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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.

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

In a high-stakes legal showdown that could redefine India’s online gaming landscape, the Supreme Court has scheduled May 5, 2025, as the date for the final hearing in a case involving show-cause notices issued to several online gaming firms. 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.

On Tuesday, Solicitor General N. Venkatraman and senior counsels representing the gaming firms appeared before the bench comprising Justices JB Pardiwala and R. Mahadevan. While the court was initially hesitant to allow a delay, stating that the expectation was for the proceedings to begin that day, it ultimately agreed to an adjournment after persistent requests from both the Additional Solicitor General and the defense team.

The matter will now be heard on May 5, 2025, and is expected to continue throughout the week. The court made it clear that no further delays will be entertained.

The outcome of this case holds enormous implications for the real money gaming (RMG) industry. The controversial 28% GST has already dealt a severe blow to the sector. A ruling in favor of the gaming firms could reinforce the legal distinction between games of skill and gambling, potentially shaping future regulation, boosting investor confidence, and ensuring the long-term growth of the industry.

A senior legal counsel, speaking on the condition of anonymity, said, “The industry has a strong case on its merits. Numerous High Court rulings support our position, and decades of jurisprudence have consistently distinguished games of skill from gambling and betting.”

According to this counsel, the government’s stance is that Rule 31A—taxing gambling and betting at 28% on the face value of bets—should also apply to online skill-based games played for money between July 2017 and October 2023. The government argues these platforms are offering "actionable claims" akin to gambling and betting.

As the case heads into its decisive phase, all eyes are on the Supreme Court. Its verdict will not only decide the fate of India’s online gaming industry but also set a critical precedent for how digital innovation is taxed and regulated in the country.

SC to hear ₹2.5 lakh crore online gaming tax case on May 5

The Indian government on Tuesday sought adjournment at the Supreme Court in the 28% GST case levied on gaming companies. Gaming companies are mounting a strong defense against what they call an unjustified tax burden that could cripple the sector. The case, with an estimated financial impact of ₹2.5 lakh crore, is one of the biggest tax battles in India’s history.

Additional Solicitor General N. Venkatraman, who will argue in favor of the tax demands and defend the government’s position on retrospective taxation sought the adjournment due to another important taxation matter at the Supreme Court. Senior counsel Dr. Abhishek Manu Singhvi representing Gameskraft requested for next hearing to be in month of April or end of March. 

Justices JB Pardiwala and R Mahadevan heard the matter and were inclined to hear the matter within next few days. 
 
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.

It should be noted that 28% GST has drastically affected the real money gaming industry but if the Court rules in favor of the gaming industry, it would set a major legal precedent, reinforcing the distinction between games of skill and gambling. The decision will also impact future regulatory policies, investor sentiment, and the long-term sustainability of India’s booming real-money gaming (RMG) sector.

Another top counsel on condition of anonymity said, "The industry has a very strong case on merits as plethora of High Court judgments support the case and there is seven-decade of jurisprudence making it clear that games of skill are distinct from gambling and betting. The government is claiming that Rule 31A of CGST Rules (taxation of gambling/betting @28% on face value of bets) is applicable for the period July 2017-October 2023, online skill-gaming when played for stakes falls within the ambit of betting and gambling and that the platforms are supplying actionable claims amounting to gambling and betting."

As the battle unfolds, all eyes are on the Supreme Court’s final verdict, which could determine the fate of India’s online gaming sector.

Breaking: SC 28% GST gaming case, Govt seeks adjournment

The Indian online gaming industry is bracing for a landmark Supreme Court showdown as the 28% GST levy faces intense legal scrutiny. With the final hearings set to commence on March 18, gaming companies are mounting a strong defense against what they call an unjustified tax burden that could cripple the sector. 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.

This high-stakes battle has drawn some of India’s most prominent legal minds. Representing gaming companies are Harish Salve who represented Vodafone in a significant $2.5 billion tax dispute with the Indian government, ultimately securing a favorable verdict from the Supreme Court, Kulbhushan Jadhav case at the International Court of Justice achieving a stay on the execution of Indian national and Salman Khan Hit-and-Run Case. 

Dr. Abhishek Manu Singhvi represented during Bhima Koregaon Case for petitioners and activists and during National Judicial Appointments Commission (NJAC) Case. 

Sajan Poovayya was part of the legal team that argued for the recognition of the right to privacy as a fundamental right under the Indian Constitution and involved in the landmark case challenging the constitutional validity of the Aadhaar scheme, focusing on issues related to privacy and data protection.

