The Calcutta High Court Has Granted Temporary Relief to Nazara’s Subsidiary in Their GST Dispute

Nitin Konde

Oct 7, 2024 — 2 min read

The Calcutta High Court Has Granted Temporary Relief to Nazara’s Subsidiary in Their GST Dispute

Openplay Technologies, a gaming company subsidiary of Nazara Technologies, was given an interim exemption from the show cause notice issued by the Director General of GST Intelligence, Kolkata, by the Calcutta High Court.

After being notified in July of a liability of INR 845.72 crore for the years 2017–18 to 2022–2023, Openplay filed a writ suit in the Calcutta High Court contesting the claim. In an exchange filing, Nazara said that the Hon'ble High Court had granted Openplay interim relief, directing that no effect would be given to any ruling passed by the Tax Authority regarding the show cause notice for the aforementioned demand without the Hon'ble High Court's permission.

Halaplay Technologies Also Received a Notice

Another subsidiary, Halaplay Technologies, also received a notification from the GST department, in addition to Openplay, which Nazara purchased in August 2021. After being purchased in several installments, Halaplay has an obligation of INR 274.21 crore from 2017-18 to 2022-2023 years. The affiliates are challenging the GST computation process, claiming that it ought to be rooted in total gaming income instead of the contribution from the player pool.

Nazara goes on to say that these subsidiaries make up very little of its sales and profit—less than 2% and 1%, respectively, in the quarter that ends in March 2024. A higher 28% tax rate on the total contest entry amounts for online gambling, casinos, and horse racing was imposed in 2023 by the GST Council. Online gaming companies received 71 show-cause notices in the previous year for alleged GST evasion surpassing INR 1.12 lakh billion in the fiscal years 2022–2023 and 2023–2024.

Bigger Consequences

An apt representation of the difficulties facing India's online gaming industry is the legal dispute over GST estimates. The regulatory burden has increased in tandem with the industry's growth. A new tax rate of 28% was imposed by the GST Council in 2023 on the total amount of contest entries for online gambling, casinos, and horse racing. Operators are becoming more concerned about compliance and sustainability as a result of this sharp increase in tax rates.

According to Nazara Technologies, its subsidiaries accounted for less than 2% of its sales and 1% of its profit for the quarter that ended in March 2024, meaning they had a negligible impact on the company's total financial performance. This background is crucial because it clarifies the difficulties these businesses encounter in a highly regulated setting where tax obligations can have a significant impact on business operations.