The Director General of GST Intelligence, Delhi (DGGI) has issued a show-cause notice to One 97 Communications Limited subsidiary First Games Technology Private Limited.
The notification suggests a liability of Rs. 5,712 crore, together with relevant interest and penalties, for the period of January 2018 to March 2023, per a statement that Paytm submitted with the National Stock Exchange (NSE).
According to the company, the notice relates to a problem that has been present in the online gaming sector for the past 18 months, where the GST responsibility has been determined to be 28 percent of the entire entrance amount rather than 18 percent of the platform fees (revenue) that gaming companies collect.
The disclosure states that First Games would contest the show cause notice (SCN) in a writ petition, opposing the retroactive implementation of the October 1, 2023, GST amendment and previous GST interpretations. Additionally, it will want temporary respite akin to that provided to other gaming industry participants.
Paytm claimed that since the carrying value of its investment in First Games was zero in its consolidated financial accounts as of March 2024, the SCN would not have an effect on its business operations.
The Directorate of Enforcement (ED) also sent Paytm a show-cause notice last month in response to some accusations made against Little Internet Pvt Limited (LIPL) and NearBuy India Pvt Ltd (NIPL).
The announcement precedes Paytm's Q4 earnings. Its operating revenue for the third quarter of the preceding fiscal year (Q3 FY25) was Rs. 1,828 crore.
