The tax department of India has sought about $150 million from the Tiger Global-backed gaming company Dream11 for underpaying taxes during 2017-2019, which the company disputes, and officials are investigating its payments for four more years, legal documents show.
Dream11 and Indian tax authorities are in a conflict over what tax rates should be paid by such gaming platforms, which have become hugely popular for fantasy cricket games they offer. Dream11 argues it should pay a tax on fees it charges customers, while Indian authorities are demanding a higher 28 per cent tax on total gaming revenue it makes from players, court papers show.
On Sept. 12, the tax authorities gave the company 30 days to explain why it should not be forced to pay a shortfall of 2.1 billion rupees for 2017-18 and 10 billion rupees for 2018-19, including interest and a penalty, government notices show.
Dream11 declined to comment and India's tax authorities did not respond to a request for comment.
Dream11 has filed a lawsuit in the High Court of Mumbai challenging the notices, court papers show. The case could be heard in the next few days.
Dream11, a Mumbai-based startup, was established in 2008 and counts as a major investor of the U.S. investment fund Tiger Global.
Tax authorities are also investigating Dream11's tax payments for four more years up to March 2023, the company said in its court filing, which was seen by Reuters but has not been made public.
Indian tax inspectors are alleging that Dream11's service is that of wagering/gambling/wagering, court papers said.
Dream11 argued that its gaming platform is a 'games of skill' and it benefits from a lower tax rate, which should be levied on its earnings, known as platform fees, and not the prize pool.