First Games Challenges ₹5,712 Crore GST Notice, Joins Industry-Wide Legal Battle in Supreme Court

Image Source: Business Today

The subsidiary company of Paytm, First Games Technology Private Limited, has stated it will move a writ petition in the Supreme Court against a ₹5,712 crore GST notice by the Directorate General of GST Intelligence (DGGI). This step follows other video game companies' similar moves in the face of an industry-wide feud over GST guidelines. The following is a detailed summary:

GST Notice Details:

The DGGI has estimated a GST liability of ₹5,712 crore, along with interest and penalties, for the period between January 2018 and March 2023.
The notice argues that GST must be charged at 28% on the entire entry amount, as compared to the 18% GST already paid on platform fees by gaming firms.

Industry-Wide Issue:

The GST department has also served similar notices on a few online gaming businesses, triggering a larger legal struggle over the application of GST law.
The issue is pending in the Supreme Court, which has extended interim relief to other game operators by putting further proceedings in abeyance.

Legal Strategy of First Games:

First Games will move to contest the retrospective implementation of the GST amendment from October 1, 2023, and the pre-amendment interpretation of GST laws.
The firm will also pursue interim relief, similar to that given to other gaming firms.

Effect on Paytm:

Paytm made it clear that the notice has no effect on its operations or any other activity, since First Games is considered a joint venture for consolidation purposes in groups.
First Games contributes below 1% to Paytm's consolidated profit/loss, and Paytm's investment in First Games is already at nil carrying value.

Future Outlook:

The result of this legal battle will also have important ramifications for the online gaming sector, possibly redefining GST laws and regulations.
First Games continues to pursue the solution in a legal manner and be compliant with the prevailing laws.

This evolution serves to underscore the continued difficulties of the online gaming sector in handling sophisticated regulatory regimes.

Sources: Economic Times, Moneycontrol, MSN