Paytm Gains After GST Relief for Subsidiary

Paytm’s shares increased by almost 2% during trading on 26 May after a large tax demand against its subsidiary, First Games Technology, was paused by the Supreme Court.

In a recent exchange filing on May 24, the company said that the supreme court has put a hold on a Goods and Services Tax (GST) notice of Rs. 5,712 crore sent by the GST department to its subsidiary. Until the final decision is made, the court has put a hold onto this matter including all related cases.

This development provided relief to the company as well as its investors, as the notice had created concerns regarding a heavy tax burden. It was suggested in the notice that 28% GST should be charged on the full amount collected from users by the gaming platform. But earlier, the company had paid only 18% GST on the platform fee, which is a usual practice done by many gaming companies.

It was revealed that this not just a single company issue according to the earlier update shared in April.

Similar notices have been sent to various online gaming platforms by the GST department. This entire matter is now under consideration by the Supreme Court and it has granted interim relief through putting a stop to further actions for now.

It was also mentioned that the company’s subsidiary is planning to file a writ petition to challenge the tax notice. The proposed liability of Rs. 5,712 crore covers a period from January 2018 to March 2023.

The stay order of Supreme Court is seen as a positive step for the digital payment and gaming firm, decreasing the immediate legal pressure and helping to win investor confidence.