Rakesh Dwivedi argued on behalf of the Travancore Devaswom Board, defending the traditional practices of the Sabarimala temple. Senior counsels include Dhruv Mehta, Gopal Sankarnarayanan, Balbir Singh, Vikram Nankani, and Arvind Datar, among others.

On the other side, the Union of India will be represented by Additional Solicitor General N. Venkatraman, who will argue in favor of the tax demands and defend the government’s position on retrospective taxation. Some of his notable cases include Kerala v. Union Suit on Borrowing Limits and The Chamber of Tax Consultants vs Director General of Income Tax. 

Sources also claim that the matter will be pushed to April considering other important tax related matters being in focus of the government. 

Adarsh Somani, Partner,  Economic Laws Practice said, "It is important to note that should the Supreme Court uphold the tax demands or merit of the notices so issued, many businesses may be forced to cease operations, as the tax liabilities would far exceed their revenues—let alone their profits."

Somani further said, "Also, in a potential turn of events, the government has introduced Section 11A, aimed at regularizing industry practices. It will be interesting to see whether, even if victorious, the government would resort to this provision only to safeguard the industry & its future.”

It should be noted that 28% GST has drastically affected the real money gaming industry but if the Court rules in favor of the gaming industry, it would set a major legal precedent, reinforcing the distinction between games of skill and gambling. The decision will also impact future regulatory policies, investor sentiment, and the long-term sustainability of India’s booming real-money gaming (RMG) sector.

Another top counsel on condition of anonymity said, "The industry has a very strong case on merits as plethora of High Court judgments support the case and there is seven-decade of jurisprudence making it clear that games of skill are distinct from gambling and betting. The government is claiming that Rule 31A of CGST Rules (taxation of gambling/betting @28% on face value of bets) is applicable for the period July 2017-October 2023, online skill-gaming when played for stakes falls within the ambit of betting and gambling and that the platforms are supplying actionable claims amounting to gambling and betting."

As the battle unfolds, all eyes are on the Supreme Court’s final verdict, which could determine the fate of India’s online gaming sector.


SC showdown: Top lawyers to face-off for 28% GST gaming case on March 18

The Finance Ministry has invited multiple stakeholders from the real-money gaming (RMG) industry to a meeting to discuss issues related to money laundering in online gaming. The stakeholders on Friday will also address challenges faced by the industry, including GST and the growing presence of offshore gambling companies in India.

According to a report by Ernst & Young and the US-India Strategic Partnership Forum (USISPF), the online gaming sector was projected to create 250,000 jobs by 2025. However, under the new GST regime, this figure has dropped significantly, with only 30,000 additional jobs now expected. Additionally, 83.3% of companies are struggling with employment creation. Foreign Direct Investment (FDI) in the sector has also nearly stalled under the new tax framework, a sharp contrast to the $1.7 billion FDI received in 2021.

Officials from the Financial Action Task Force (FATF), an intergovernmental organization that sets international standards to prevent money laundering and terrorist financing, will also be present at the meeting. The FATF will outline its agenda and the government's stance on the industry while seeking feedback and suggestions on curbing money laundering in online gaming.

An RMG operator told Storyboard18, "The Finance Ministry aims to discuss strategies for combating money laundering in the online gaming space. We anticipate a swift crackdown on offshore gambling platforms that are illegally operating in India. These unregulated offshore betting companies not only affect the revenue of legitimate businesses but are also involved in terror financing and money laundering, which is a serious concern."

A source close to the development stated, "During the 40-minute open discussion session, we will address the challenges faced by the RMG industry, including GST issues and the infiltration of offshore gambling firms that operate in India without paying taxes."

It is important to note that in its 50th meeting held in July 2023, the GST Council decided to impose a 28% tax—the highest slab—on the full face value of online gaming, bringing it in line with casinos and horse racing. In September 2024, Finance Minister Nirmala Sitharaman announced that revenue from online gaming had increased by 412%, reaching ₹6,909 crore within six months. Meanwhile, casino revenues saw a 30% rise.

A recent report by Ernst & Young and USISPF highlighted the impact of the 28% GST. Among the 12 companies surveyed, 20% of early-stage startups were forced to shut down, 40% halted hiring, and 20% laid off employees.

