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Paytm’s parent company, One 97 Communications Ltd, informed stock exchanges on 28 April, 2025, that its subsidiary, First Games Technology Pvt Ltd, received a show-cause notice (SCN) from the Directorate General of GST Intelligence (DGGI). The notice proposes a GST liability of 28% on the total entry amount, rather than the 18% GST currently paid on platform fees (revenue) earned by gaming companies.
The notice said "This is to inform you that our subsidiary company, First Games Technology Private Limited ("First Games"), has notified us today at 6:07 p.m. IST that in relation to an ongoing GST matter in the online gaming industry for over 18 months, they have received a Show Cause notice ("SCN")"
The DGGI contends that GST should be levied at 28% on the entire admission amount, instead of the 18% GST currently applied to platform fees or revenue earned by gaming companies.
According to the disclosure, First Games plans to file a writ petition challenging the show-cause notice (SCN), contesting the retrospective application of the GST amendment effective October 1, 2023, and prior GST interpretations. The company will also seek interim relief similar to that granted to others in the gaming industry.
Paytm stated that the SCN will not impact its operations, as the carrying value of its investment in First Games was already zero as of March 2024, per the company’s consolidated financial statements.
Another Show-Cause Notice
The Directorate of Enforcement (ED) issued a show-cause notice to Paytm last month in response to claims made against Little Internet Pvt Ltd (LIPL) and Nearbuy India Pvt Ltd (NIPL). The notice cites alleged violations of the Foreign Exchange Management Act (FEMA), involving aggregate transactions worth more than ₹611 crore relating to the acquisition of its subsidiaries.
The alleged violations pertain to Paytm’s acquisition of two subsidiaries, Little Internet Pvt Ltd and Nearbuy India Pvt Ltd, formerly Groupon, involving certain directors and officers.
This development comes ahead of Paytm’s fourth-quarter financial results. In the third quarter of the previous fiscal year (Q3 FY25), the company reported operating revenue of ₹1,828 crore and a net loss of ₹208 crore.
