India's Supreme Court halts $678M GST demand on Paytms First Games
The Supreme Court of India has stayed a ?5,712-crore ($678 million) Goods and Services Tax (GST) notice issued to Paytm-owned real money gaming platform, First Games. The interim relief comes amid one of Indias largest tax disputes impacting the entire online gaming industry.
GST notice issued in April
On 28 April 2025, One97 Communications Ltd, the parent company of Paytm, disclosed that its subsidiary First Games Technology Pvt Ltd had received a show cause notice (SCN) from the Directorate General of GST Intelligence (DGGI), New Delhi. The notice demanded a on the total entry amount collected from usersa sharp increase from the 18 percent GST the platform has been paying on its platform fees.
The total tax liability cited in the notice is ?5,712 crore, excluding interest and penalties. The SCN is part of a larger regulatory crackdown affecting multiple gaming companies across India.
Supreme Court stay granted
According to a regulatory filing on 24 May, First Games informed One97 Communications that the Supreme Court, on 23 May, had granted a stay on the proceedings of the SCN. The relief came after First Games filed a writ petition challenging the tax notice.
Following the news, shares of Paytm shares jumped 1.98 percent to touch ?861 on the Bombay Stock Exchange (BSE) at the time of publishing.
Industry-wide tax battle
The tax notice stems from a broader interpretation by the DGGI under Rule 31A of the Central GST Rules. Authorities argue that 28 percent GST should be levied on the full face value of user entry amounts, treating them akin to bets.
However, gaming operators argue that this rule is meant for gambling and betting, not for skill-based games like poker, rummy, and fantasy sports. The industry has largely been applying GST only on the platform fees, not the total entry amounts.
One97 Communications stated that this issue is not unique to First Games and affects the entire online gaming sector. Several companies have already approached the courts and obtained interim relief against similar GST demands.
Financial exposure for parent company
One 97 Communications stated in its exchange filing that First Games is treated as a joint venture for group consolidation purposes. As such, the GST notice does not affect the parent companys ongoing operations or financial performance.
The filing clarifies that the parent companys exposure to First Games stands at approximately ?225 crore, primarily through shareholder loans including interest as of 31 December 2024. Additionally, First Games revenues are not consolidated with the parent, and its contribution to the consolidated profit or loss for financial year 2023C24 is less than 1 percent.