Approximately 30 petitions have been filed by RMG companies challenging retrospective GST demands exceeding ₹1.5 trillion, calculated at 28% on the face value of bets. Of these, 27 pleas have been transferred to the Supreme Court from various High Courts. The original petition was filed by Head Digital, Play Games24x7, and Baazi Games, while the GST department has also challenged a Karnataka High Court verdict.

Finance Ministry to meet RMG operators on Friday, will discuss money laundering in online gaming

Zee Entertainment Enterprises Ltd. (ZEEL) has received GST notice from the Commercial Tax Officer, Chengalpattu, Tamil Nadu. The order demands INR 0.40 million (including penalty) for ineligible Input Tax Credit (ITC) claims, along with INR 16.56 million in interest for excess ITC availed between July 2017 and March 2018. 

ZEEL believes the case has merit and will appeal within three months under the TNGST Act. The company assured investors that the order will not materially impact its financials or operations. The violation stated reads GST demanded towards excess ITC claimed in GSTR-3B.

ZEEL in its disclosure to stock exchanges stated that they have received a GST Order passed under Section 74, of TNGST/CGST/IGST Act, 2017 determining tax payable under GST of INR 0.40 million (including penalty) on ineligible ITC claimed and interest towards discrepancies arising in excess availment of ITC of INR 16.56 million for the period July 2017 to March 2018.

ZEEL in its filing stated, "The Company believes that there are merits in the case and will take necessary legal recourse under the available law by filing an appeal with three months before the adjudicating authority as per the provisions of TNGST Act. There is no material impact on financial, operations or other activities of the Company."

ZEEL gets GST notice of Rs 16.60 million for ineligible ITC claims

Real Money Gaming (RMG) companies are anticipating 2025 to be a pivotal year for the industry, with hopes of government relief from the 28% GST that has significantly impacted both new-age startups and the overall ecosystem. Meanwhile experts state there's been a surge of Rs 8.2 trillion in transactions on illegal betting and gambling platforms in India.

The India Gaming Market Report 2024 revealed that in FY23, $2.69 billion (86.7%) of gaming revenues in India came from pay-to-play models, out of a total $3.10 billion in the online gaming industry. The remaining revenue was generated through in-app purchases, advertisements, and other sources.

In July 2023, during the 50th GST Council meeting, online games—including skill-based and chance-based games—were placed in the 28% GST slab, which came into effect on October 1, 2023. Previously, skill-based games were taxed at 18%.

Finance Minister Nirmala Sitharaman announced in September 2024 that revenue from online gaming increased by 412%, reaching Rs 6,909 crore within six months. Meanwhile, casino revenues saw a 30% rise.

Saumya Singh Rathore, Co-founder of WinZO, commented, “While the impact of 28% GST on RMG, especially formats like casual skill gaming, has been devastating, there is significant hope that the government will take positive steps. They are open to meeting stakeholders and assessing the impact of high taxation on different formats within the RMG industry.”

She added, “Looking ahead, we hope for more inclusive dialogue between the government and diverse segments of the online gaming industry. This would help develop policies that reflect the sector's diversity. Despite the challenges of the current taxation framework, the regulatory landscape is evolving. Through continued engagement and data-driven insights, we are optimistic the government will implement balanced taxation norms to enable legitimate gaming platforms to thrive domestically and compete globally.”

A recent report by Ernst & Young and the US-India Strategic Partnership Forum (USISPF) highlighted the impact of the 28% GST. Of the 12 companies surveyed, 20% of early-stage startups had to shut down, 40% stopped hiring, and 20% laid off employees.

Kazim Rizvi, Founding Director of The Dialogue, stated, “Retrospective taxation depletes investor confidence, hampers investment flow, and creates significant barriers for businesses of all sizes. A clarification from the government could give Indian companies more room to grow, innovate, and attract capital.”

According to the Ernst & Young and USISPF report, the online gaming sector was projected to create 250,000 jobs by 2025. However, due to the new GST regime, it is now expected to create just 30,000 additional jobs, with 83.3% of companies facing challenges in employment creation. Similarly, Foreign Direct Investment (FDI) in the sector has nearly stalled under the new tax regime, in stark contrast to the $1.7 billion FDI received in 2021.

John Joseph, Strategic Adviser at DeepStrat and Former Chairman of CBIC, remarked, “The online gaming sector is under immense stress due to the new tax regime, which has increased the tax burden by 350%. To avoid prolonged litigation and provide relief to this nascent sector, it’s advisable that the government clarify that GST between July 2017 and September 2023 be applied ‘as is’ at 18% on platform fees.”

