Paytm's First Games receives Rs 5,712-crore GST notice

One 97 stated that the GST notice does not impact its operations or activities, as First Games is treated as a joint venture (JV) for group consolidation purposes.

Paytm's parent company — One 97 Communication Ltd — has informed the stock exchanges that its subsidiary First Games Technology Private Limited has received a show cause notice (SCN) from the Directorate General of GST Intelligence (DGGI) proposing that GST liability be computed at 28 percent on the total entry amount, as against 18 percent GST paid on the platform fee (revenue) generated by the gaming companies.

As per the exchange filing, the notice refers to a tax liability of Rs 5,712 crores, plus applicable interest and penalties, on First Games.

One 97 Communication, stated that the notice stems from "an industry-wide issue" over GST calculation methods that has affected the entire online gaming industry.

According to the company, DGGI contends that GST should be levied at 28 percent on the total entry amount rather than the 18 percent GST that gaming companies have been paying on platform fees (revenue).

It informed the exchanges that First Games plans to file a writ petition challenging the show cause notice on legal grounds, including objections to the retrospective application of the GST amendment dated October 1, 2023, and the interpretation of GST regulations prior to the amendment. The company will seek interim relief similar to that granted to other gaming companies.

The statement emphasizes that the ongoing matter is currently pending before the Supreme Court, which has already granted interim relief to several gaming companies by staying further proceedings.

One 97 stated that the GST notice does not impact its operations or activities, as First Games is treated as a joint venture (JV) for group consolidation purposes.

The exchange filing also states that the parent company's exposure to First Games is limited to approximately Rs 225 crores, stemming primarily from shareholder loans - which includes applicable interest as of December 31, 2024.

According to the statement, First Games' revenues are not consolidated with its parent company, and its share of profit/loss represents less than 1 percent of the parent company's consolidated profit or loss for the financial year ended March 31, 2024.