Mumbai-based gaming company Nazara Tech subsidiaries receives Rs 1,120 crore GST notice

Mumbai-based gaming company Nazara Technologies recently said that two of its subsidiaries have received show-cause notices from the Director General of GST Intelligence, Kolkata.

The notices relate to an ongoing goods and services tax (GST) matter, totaling Rs 1,120 crore.

The notices were issued on July 16, with Openplay Technologies Pvt Ltd receiving a proposed liability of Rs 845.72 crore and Halaplay Technologies Pvt Ltd facing a proposed liability of Rs 274.21 crore. Both notices cover the period from 2017-18 to 2022-23.

Basis of the GST claims

The GST claims are based on the calculation method, which considers the sums pooled by players rather than the gross gaming revenues.

The approach has been a point of contention in the gaming industry, leading to significant tax demands.

Nazara Technologies stated, "Both subsidiaries are reviewing the notices with their legal counsels and tax advisors to determine their future course of action."

How significant are these subsidiaries to Nazara?

For the quarter ended March 2024, the two subsidiaries contributed less than 2% of Nazara Technologies' revenues and less than 1% of its profit.

This indicates that, while the tax demand is substantial, the financial impact on the overall company might be limited.

In May 2024, Nazara reported a net profit of Rs 0.18 crore, a sharp decline from Rs 9.4 crore in the same quarter the previous year. The decrease was mainly due to a Rs 16.87 crore loss from discontinued operations, including write-offs in legacy businesses like real-money gaming.