleged Goods and Services Tax (GST) evasion amounting to over ₹1,200 crores, excluding interest and penalty. The notices pertain to the financial years 2017-18 and 2018-19, raising concerns of a 28% GST evasion on amounts attributed to providing gambling services to users.
Dream11's stance is firmly grounded in the belief that online fantasy sports primarily involve skill and strategy, not gambling or betting. The platform emphasized that the authorities' interpretation, treating their service as gambling, was erroneous. The tax was imposed not only on the platform fee but also on the prize pool amount as an actionable claim.
Sporta Technology, the entity behind the Dream11 brand, clarified its position, stating that GST on actionable claims cannot be levied on them. They are neither a supplier nor a recipient of the claim but merely provide the platform for users to engage. The notices were perceived as being issued without proper jurisdiction, in direct conflict with the Supreme Court's established position that online fantasy sports predominantly constitute games of skill and not games of chance.
Through legal representation by TLC Legal LLP, the plea challenged the investigation initiated by the Deputy Commissioner of the State Tax department and the Directorate General of GST Intelligence concerning the alleged evasion. Additionally, it contested the notices served by the GST authorities, summoning documents for the fiscal years 2017-18 and 2018-19.
Sporta further argued that the notices applied a retrospective effect to amendments to the GST Act, valuing online fantasy sports at a 28% rate. However, this amendment was effective only from October 1, 2023, making any retrospective application inappropriate.
Notably, the plea also raised concerns about Section 15(5) of the Central GST Act, claiming it to be arbitrary and suffering from excessive delegation. This section empowers officers to determine the value of supplies for taxation purposes based on the GST council's recommendations, a provision criticized for granting disproportionate power to officers.