Demystifying Dream11's 28% GST and fantasy earnings tax

The recent implementation of 28% Goods and Services Tax (GST) for online gaming came as a shock to all gamers, as the increase in tax on online gaming meant reduced balance on player deposits. However, Dream11 has announced a new discount point system to offset deposit loss for players.

The new discount point system will bring back the original full deposit system for the amount deposited by players. This means that despite the new tax rate on full face value, players will get the same amount they add to their Dream11 wallet for fantasy leagues.

This is the first time a fantasy gaming company has made such a move. Those thinking thinking they will have to pay 28% GST on Dream11 earnings need not worry as the GST is only charged on the initial deposit amount, which will also be recovered through Dream11’s new discount system.

This move comes just before the onset of the ODI World Cup 2023 and thus, Dream11 seems to be aiming to keep players' experience on its fantasy gaming platform similar to how it was before the new GST regime came into effect on October 1, 2023.

How is GST calculated on Dream11 deposits?

During the 51st GST Council meeting, the government declared that GST for players will only be charged on initial deposits. This means that concurrent entries in multiple contests will not be charged by the government. 

To explain this, suppose a user deposits INR 1,000 to their account. They will be entitled to receive INR 781.2 in their funds account. Post that, no taxes will be charged for entering the contests.

How does the discount point system eliminates GST for players?

As of now, the new GST amendments state that online gaming deposits will be charged at the rate of 28% on the full face value for the entry amount (the amount deposited by players). This means that a user adding Rs 100 to their account will only get INR 78.12 as their final playable balance. Now, 28% of INR 78.12, which amounts to INR 21.88, will be deducted as per the new GST rate.

This becomes problematic as most Dream11 players play in leagues with an entry fee of Inr 49. With the current GST charges, players will only be able to make a single team. Adding a higher amount will take out a significant chunk and players would be required to add more amount, which will again see a 28% GST charge.

However, the company has decided to provide the players with discount points equal to what was charged as GST. The discount points will act as the currency at face value, meaning 1 point is equoal to Re 1. The deducted amount from GST charges while depositing money in the account will be added as a discount point, making the final account balance the same as the intended amount.

Now, the players who deposit INR 100 to their Dream11 account will receive the same amount without any form of deduction. The company will bear the full expenses of GST charges for players depositing the initial amount to play.

Are there any hidden/extra charges?

Dream11 only charges a platform fee, whereas, the government dictates the taxes. The initial deposit tax is currently being offset by the company, so the players will only have to pay the TDS (Tax Deducted at Source) on their withdrawals, which is set at 30% for all online games.

Additionally, the platform fees charged by Dream11 will remain the same for all kinds of contests, viz., Head-to-Head contests, Mega Contests, Grand Leagues, to name a few. Thus, the only amount to be borne by a user in addition to the existing ones are that of the recently imposed GST.

To conclude, one may say that the company's move to compensate the GST charges paid by the user makes it feasible for them to continue playing like before without worrying much about tax burdens.

Frequently Asked Questions: 

How do I calculate payable GST on my deposits?

Dream11 has already provided the convenience of calculating the amount of GST that will be deducted for each deposit. To check this, the users have to enter any amount in the app, and the deductible amount will be automatically calculated within the app. 

Additionally, the entire amount that will be deposited in the wallet will also be displayed, even before a user actually initiates a payment. Thus, the virtual calculator can be used to check the amount of GST charged, which enables the player to view the payment breakdown.

Is there any expiry period for Discount Points?

Currently, the discount points, once credited, will be valid for a period of 14 days. Therefore, the users will have to utilize the points within the said period.

Is there any tax deduction on winnings?

Once the GST is deducted at the time of making a deposit, no further GST is to be paid. However, TDS is to be paid for withdrawals made on winnings as per the existing rules.