Vision11 and Twelfth Man Fantasy Successfully Defend against GST Retrospective Tax Cases in Gujarat

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A bench of the Gujarat High Court consisting of Justices Biren Vaishnaw and Mauna Bhatt issued an order on November 3, 2023, to stay a show cause notice served to fantasy operator, Vision11, under section 74(1) of the CGST Act. The tax department has demanded over Rs. 1700 crores, claiming that the services offered by the gaming company are similar to betting and gambling.

Vision11 has challenged the notice, citing past cases such as Varun Gumber vs. UOI, and arguing that it only provides a platform for skill-based games and does not engage in betting or gambling. The company stated that it holds all winnings and credits in a trust and has no claim over them.

The show cause notice alleged that Vision11 operates an online betting platform and proposed charging GST on the ‘face value’ of total bets. This matter was consolidated with another similar case involving Twelfth Man Fantasy. Twelfth Man Fantasy also challenged the constitutionality of Rule 31A of CGST Rules, claiming that the rule is arbitrary and extends beyond the statutory requirements.

The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued show cause notices to 40 online gaming companies for retrospective tax dues from 2017-2022, totaling over Rs. 1.5 lakh crores, plus interest and penalty. The notices are based on the belief that these platforms offer gambling and betting services, and hence every bet or entry fee should be subject to 28% tax.

The Gujarat High Court has granted a temporary stay on further proceedings, with the case set for a hearing in January 2024. Similar cases have been filed in other High Courts, including the Bombay High Court (Goa Bench) and Sikkim. In addition, a special leave petition on a similar case involving Gameskraft, a skill gaming operator, is also pending before the Supreme Court.

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