​Paytm’s gaming subsidiary, First Games Technology Pvt Ltd, has received a ₹5,712 crore show cause notice from the Directorate General of GST Intelligence (DGGI). The notice alleges that the company underpaid Goods and Services Tax (GST) by applying an 18% rate on platform fees instead of the 28% rate on the total entry amount collected from users. This demand covers the period from January 2018 to March 2023 and includes applicable interest and penalties .​

Paytm’s parent company, One97 Communications Ltd, clarified that First Games is treated as a joint venture for accounting purposes, and its revenues are not consolidated into Paytm’s financials. The company’s exposure to First Games is limited to approximately ₹225 crore, primarily in the form of shareholder loans .​

First Games plans to challenge the notice by filing a writ petition, arguing against the retrospective application of the GST amendment effective from October 1, 2023, and disputing the interpretation of GST regulations prior to that amendment. The company will seek interim relief similar to that granted to other gaming firms, as the matter is currently pending before the Supreme Court .​

This issue is part of a broader industry-wide dispute over GST calculation methods in the online gaming sector, with several companies receiving similar notices.​

Sources