Paytm’s Gaming Subsidiary Gets INR 5,712 Cr GST Notice

Fintech major Paytm’s online gaming subsidiary First Games Technology Pvt Ltd has received a tax demand notice to the tune of INR 5,712 Cr, excluding interest and penalty, from the Delhi zonal unit of the Directorate General of GST Intelligence (DGGI). 

In a filing with the exchanges, the fintech giant said that the show cause notice pertains to the department’s view that GST liability for online gaming platforms should be calculated at 28% of the total entry amount as against 18% GST being paid on platform fee. 

First Games offers rummy, fantasy sports, ludo and fantasy cricket to its customers. The demand notice pertains to the period between January 2018 and March 2023.

“Show Cause Notice to First Games under section 74(1) of the CGST Act, 2017, UPGST Act, 2017 and section 20 of the IGST Act, 2017, proposing GST demand of INR 5,712 Cr and applicable interest and penalty, for ongoing GST matters against online gaming industry

wherein DGGI has taken a view that GST liability should be computed @ 28% on total entry amount as against 18% GST being paid on platform fee by online gaming companies,” read the filing. 

The company said that it now plans to file a writ petition challenging the proposed liability, and seek relief at par with others in the gaming industry. 

Paytm also said that the notice will “not have any impact” on the “operations or other activities” of parent One97 Communications Ltd. (OCL). Elaborating further, Paytm said that OCL’s exposure to First Games is limited to nearly INR 225 Cr, primarily on account of shareholder loan (including applicable interest) as on December 2024. 

“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,” added Paytm. 

Meanwhile, the latest demand notice against Paytm First Games comes at a time when the larger online gaming ecosystem is grappling with the fallout of the Centre’s 28% GST mandates. It all started in 2023 when the GST Council announced a decision to levy the tax rate on full face value of bets for online real-money gaming platforms. 

Just as the new regime came into effect on October 1, 2023, online gaming players began receiving GST notices. Compass like Dream11, MPL, WinZO and others have so far received demand notices to the tune of over INR 1 Lakh Cr from GST officials. 

Many platforms filed legal cases against these retrospective notices. In some respite, the Supreme Court, in January 2025, put a temporary halt on GST proceedings against 49 real-money gaming companies. It is the same relief that Paytm First Games, too, plans to seek by filing a writ petition. 

Meanwhile, the GST troubles are expected to spell trouble for Paytm’s renewed focus towards digital payments. Earlier this year, Inc42 exclusively reported that the fintech major was looking to offload the profitable First Games amid revenue chill in the gaming industry and dwindling downloads. 

Nevertheless, Paytm founder and CEO Vijay Shekhar Sharma, earlier this year, said that the company was on track to deliver profits in the first quarter (Q1) of the fiscal year 2025-26 (FY26).