Nazara Subsidiaries Receive Tax Notices Worth INR 1,119.93 Cr

Gaming major Nazara Technologies is facing tax scrutiny as its subsidiaries, Openplay Technologies Pvt Ltd and Halaplay Technologies Pvt Ltd, have received substantial tax notices from the Director General of GST Intelligence, Kolkata.

On July 16, 2024, Openplay Technologies was served a Show Cause Notice under Section 74(1) of the CGST Act, 2017, and the State SGST Act, 2017, with a proposed liability amounting to INR 845.72 Cr for the period from 2017-18 to 2022-23, Nazara said in an exchange filing.

Similarly, Halaplay Technologies has been notified of a proposed tax liability of INR 274.21 Cr under the CGST Act, 2017, for the same period. Together, these notices represent a total proposed tax liability of over INR 1,119.93 Cr.

“These claims are in relation to calculation of GST based on the sums pooled by players as opposed to gross gaming revenues. Both subsidiaries are reviewing the notices with their legal counsels and tax advisors to determine their future course of action,” Nazara said.

For the quarter ended March, 2024 , these subsidiaries collectively contributed to less than 2% of the company’s revenues and less than 1% of its profit, it noted.

Last year, Nazara Technologies received a GST show cause notice from the Mumbai office of the Directorate of GST Intelligence (DGGI) worth INR 2.84 Cr, the listed online gaming startup informed the bourses on Wednesday (September 27).

Last year, the GST Council decided to impose a 28% GST on online real-money gaming on the full face value of the bets. This decision faced heavy criticism from industry stakeholders, including gaming startups, industry bodies, and investors, who wrote to the government urging a reconsideration. Despite the criticism, the GST Council remained firm in its decision.

In August, amendments to the Central Goods and Services Tax (Amendment) Bill, 2023 and the Integrated Goods and Services Tax (Amendment) Bill, 2023 were approved by the GST Council. Later, the Parliament approved these amendments.

Several online gaming startups, including Gameskraft, Delta Corp and others received notices to pay INR 1.12 Lakh Cr GST, following which many have moved courts challenging the tax notices.

More than 50% of online gaming companies in India witnessed stagnant or declining revenues after the government imposed 28% GST, a recent report released jointly by EY and US-India Strategic Partnership Forum (USISPF) said, based on the latter’s survey of 12 such companies.