Breaking: Paytm's First Games receives ₹5,712 crore GST show cause notice

Paytm clarified that this issue is not unique to First Games, noting that the GST department has sent similar notices to several gaming companies in the past.

By  Imran FazalApr 29, 2025 9:19 AM
Breaking: Paytm's First Games receives ₹5,712 crore GST show cause notice
In response, First Games plans to file a writ petition to challenge the SCN on legal grounds, particularly opposing the retrospective application of a GST amendment effective from October 1, 2023.

One 97 Communications Limited, the parent company of First Games Technology Private Limited has received a show cause notice (SCN) from the Directorate General of GST Intelligence (DGGI), Delhi Zonal Unit. The notice pertains to an ongoing tax matter in the online gaming industry and proposes a demand of ₹5,712 crore in unpaid Goods and Services Tax (GST), along with applicable interest and penalties.

The notice, received by First Games on April 28, 2025, argues that GST should be levied at 28% on the total entry amount collected by the platform, rather than the 18% paid on platform fees — a stance that has become a contentious issue across the online real money gaming sector. The liability outlined in the notice covers the period from January 2018 to March 2023.

Paytm clarified that this issue is not unique to First Games, noting that the GST department has sent similar notices to several gaming companies in the past. The matter is currently under consideration by the Supreme Court, which has granted interim relief by staying further proceedings.

In response, First Games plans to file a writ petition to challenge the SCN on legal grounds, particularly opposing the retrospective application of a GST amendment effective from October 1, 2023. The petition will also question the interpretation of regulations before this amendment, seeking interim relief consistent with that granted to other companies in the industry.

Paytm has emphasized that the SCN has no operational or financial impact on One 97 Communications Limited itself. As per accounting standards, First Games is treated as a joint venture (JV), and its financials are not consolidated into Paytm’s statements. The company noted that its investment in First Games is already valued at nil as of March 31, 2024, with an exposure limited to ₹225 crore in shareholder loans as of December 31, 2024.

The Supreme Court of India will hear the biggest taxation matter of online gaming industry from May 5-9. The case, with an estimated financial impact of ₹2.5 lakh crore, is one of the biggest tax battles in India’s history.

Gaming companies are challenging the government’s interpretation of Rule 31A of the CGST Rules, which states that GST at 28% should be levied on the face value of each bet. The industry argues that this rule applies only to gambling and betting, not to games of skill like rummy, poker, or fantasy sports.

First Published on Apr 29, 2025 7:44 AM

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