India’s taxman is looking for answers. It wants to know if skill gaming companies such as Dream11 and others are paying the proper amount of goods and services tax (GST), or if they have decided to use some creative accounting to make their tax calculations.
According to a report by the India Times, India’s indirect department believes there may be a revenue leakage and asserts that this leakage could be coming from the way skill gaming companies are calculating their taxes. The officials want to know if the GST is being applied to the total transaction value or only the net revenues earned by the companies.
An exercise is now underway to figure out whether or not the GST needs to apply to the entire transaction or only to the net proceeds. So far, around six gaming companies have been questioned by India’s tax department, with one tax official explaining, “The valuation rules (under GST framework) are quite clear that GST is levied on the consideration and currently there is no clarity as to whether the revenue charged by these companies be considered consideration or the total pool. In March, some companies were asked to explain why they shouldn’t be paying GST on the total pool.” The official added that no demands for additional payments have yet been made.
The Indian Federation of Sports Gaming (IFSG) has contacted the Ministry of Finance, as well as the GST committee in order to try to clarify the issue. The IFSG represents a number of gaming companies, including Dream11, My11Circile, Fantain and FanFight, among others.
For its part, Dream11 says it is in compliance with the laws. It pays 18% on gross commissions and the company’s co-founder and CEO, Harsh Jain, adds, “We pay GST on the gross consideration collected by our platform and not on our margins. Levying GST on user deposits would mean that it’s paid only once when users make their deposits and not every time they play in our contests with their winnings as well, which is when Dream11 provides a service to them. This is the same practice followed globally in every mature GST-following country. GST for online gaming companies is charged on their Gross Gaming Revenue.”