Paytm's First Games Faces Hefty GST Notice Amidst Industry-Wide Tax Dispute

Paytm's subsidiary, First Games, received a Show Cause Notice from the GST Intelligence Department, challenging the GST rate on entry fees. The notice alleges a Rs 5,712 crore GST liability. The gaming industry awaits a Supreme Court decision on the broader GST taxation issue affecting multiple companies.

Paytm has announced that its subsidiary, First Games Technology Private Limited, has been served a Show Cause Notice by the Directorate General of GST Intelligence (DGGI). This notice challenges the GST applicable on entry fees in the online gaming sector.

Currently, gaming companies pay an 18% GST on platform fees, but the DGGI contends that a 28% GST should be applied to the total entry amount. The notice outlines a dramatic GST liability of Rs 5,712 crore for the period between January 2018 and March 2023. This controversy echoes a broader contention within the gaming industry, with several companies facing similar scrutiny.

The issue is currently held up in the Supreme Court, which offered interim relief by pausing actions on prior notices following various petitions. Paytm's filing assured that the SCN does not affect its main operations and highlighted that First Games' financial contribution to Paytm is minimal. Paytm plans to challenge the SCN legally, arguing against the backdated application of the GST amendment effective from October 2023 and its interpretation before this amendment.

(With inputs from agencies.)