The Indian tax department has raised a demand of approximately $150 million from the Tiger Global-backed gaming firm, Dream11, alleging that the company underpaid taxes between 2017 and 2019. Legal documents indicate that tax officials are also investigating the company's tax payments for an additional four years.
The disagreement between Dream11 and Indian tax authorities centers on the applicable tax rates for gaming platforms, especially those that have gained immense popularity for offering fantasy cricket games.
Dream11's position is that it should be taxed on the fees it charges its customers. In contrast, Indian authorities are insisting on a higher 28 percent tax on the total gaming revenue generated from players.
Government notices issued on September 12th gave Dream11 a 30-day window to provide an explanation for why it should not be liable for a shortfall of 2.1 billion rupees ($26.07 million) for the fiscal year 2017-18 and 10 billion rupees ($120.85 million) for 2018-19. This demand also includes interest and a penalty.
Dream11 has chosen not to comment on the matter, and Indian tax authorities have not responded to requests for comment.
Dream11 has taken legal action by filing a lawsuit in the High Court in Mumbai to challenge the notices. The case is expected to be heard in the coming days.
Established in Mumbai in 2008, Dream11 has significant investment from the US investment fund Tiger Global.
The company revealed in its court filing, which Reuters has seen but has not been made public, that tax authorities are also scrutinizing its tax payments for the period up to March 2023. Indian tax inspectors contend that the services provided by Dream11 constitute betting, gambling, or wagering.
In response, Dream11 asserts that its gaming platform involves games of skill and therefore should be subject to a lower tax rate, which should apply to its earnings from platform fees rather than the prize pool.