Thirty petitions have been filed by RMG companies challenging retrospective GST demands exceeding Rs 1.5 trillion, calculated at 28% on the face value of bets. Of these, 27 pleas have been transferred to the Supreme Court from various High Courts. The original petition was filed by Head Digital, Play Games24x7, and Baazi Games, with the GST department also challenging a Karnataka High Court verdict.

Sujit Ghosh, Senior Advocate at the Supreme Court, stated, “Resolving this issue would eliminate the need for prolonged and costly litigation. From a policy standpoint, it would also curb user migration to unregulated offshore platforms. A stable tax regime coupled with regulatory clarity will foster responsible growth in the sector, ensuring user safety and discouraging participation in the black market.”

Beyond taxation challenges, RMG companies are urging the government to refine online gaming regulations to clearly differentiate between skill-based gaming and betting or gambling.

RMG players' woes increase, while Rs 8.2 trillion illegal betting market grows

Indian Sellers Collective, an umbrella body of trade associations and sellers across the country has urged the Finance Minister and the GST Council to reject the recommendations of GoM (Group of Ministers) on GST Rate Rationalization. The sellers body believes that a new fifth GST slab of 35% and pricing-based rate structure will materially and fundamentally alter the country’s GST framework with devastating outcomes.

These recommendations violate both the letter and the spirit of PM Modi’s promise of GST to the citizens of India that it will be a ‘good and simple tax’. The proposed, materially different, GST framework would neither be good, nor simple. On the contrary, it will hurt the profit margins of the retailers, lead to compliance nightmares and fuel a parallel economy. This move will primarily benefit Chinese producers who dominate the market of cheap products at the cost of Indian producers. 

“All the gains of the GST regime will be wiped out, with permanent damage to the vast age-old retailer network of India, if the GoM recommendations are adopted,” said Abhay Raj Mishra, Member & National Coordinator, Indian Sellers Collective. He explains this further, “A 35% tax on demerit goods like tobacco and aeriated beverages will exponentially grow their illicit market, and a large number of sellers will move out of the formal economy. A pricing-based rate structure will trigger either manipulation or re-engineering of business models to beat the system. For small and mid-tier sellers, this will mean compliance nightmares and a very high risk of litigation.”

“Traditional Indian retail is already being eroded by e-commerce and quick-commerce, and such a massive shift in GST will be its final death knell. The GoM has been misguided by vested interests who want Indian retailers and intermediaries to weaken and become subservient to their agenda” he concluded.

Indian Sellers Collective has identified five immediate fall-outs which will hurt the business environment. These are:

1. Graded GST rates will make goods with incremental features more expensive, thereby denying middle-income people the opportunity to buy these products as this will be beyond their capacity to pay. This is regressive and will result in keeping the poor living like the poor.

2. A 35% tax on demerit goods like tobacco and aerated drinks will put these products out of reach for the common man, forcing them to choose illicit, inferior, and unsafe options like smuggled and fake bottled beverages and cigarettes that have brand lookalikes, are cheaper for consumers and can have worst health impact on those who don’t have the money to pay for illness. Also, the market for demerit goods will be ruled by illicit and smuggling syndicates with small retailers subservient to them in order to survive. 

3. Too many slabs and rate-based sub-slabs will make compliance a nightmare for small to medium business owners, who may prefer to return to the cash economy. This will also lead to manipulation and under-invoicing, with dire litigatory consequences.

4. Tax collectors, focused solely on revenue generation with disregard for social impact, may be tempted to push more goods into higher tax slabs, requiring reclassification and inventory recalibration, forcing frequent shifts in business models, resulting in a long string of litigations. This will also breed corruption in the tax management system.

5. An overcomplicated tax system, rising costs of superior goods, business models requiring frequent changes, rising corruption, and a thriving black and cash economy will kill small and mid-sized retail businesses and eventually hurt investor sentiment.

Dhairyashil Patil National President AICPDF (All India Consumer Products Distributors Federation) said “The Indian retail community would like to make a heartfelt appeal to the Honorable Prime Minister, Finance Minister, and the GST Council not to accept the recommendations which are against the principle of rationalization and simplification. This move, if implemented, would exacerbate the struggles of an already beleaguered retail community.”  

“We are hopeful that the Government will uphold its progressive vision by introducing a simpler and more efficient GST framework. A fair reduction in GST rates, wherever possible, is the need of the hour. However, we urge the Government to avoid any superficial exercises where reductions in some items are offset by increases in others, which would only create confusion and instability in the marketplace.”  

