10 Facts about the biggest demand notice of indirect tax

A demand notice of Rs.25000 crore is raised on Dream 11. It is probably be the largest indirect tax demand notice of Indian history. The notice to many other online gaming companies is also sent. With a whole set of notices it is expected to reach a whopping one lac crore. Now let us dwell upon on some important facts related to this.

1- Recently the tax rate on online gaming was changed. Earlier t was proved at various courts that dream 11 is a game of skill and not a betting. Thus the normal tax rate of GST is leviable. But after losing the case in Gameskraft technology, the makers or Junglee Rummy the government decided to increase the tax rate.

2- Dream 11 , the parent company Sporta technologies private limited, receiving the notice for Rs. 25000 crore had the turnover of Rs. 3841 Crore and profits of Rs.142.8 Cr. in FY 22. So the notice is more than 10 times of its turnover.

3- A company with that turnover, even if lose the case is unable to pay that sum. If the case is won by the CBIC , The chances of company getting insolvent are high. This is how a successful running business is killed by tax litigation.

4- The company has moved to Bombay high court against the show cause notice.

5- A similar notice for GST dues of Rs 20,000 Crores is also issued to another online gaming company, Games 24X7.

6- Before this a notice of Rs. 21000 crore was sent to the Gameskraft technologies. The company went to the high court against the notice and won the case. The department filed the case in Supreme court. The Supreme court stayed the decision of High court which dropped the demand of the department. The final hearing of that case is still pending.

7- By the time the apps were booking their cut as the revenue from the app. But new provision places 28% tax on the whole amount of bet. Which will increase their revenue and tax amount by many folds.

8- Although the companies have the right to go to appeal but even for that they will have to deposit the 10% of demand not agreed upon and 100% of demand agreed upon by the company. Which is a huge sum as the notice is around 10 times of their turnover. Thus deposition that huge sum for appeal will be very difficult.

9- Many of these companies will directly approach the high court against the notices. It is possible to approach the High court when something is done against the fundamental rights or without jurisdiction or against the principles of natural justice.

10- If they won the cases, chances of some retrospective amendments in law cant be denied. That has done historically by many governments. It is going to be a quite interesting fight.