Paytm's gaming subsidiary faces ₹5,712 crore GST demand notice
What's the story
Paytm's subsidiary, First Games Technology Private Limited, has been served a show cause notice by the Director General of GST Intelligence (DGGI) in Delhi. The notice proposes a liability of ₹5,712 crore with applicable interest and penalties for the period January 2018 to March 2023. Paytm disclosed the same to the National Stock Exchange (NSE).
Dispute details
GST liability controversy in online gaming industry
The notice pertains to a long-standing debate in the online gaming industry for the last 18 months. The debate concerns the calculation of GST liability at 28% on total entry amount, instead of 18% on platform fees (revenue) collected by gaming companies. First Games has said it will file a writ petition against this show cause notice.
Legal action
Paytm to challenge GST notice
First Games intends to challenge the retrospective effect of the October 1, 2023, GST amendment and previous interpretations of GST. The company also wants interim relief similar to that provided to other companies in the gaming industry. Despite this legal challenge, Paytm has said it won't impact its operations as its investment in First Games was already valued at zero in Paytm's consolidated financial statements as of March 2024.
Other allegations
Paytm also under scrutiny by ED
Apart from the GST notice, Paytm also received a show cause notice from the Directorate of Enforcement (ED) last month. This was in connection with certain allegations against Little Internet Pvt Limited (LIPL) and NearBuy India Pvt Ltd (NIPL). These developments come ahead of Paytm's Q4 results announcement. In Q3 FY25, its revenue from operations stood at ₹1,828 crore with a loss of ₹208 crore during the period.