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In the last week of September, all hell broke loose in the legal departments of India’s gaming startups that run platforms where “real money” is wagered on the outcome of games like rummy and poker.

Gameskraft—one of the leading real-money-gaming (RMG) companies and among the most profitable startups in the country—had received received Yourstory GST authorities issue Rs 21,000Cr show-cause notice to Gameskraft Technology Read more  one of the largest-ever tax notices the previous weekend.

The tax department slapped the company with an astronomical Rs 21,000 crore ($2.6 billion) show-cause notice for allegedly evading the goods and services tax (GST).

For comparison, the amount is ~11X of Gameskraft’s cumulative revenue, which stands at Rs 1,900 crore ($230 million), in its four years of operations.

Gameskraft wasted no time in reaching out to industry peers for support. It also approached fellow members of the industry body All India Gaming Federation (AIGF), according to multiple executives and lawyers in the industry.

Most industry executives and lawyers The Ken spoke to for this story declined to be identified, as they were either unauthorised to comment on competitors or did not want to talk about ongoing trials.

Help did not arrive immediately for Gameskraft. Most RMG firms had concerns surrounding the allegations made against the company. These claims related to discrepancies in its invoices and discounting practices, The Ken had earlier learned learned Twitter Thread by @_soumyajit37 Read more .

At first, the companies did not want to invite the ire of the GST authorities by openly supporting Gameskraft, said multiple senior industry executives and lawyers. The realisation—that the tax department might come after their own huge interests and fortunes next—came later.

RMG products, like fantasy sports and online card games, are wildly popular in India: operators like Gameskraft, MPL, Dream11, and Games24x7 claim user bases running in the tens of millions. The major ones also rake in hundreds of crores in profits each year, something that even prominent startups, such as edtech giant Byju’s and food-delivery firm Swiggy, have not achieved so far.

These companies belong to a promising industry that is slated to be worth over Rs 10,000 crore ($1.2 billion) by 2024, according to a report by professional services firm EY and the industry body Federation of Indian Chambers of Commerce and Industry (FICCI). Nevertheless (or, therefore), they are often put under intense scrutiny.

These enterprises are also often likened to gambling operations, opening them up to legislative actions in several states, as gambling is a state subject in India.

AUTHOR

Soumyajit Saha

Soumyajit covers the operations of Big Tech companies and OTTs in India. Before The Ken, he covered equity and currency markets in Southeast Asia, Australia and New Zealand for Reuters. You can hit him up via email about anything, except money he allegedly owes you.

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