Nazara’s subsidiary gets interim relief by Calcutta High Court in GST dispute

The Calcutta High Court has granted interim relief to Openplay Technologies, a subsidiary of gaming company Nazara Technologies, providing temporary reprieve from the show cause notice issued by the Director General of GST Intelligence, Kolkata.

Openplay, which received a notice in July regarding a liability of Rs 845.72 crore from 2017-18 to 2022-23, filed a writ petition with the Calcutta High Court challenging the demand.

“The Hon’ble High Court has granted interim relief to Openplay, directing that no effect shall be given to any order passed by the Tax Authority in relation to the show cause notice for the above demand without the leave of the Hon’ble High Court,” Nazara said in an exchange filing.

Along with Openplay, which Nazara acquired in August 2021, another subsidiary, Halaplay Technologies, also received a notice from the GST department. Halaplay, acquired in multiple tranches, faces a liability of Rs 274.21 crore for the period from 2017-18 to 2022-23.

The subsidiaries are disputing the GST calculation method, arguing that it should be based on gross gaming revenue rather than the player pool contribution.

Nazara further highlights that these subsidiaries contribute minimally, accounting for less than 2% of its revenue and 1% of its profit in the quarter ending March 2024.

In 2023, the GST Council implemented a higher 28% tax rate on the total contest entry amounts for online gaming, casinos, and horse racing.

In the previous year, 71 show cause notices were issued to online gaming companies for alleged GST evasion exceeding Rs 1.12 lakh crore during the financial years 2022-23 and 2023-24.