The Supreme Court has stayed proceedings related to a ₹5,712 crore Goods and Services Tax (GST) demand issued against First Games, a real-money gaming platform owned by Paytm’s parent company, One97 Communications.
The apex court’s order came in response to a writ petition filed by First Games on May 3, 2025, challenging the massive GST demand raised by the Directorate General of GST Intelligence (DGGI). The stay was granted on May 23, 2025, and formally communicated to One97 Communications by First Games on May 24.
In a regulatory filing disclosed on Saturday, One97 Communications confirmed:
“We hereby inform you that First Games has notified us on 24 May 2025 at 10:44 am IST that in the writ petition… filed by First Games challenging the said SCN, the Hon’ble Supreme Court of India has, on 23 May 2025, stayed the proceedings of the SCN.”
The Tax Dispute
The case centres around the method of calculating GST on online gaming platforms. On April 28, 2025, the DGGI issued a show-cause notice to First Games, proposing a GST liability of ₹5,712 crore, along with interest and penalties. The notice covered the period from January 2018 to March 2023.
The core issue is whether GST should be levied at 18 per cent on gross gaming revenue (GGR)—that is, the commission or platform fees earned by the company—or at 28 per cent on the total face value of bets placed by users. The DGGI’s demand assumes the latter, significantly inflating the tax burden.
First Games has contested this position, arguing against the retrospective application of the GST Council’s October 2023 amendment, which mandates 28 per cent GST on the full entry amount for all online games, irrespective of whether they are classified as games of skill or chance. The company has sought relief similar to what has been granted in other related cases.
Industry-Wide Impact
This legal tussle is part of a broader regulatory battle impacting the entire online gaming industry. The GST Council’s 2023 amendment to the Central GST Act aimed to resolve ambiguities that had led to inconsistent tax treatment and litigation. Before the amendment, online games of skill were taxed at 18 per cent on GGR, while games of chance were subject to 28 per cent on the full bet amount. However, the overlap between skill and chance in games like poker and fantasy sports created classification challenges.
By making the 28 per cent rate applicable across the board and retrospectively from August 2017, the amendment has led to aggressive tax enforcement by authorities. Multiple companies have received similar show-cause notices under Section 74 of the CGST Act, prompting a wave of legal challenges.
One97 Communications has clarified that the issue is not unique to First Games and reflects a larger, ongoing debate about the taxation of digital gaming services in India.
As the matter now lies before the Supreme Court, the decision will likely have far-reaching consequences for how online gaming businesses are taxed and regulated in the country.
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