“The overarching goal of reducing the cost of goods for the common man will be entirely negated if small retailers, who serve as the backbone of the retail economy and a vital part of the common man’s livelihood, are driven to closure. Increased compliance costs under a complex GST regime will erode their already razor-thin profit margins, making the cost of doing business unsustainable for micro and ultra-small retailers. This would inevitably lead to their exit from the market, further straining the retail ecosystem.”  

“The AICPDF stands firm in advocating for the interests of small retailers and distributors, who are essential to India’s economic fabric. We call upon the Government to prioritize their welfare by simplifying GST compliance, reducing rates thoughtfully, and ensuring a stable, equitable business environment”, he concluded. 

Indian retailers urge GST council to reject GST rate rationalization recommendation

Ahead of the festive season in the country, Empower India, a think tank, has suggested deferring the introduction of the Invoice Management System (IMS), likely to be launched on 1 October 2024.

The primary objective of the IMS is to streamline the input tax credit (ITC) claim process. However, according to Empower India, the lack of preparation will not only increase the compliance burden but also impede the efficient deployment of the capital.

Under the new system, the recipient taxpayer will be required to accept or reject every invoice or credit note or keep it pending instead of the current system where businesses can simply claim ITC on their own.

The think tank added that the lack of legal backing for the IMS, proposal is a key concern as taxpayers are currently doing self-assessments and claiming ITC in their GST returns.

The Goods and Services Tax Network (GSTN) has proposed to launch the IMS on 1 October 2024.

K Giri Director General, Empower India said, "It is prudent to defer the introduction of the IMS as it could impact the retail ecosystem during the festive season when they conclude 30-35% of their yearly sales. Also for the retail ecosystem, a new guideline to be followed in the middle of a busy sales period is an unwarranted distraction. The lack of a functional supplier dashboard, which would provide visibility on recipient actions, further complicates the implementation".

As per Empower India's suggestions, consultations with small businesses and with the last retailer are paramount. The think tank mentioned some of the suggestions by taxpayers such as allowing credit notes to be kept pending, providing sufficient time for alignment before automatic addition of tax liability, and enabling suppliers to issue debit notes to offset rejected credit notes.

"The current proposal lacks a clear mechanism for suppliers to dispute any incorrect or mischievous rejection of credit notes by their customers," Empower India added.

The think tank said that companies are already handling major GST change by way of Input Service distribution becoming mandatory from the next fiscal year, and the unannounced change complicates the compliance process.

"Business should be allowed at least 12 months to prepare for the implementation of IMS," Empower India said.

IMS rollout could curtail festive sales opportunity for retailers: Empower India

The Rs 60,000 crore Indian non-alcoholic beverage sector, represented by companies such as PepsiCo, Coca-Cola, Bisleri, Tata Group, and Campa (Reliance Industries Ltd), has formally appealed to the government for urgent tax reform, according to reports by CNBC-TV18. 

In letters to the Finance Ministry, the GST Council, and a GST-Council-nominated Group of Ministers (GoM) on rate rationalisation, the industry has outlined the detrimental effects of high GST rates on the sector.

In an exclusive interview with CNBC-TV18, CK Jaipuria, Chairman of the Indian Beverage Association (IBA), emphasized the need for immediate action. He labelled the existing tax structure as "retrograde" and noted that the high rates place a significant burden on the rapidly growing industry, which is expanding at a rate of 14% annually.

The industry has proposed lowering the GST on essential items like bottled water, currently taxed at 18% and 12%, to 5%. "Water is a necessity," Jaipuria remarked, adding that the government itself procured bottled water for disaster relief efforts, underscoring its importance. "A reduction in tax would allow us to pass on the benefits to consumers."

Jaipuria also called for a GST reduction on fruit juices, currently taxed at 12%, to 5%, in line with food items. He recalled the Prime Minister's earlier push for the beverage industry to increase its procurement of fruits to support farmers, stating that the sector has yet to see the promised tax relief despite increasing fruit content in beverages.

For carbonated drinks, which are taxed at 28% with an additional 12% cess, the industry has requested a reclassification. "Carbonated drinks should not be treated as sin goods like alcohol and tobacco," Jaipuria argued. He urged the government to reduce the overall tax burden on these products to 18%.

The GoM meeting, scheduled for today in Goa, may address these proposals, but the outcome remains uncertain.