The Indian tax department has issued a demand of approximately $150 million from Dream11, an online gaming company backed by Tiger Global, for alleged tax underpayment during the years 2017-2019.
The company is in dispute with tax authorities over the applicable tax rates for gaming platforms, specifically related to their immensely popular fantasy cricket games, Reuters news report said.
Dream11 argues that it should pay taxes based on the fees it charges customers, while Indian tax authorities are insisting on a higher 28 percent tax on the total gaming revenue derived from players, according to court documents.
The tax authorities, on September 12, provided Dream11 a 30-day window to explain why they should not be obligated to pay a shortfall of 2.1 billion rupees ($26.07 million) for the fiscal year 2017-18 and 10 billion rupees ($120.85 million) for the fiscal year 2018-19, in addition to interest and penalties, as stated in government notices.
Dream11 has taken legal action by filing a lawsuit in the High Court in Mumbai to challenge these notices. The case is expected to be heard in the coming days.
Mumbai-based Dream11, established in 2008, has Tiger Global, a prominent U.S. investment fund, as a major investor.
In an undisclosed court filing, the company stated that tax authorities are investigating its tax payments for an additional four years up to March 2023.
Indian tax inspectors have alleged that the service provided by Dream11 falls under the category of betting, gambling, or wagering, according to court papers. However, Dream11 contends that its gaming platform involves games of skill and should attract a lower tax rate, specifically levied on its earnings, known as platform fees, rather than the prize pool.