First Games Technology, a subsidiary of One 97 Communications Limited, has received a show cause notice from the Directorate General of GST Intelligence (DGGI).

According to a disclosure filed by Paytm with the National Stock Exchange (NSE), the notice proposes a liability of Rs 5,712 crore, along with applicable interest and penalties, for the period January 2018 to March 2023.

The Vijay Shekhar Sharma-led company said that the notice pertains to an ongoing matter in the online gaming industry over the past 18 months, where GST liability has been calculated at 28% on the total entry amount, instead of18% GST paid on the platform fees 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 Honourable Supreme Court and they have granted interim relief by staying further proceedings,” the company said in a statement.

 

Paytm stated that First Games will file a writ petition challenging the show cause notice, including objections to the  retrospective application of the GST amendment dated October 1, 2023, along with the interpretation of the GST regulation prior to the amendment. It will also seek interim relief similar to that granted to others in the gaming industry.

“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 (as mentioned in this SCN) along with applicable interest and penalties, for the period from January 2018 to March 2023,” it added.

The Noida-based company also added that the SCN will not impact its operations, as the carrying value of its investment in First Games was already nil in Paytm’s consolidated financial statements as of March 2024.

Last Month, Paytm also received a show cause notice from the Directorate of Enforcement (ED) in connection with violations of foreign exchange norms related to the acquisition of its subsidiaries, Little Internet Pvt Limited (LIPL) and NearBuy India Pvt Ltd (NIPL). The show cause notice alleges contraventions in respect of aggregate transaction amounts of Rs 611 crore -- Rs 245 crore attributable to OCL; Rs 344.99 crore to Little Internet, and Rs 20.97 crore to Nearbuy. 

During the third quarter of the previous fiscal year (Q3 FY25), Paytm reported Rs 1,828 crore in revenue from operations, and a loss of Rs 208 crore.