Is Paytm's First Games Facing Legal Challenges Over GST Notices?
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Synopsis
Paytm's subsidiary, First Games, is facing a significant GST notice from the DGGI. The legal battle over this issue could reshape the online gaming landscape in India, with potential implications for the entire industry. Discover how this dispute unfolds and what it means for the future of gaming in the country.
Key Takeaways
- Paytm's First Games is contesting a GST notice from the DGGI.
- The GST liability proposed amounts to Rs 5,712 crore.
- The case is currently under review by the Supreme Court.
- Paytm claims this issue does not impact its overall operations.
- First Games contributes less than 1% to Paytm's consolidated profit/loss.
New Delhi, April 29 (NationPress) The parent company of Paytm, One 97 Communication Ltd, announced that its subsidiary, First Games Technology Private Limited, has been issued a show-cause notice by the Directorate General of GST Intelligence (DGGI).
This notice, dated April 28, 2025, pertains to a prolonged Goods and Services Tax (GST) issue that has been scrutinized within the online gaming sector for more than 18 months.
The DGGI asserts that a 28 percent GST should be applied on the total entry fee, contrasting with the current 18 percent GST levied on the platform fee or revenue generated by gaming firms.
In a filing to the stock exchange, Paytm highlighted that this is a widespread industry challenge, with various other online gaming firms having received similar notifications previously.
This issue is currently before the Supreme Court, which has provided interim relief by suspending further actions on earlier notices following the consideration of writ petitions from several gaming companies.
“In accordance with the industry stance,” Paytm stated in its filing, “First Games will also submit a writ petition contesting the SCN on legal grounds, including the retrospective nature of the GST amendment effective from October 1, 2023, and/or the interpretation of GST laws prior to that amendment.”
The petition aims to secure interim relief similar to that granted to other gaming operators.
The SCN directed at First Games cites a potential GST liability of Rs 5,712 crore, alongside applicable interest and penalties, for the period spanning January 2018 to March 2023.
Paytm has clarified that this situation does not affect its operations or other business activities. “First Games is treated as a joint venture for group consolidation under relevant accounting standards, meaning its revenues are not included in OCL’s financials,” the company explained.
It further mentioned that First Games accounted for less than 1 percent of its consolidated profit/loss for the financial year ending March 31, 2024.
The filing also indicated that the value of Paytm's investment in First Games is already nil as of March 31, 2024, with OCL’s financial exposure to First Games amounting to around Rs 225 crore, primarily comprising a shareholder loan (with applicable interest) as of December 31, 2024.
Point of View
It's crucial to recognize the broader implications of Paytm's legal challenges. This situation highlights significant regulatory concerns within the online gaming sector that could influence future policies. The nation must watch how this case evolves, as it may set essential precedents for the industry as a whole.
NationPress
25/06/2025
Frequently Asked Questions
What is the GST dispute involving Paytm's First Games?
The dispute revolves around a show-cause notice from the DGGI, asserting that a higher GST rate should apply to entry fees in online gaming, which could impact the entire sector.
How much GST liability is First Games facing?
First Games has been cited for a potential GST liability of Rs 5,712 crore, along with applicable interest and penalties.
What steps is Paytm taking in response to the notice?
Paytm plans to file a writ petition challenging the notice on legal grounds, seeking interim relief similar to what other operators have received.
Does this legal matter impact Paytm's overall operations?
Paytm has stated that this development does not affect its operations, as First Games accounts for less than 1% of its consolidated profit/loss.
What is the current status of the legal dispute?
The matter is pending before the Supreme Court, which has temporarily stayed further proceedings on previous notices.
