The PayTM’s subsidiary company, First Games Technology Private Limited (“First Games”), in relation to an ongoing GST matter in the online gaming industry for over 18 months, have received a Show Cause notice (“SCN”), wherein the Directorate General of GST Intelligence (“DGGI”) has taken a view that GST liability should be computed at 28% on the total entry amount, as against 18% GST paid on the platform fee (revenue) generated by the 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.
In line with the industry, First Games will also be filing a writ petition challenging the SCN on legal grounds, including the retrospective application of the GST amendment dated October 1, 2023, and/or the interpretation of the GST regulation prior to the amendment. 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 INR 5,712 crores (as mentioned in this SCN) along with applicable interest and penalties, for the period from January 2018 to March 2023.
This SCN does not have any impact on the operations or other activities of One 97 Communications Limited (“OCL”). First Games is considered as a “JV” for Group consolidation perspective as per Accounting standards, hence its revenues are not consolidated, and our share of its profit/ loss as per Equity method, is less than 1% of OCL’s Consolidated Profit / Loss for the financial year ended March 31, 2024. The carrying value of Investment in First Games in the Consolidated Financial Statements of OCL as on March 31, 2024 is already Nil. OCL’s exposure to First Games is limited to approximately INR 225 crores, primarily on account of shareholder loan (including applicable interest) as on December 31, 2024.
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