Paytm’s gaming firm gets Rs 5,712 cr GST notice, will seek relief

First Games Technology, a subsidiary of the company that owns fintech major Paytm, has got a notice from the Directorate General of GST Intelligence (DGGI) claiming a proposed liability of Rs 5,712 crore along with interest and penalties.

The show-cause notice, received by the gaming company on Monday, is for the period between January 2018 and March 2023. First Games, a unit of One97 Communications Ltd. (OCL), said that the DGGI has taken the view that GST liability should be computed at 28 per cent on the total entry amount, as against 18 per cent paid on platform fee or revenue generated by gaming companies.

“This is an industry-wide issue where the GST department has sent notices to several gaming companies previously. This matter is currently pending with the Supreme Court and they have granted interim relief by staying further proceedings,” said the company in a statement.

First Games will file a petition challenging the notice, including the retrospective application of the GST amendment dated October 1, 2023, along with the interpretation of the GST regulation prior to the amendment.

“The writ petition will seek interim relief at par with others in the gaming industry and accordingly, First Games will challenge the proposed liability of Rs 5,712 crore along with applicable interest and penalties, for the period from January 2018 to March 2023,” it said.

In March, OCL received a show-cause notice from the Enforcement Directorate for alleged violations of the Foreign Exchange Management Act involving aggregate transactions worth over Rs 611 crore related to the acquisition of the two subsidiaries.

The alleged violations relate to OCL acquisition of two subsidiaries — Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), formerly Groupon — including certain directors and officers.

About Rs 345 crore of the total Rs 611 crore is linked to investment transactions involving LIPL, while Rs 21 crore relates to NIPL. The remaining amount pertains to OCL. The notice does not impact the company’s operations, said First Games.