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As the challenges for the Indian gaming firms continues to rise, Diversified gaming company Nazara Technologies said it has also received a show cause notice from the Director General of GST Intelligence, Mumbai for a tax demand of Rs 2.83 crore, along with interest and penalty.
What does the notice say?
"Pursuant to Regulation 30 of SEBI Listing Regulations, we would like to intimate that a Show Cause Notice (SCN) dated 21st September 2023, has been received by the Company today i.e on 27th September, 2023 from Director General of GST Intelligence, Mumbai stating a tax demand of INR 2,83,96,324/- under section 74(1) of Central Goods and Services Tax Act, 2017 (“Act”)/ Maharashtra Goods and Services Tax Act 2017 along with interest under section 50 of CGST and penalty under Section 122(2)(b) of the Act read with Section 20 of Integrated Goods and Services Tax Act, 2017," the company informed in an exchange filing.
To put it simpler, The company has received a Show Cause Notice on 27th September 2023, from the Director General of GST Intelligence, Mumbai. This notice, dated 21st September 2023, states a tax demand of Rs 2,83,96,324 under the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act 2017.
Additionally, it includes interest under section 50 of CGST and a penalty under Section 122(2)(b) of the Act, along with Section 20 of the Integrated Goods and Services Tax Act, 2017.
Nazara's justification
Nazara mentioned that it provided services for export under a specific rule, without paying GST, expecting to receive the export proceeds later. However, due to unforeseen and uncontrollable events, the proceeds have not been received. As a result, the provided services can't be considered as exported services, and the company is now required to pay an 18% Integrated Goods and Service Tax (IGST) on the value of those services, the company said.
"Nazara exported services under a letter of undertaking without payment of GST as per rule 96A of CGST Rules, 2017. As export proceeds have still not been received (on account of a force majeure event) section 2(6)(iv) is not complied, the sale of services can’t be treated as export of services and hence company is responsible to pay IGST @18% on value of such services," the company added.
Nazara said that would be filing its response to the said show cause notice within the prescribed timelines.
This development comes at a time when tax authorities are becoming stricter with Indian gaming firms, following the introduction of a 28% GST on online gaming companies in the country.
What does Nazara Technologies do?
Founded in 1999 by Nitish Mittersain, Nazara Technologies is an Indian gaming and media company that offers interactive gaming, e-sports, adtech, and gamified early learning for users across India, Africa, and North America.
The company recently raised Rs 100 crore from Kamath Associates & NKSquared, managed by Zerodha's founders Nikhil and Nithin Kamath. Soon after, Nazara raised Rs 410 core in funding from SBI Mutual Fund.
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