SC Stays INR 5,712 Cr GST Notice Against Paytm’s First Games

In a major relief for Paytm, the Supreme Court (SC) has stayed INR 5,712 Cr GST notice issued against the listed fintech giant’s gaming subsidiary First Games Technology Pvt Ltd. 

In a filing with the exchanges, the company said that First Games filed a writ petition against the notice on May 3 and the SC stayed the proceedings on May 23. 

“Further proceedings of all the impugned show cause notices shall remain stayed till the final disposal of the main matter along with all the matters which are tagged,” the SC order read as per the filing.

The Vijay Shekhar Sharma-led company further reiterated that this is an “industry-wide issue” whereby the GST department has sent notices to several gaming companies including First Games. 

This comes a month after the Delhi zonal unit of the Directorate General of GST Intelligence (DGGI) sent a show cause notice to First Games. Citing its rationale for the demand notice, the department said 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. 

The demand notice pertained to the period between January 2018 and March 2023. 

First Games offers rummy, fantasy sports, ludo and fantasy cricket games to its customers. Unlike Paytm’s other verticals, the online gaming arm is a profitable business and clocked a net profit of INR 10.6 Cr in FY24 as against a net loss of INR 21.6 Cr in the previous year. 

However, the profitability came at the cost of revenue. Its top line slumped 50% to INR 213.5 Cr in the fiscal year under review from INR 487.4 Cr in FY23. Earlier this year, Inc42 reported that the number of downloads of the gaming app fell sharply to 1 Lakh in February 2025 from 1.5 Lakh during the same period last year. 

Amid regulatory headwinds in the broader real money gaming space and Paytm’s renewed focus on payments and profitability, the listed fintech major was said to be looking to sell its gaming vertical.  

GST Troubles For Gaming Industry 

At the heart of the GST notices is the decision of the GST Council in 2023 to charge 28% tax on the total value of bets placed on real money gaming platforms as against 18% paid earlier on gross gaming revenue.

After the new GST rule came into effect on October 1, 2023, the GST department began sending tax notices to gaming companies. As per government data, 71 show cause notices have been sent to various RMG platforms for alleged evasion of goods and services tax (GST) totalling INR 1.12 Lakh Cr. 

Arguing that the government was employing the new GST mandates retrospectively, gaming platforms like Gameskraft, Dream11, Games 24×7, and Head Digital Works approached various courts around the country to challenge the notices.

In some respite earlier this year, the SC put a temporary stay on the notices for 49 online gaming platforms. Last week during a hearing in the top court, the gaming platforms reportedly challenged the Centre’s classification of participation fees for skill-based games as “actionable claims”, arguing that the move was misconceived. 

Nevertheless, the real money gaming sector accounts for nearly 86% of India’s $3.7 Bn online gaming market. As per a report, the homegrown online gaming industry is projected to become a $9.1 Bn opportunity on the back of rising internet and smartphone penetration and disposable incomes.