Nazara Technologies plunges 5% as subsidiaries face Rs 1,120 crore GST liability notices

GST authorities have previously served retrospective tax notices to a slew of skill-based gaming firms such as Dream Sports, Gameskraft, Games 24x7, Delta Corp's Deltatech Gaming, and Head Digital Works (A23) for alleged tax evasion to the tune of over Rs 1 lakh crore.

Shares of Nazara Technologies plunged over 5 percent on July 18 as two of its subsidiaries — Openplay Technologies and Halaplay Technologies — are facing significant GST liability notices totalling nearly Rs 1,120 crore.

Openplay Technologies has been issued a show cause notice by the Director General of GST Intelligence, Kolkata, for a proposed liability of Rs 845.72 crore. While Halaplay Technologies faces a liability of Rs 274.21 crore.

These notices pertain to the period from 2017-18 to 2022-23, Nazara Tech informed in a regulatory filing.

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The claims relate to the calculation of GST based on sums pooled by players rather than gross gaming revenues, according to the company. Nazara Tech stated that both subsidiaries are currently consulting with legal and tax advisors to determine their next steps.

"We wish to inform you of the following developments related to ongoing GST matters of the gaming industry on behalf of our subsidiaries," the company said in the exchange filing.

For the quarter ended March 2024, these subsidiaries collectively contributed to less than 2 percent of Nazara Tech's revenues and less than 1 percent of its profit," Nazara said.

At 9:26 am, Nazara Tech shares were trading 4.8 percent lower at Rs 880 on the National Stock Exchange (NSE). So far this year, the stock has risen around 2 percent, underperforming benchmark Nifty which has risen nearly 13 percent during this period.

In the last one year, however, the stock's 31 percent returns have beaten Nifty's returns of 24 percent.

It is worth mentioning that the GST Council in Augusthad clarified that a 28 percent tax would be levied on the full value of bets placed on online gaming platforms.

Also Read | Nazara Tech, Delta Corp shares rise as SC likely to hear online gaming firms' GST challenge next week

Last year, GST officers issued around 71 show cause notices to online gaming companies for alleged GST evasion totaling over Rs 1.12 lakh crore during FY23 and FY24. Many of these companies have contested the notices, and the cases are still pending.

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