India's tax authorities issued notices to fantasy sports platform Dream11 on September 12, giving the company 30 days to explain why it should not have to pay a shortfall of 2.1 billion rupees ($26.07 million) for 2017-18 and 10 billion rupees ($120.85 million) for 2018-19, along with interest and penalties1. Dream11 responded by filing a lawsuit in the High Court in Mumbai challenging the demands1.
The dispute turns on how Dream11's platform is classified. Dream11 argues it falls within the "games of skill" category, which it says merits a lower tax rate applied to its earnings, particularly platform fees, rather than the entire prize pool1. Tax authorities insist on a higher 28% tax on the total gaming revenue generated from players1.
In total, Indian tax authorities have demanded approximately $150 million from Dream11 for alleged underpayment during 2017 to 2019, and are investigating its tax payments for a further four years extending to March 2023, according to the company's court filing1.
The demands follow a decision at the 50th GST Council meeting that online gaming platforms, including Dream11, would be subject to a 28% tax rate based on the full-face value of placed bets1. Previously, skill games attracted GST at 18%, while chance games were taxed at 28% on the commission; the new rules do not differentiate between skill and chance1.
"The GST Council's new laws do not differentiate between skill and chance and levy 28% GST on both!"
Finance Minister Nirmala Sitharaman said the intention was not to harm the industry, and posed a moral question about whether gaming, including casinos and horse racing, should receive greater encouragement than essential goods; she also cited simplifying the tax mechanism and promoting transparency1.
The change alters how tax is calculated. On an entry fee of 100 rupees, with gross gaming revenue of 20 rupees, the operator previously paid 18% on GGR, or 3.6 rupees; under the new provision, tax applies to the 100 rupee entry bet at 28%, or 28 rupees1. The Hindu reported this reduces resources available for platform fees and shrinks the prize pool1.
What it means for players
The notices concern Dream11's own tax position for past years, not a charge on players. The wider change is in how platforms are taxed: a 28% levy on the full entry amount rather than on the operator's commission. The Hindu reported that this leaves less for platform costs and prize pools1. How operators pass any of that through to entry fees, contest sizes or prize structures has not been reported. India's rules on what gambling and skill gaming are permitted, and for whom, are set out in the site's guide to gambling in India and its overview of gambling laws across Asia.
What happens next
Dream11's lawsuit in the Mumbai High Court is pending; no hearing date or outcome has been reported1. The tax authorities' investigation into Dream11's payments for the four years to March 2023 is also ongoing, per the company's court filing1.
