Paytm’s online gaming subsidiary, First Games Technology Private Limited, has received a show cause notice from the Directorate General of GST Intelligence (DGGI), Delhi Zonal Unit. The notice proposes a tax liability of ₹5,712 crore, plus interest and penalties, for the period between January 2018 and March 2023.
According to a report by Money Control, the DGGI argues that Goods and Services Tax (GST) should be applied at 28% on the total entry amount. This contrasts with the 18% GST that gaming companies, including First Games, have been paying on platform fees.
The notice was received by First Games on April 28, 2025. Paytm clarified that the matter is not unique to First Games. “The GST department has sent similar notices to several gaming companies in the past,” the company said.
The Show Cause Notice was issued under Section 74(1) of the CGST Act, 2017, the UPGST Act, 2017, and Section 20 of the IGST Act, 2017. It also cites potential penalties under Sections 122(1) and 125 of these laws.
One 97 Communications Limited, Paytm’s parent company, stated that the matter is currently pending before the Supreme Court. The apex court has already granted interim relief to some gaming companies by staying further proceedings.
First Games plans to challenge the notice by filing a writ petition. The company is opposing the retrospective application of the GST amendment effective from October 1, 2023. It also disputes the interpretation of GST rules prior to this amendment.
“The company will seek interim relief similar to that granted to other gaming companies,” said One 97 Communications in its exchange filing.
The ongoing tax dispute centers around Rule 31A of the CGST Rules. The government asserts that 28% GST should apply to the face value of each bet. The gaming industry contends this rule pertains only to gambling and betting, not games of skill such as rummy, poker, and fantasy sports.
Paytm emphasized that the notice does not affect its operations or finances. First Games is considered a joint venture for consolidation purposes. As such, its revenues are not merged with Paytm’s consolidated statements.
The company’s financial exposure to First Games stands at around ₹225 crore, primarily in the form of shareholder loans. As of March 31, 2024, Paytm values its investment in the subsidiary at nil.
The disclosure was made as part of regulatory compliance under SEBI’s Listing Obligations and Disclosure Requirements Regulations, 2015. The Supreme Court is scheduled to hear the case between May 5 and May 9. The proceedings could have implications worth ₹2.5 lakh crore for the online gaming sector.
Source from: https://g2g.news/gst-on-online-gaming/paytms-gaming-arm-first-games-receives-5712-crore-gst-show-cause-notice/
