Paytm shares in focus as subsidiary faces Rs 5,712 crore GST demand notice

Shares of One 97 Communications Ltd (Paytm) are likely to be in focus on Tuesday, April 29, after its subsidiary, First Games Technology, received a Show Cause Notice (SCN) from the Directorate General of GST Intelligence (DGGI) for Rs 5,712 crore.

The notice proposes a GST demand, along with applicable interest and penalties, pertaining to GST matters related to the online gaming industry and covers the period from January 2018 to March 2023.

According to the notice, the DGGI has taken the view that GST liability should be calculated at 28% on the total entry amount, as opposed to the 18% GST currently paid on platform fees by online gaming companies.


“This is to inform you that our subsidiary company, First Games Technology Private Limited (‘First Games’), has notified us today at 6:07 p.m. IST that in relation to an ongoing GST matter in the online gaming industry for over 18 months, they have received a Show Cause Notice (‘SCN’), wherein the Directorate General of GST Intelligence (‘DGGI’) has taken the view that GST liability should be computed at 28% on the total entry amount, as against 18% GST paid on the platform fee (revenue) generated by gaming companies,” the company said in a regulatory filing.

Also read: IndusInd may slip into red in Q4 on derivative losses

In its regulatory filing, Paytm clarified that the SCN does not have any material financial impact on the operations or other activities of One 97 Communications Ltd. The company also stated that it intends to file an appropriate response, including a petition before the Honourable Courts, challenging the proposed demand.

Paytm informed that First Games will file a writ petition against the retrospective application of the GST amendment and will seek interim relief, arguing that the amendment should not apply to the period before October 1, 2023.

Paytm further noted that its investment in First Games is accounted for as a "joint venture" and consolidated under the "share of profit/loss" method. As of March 31, 2024, Paytm’s shareholding in First Games stood at approximately Rs 25 crore, with minimal impact on its overall financials.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)