Supreme Court Stays Rs.5,712 Crore GST Notice To First Games Technology
Supreme Court Stays Rs.5,712 Crore GST Notice To First Games Technology
The case holds immense significance and could set a precedent for tax treatment in India's burgeoning online gaming industry
The Supreme Court has provided relief to First Games Technology Pvt Ltd, a gaming subsidiary of One 97 Communications Ltd, by staying a Rs.5,712 crore show-cause notice issued by the Directorate General of the Goods and Services Tax (GST) Intelligence.
The suspension will continue until the court decides on the contentious GST demand, as First Games had challenged the notice.
The apex court held, "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 notice under Section 74(1) of the Central Goods and Services Tax (CGST) Act, 2017, the Uttar Pradesh Goods and Services Tax (UPGST) Act, 2017, and Section 20 of the Integrated Goods and Services Tax (IGST) Act, 2017, proposed GST demand of Rs.5712 (from January 2018 to March 2023), including applicable interest and penalties.
It is part of a broader regulatory crackdown wherein several online gaming companies have received similar tax notices.
The DGGI stated that GST liability should be computed at 28 percent on the total entry amount, as against 18 percent paid on the platform fee by online gaming companies.
Recently, One 97 Communications, the parent company of Paytm, disclosed the matter to the stock exchanges in compliance with Regulation 30 of the Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements (LODR).
The company maintained that the matter was under the top court’s scrutiny amidst the ongoing legal uncertainty in the gaming sector.
The case could set a precedent for tax treatment in India's burgeoning online gaming industry.
The matter is controversial because of the GST department's interpretation of the taxable value of gaming services. The industry players have contended that only platform fees (not prize pools) should be taxed.
Meanwhile, Paytm stated that it would continue to cooperate with the authorities and defend its position as the case proceeds in court.
