Mumbai-based gaming company Nazara Tech has announced that two of its subsidiaries have received significant GST notice from the Director General of GST Intelligence, Kolkata. The total amount involved in these notices is Rs 1,120 crore.
Details of the Notices
The notices were issued on July 16 and concern Openplay Technologies Pvt Ltd and Halaplay Technologies Pvt Ltd. Openplay Technologies is facing a proposed GST liability of Rs 845.72 crore, while Halaplay Technologies has a proposed liability of Rs 274.21 crore. These notices cover the period from 2017-18 to 2022-23.
Basis of the GST Claims
The GST claims are based on a calculation method that considers the sums pooled by players rather than the gross gaming revenues. This approach has been a contentious issue within the gaming industry, leading to significant tax demands.
Nazara Technologies has stated that both subsidiaries are currently reviewing the notices with their legal counsels and tax advisors. They are determining their future course of action in response to these substantial tax demands.
Impact on Nazara Technologies
Despite the large tax demand, the financial impact on Nazara Technologies may be limited. For the quarter ending in March 2024, the two subsidiaries contributed less than 2% of Nazara’s total revenues and less than 1% of its profit. This indicates that the overall financial health of Nazara Technologies might not be severely affected by these notices.
Recent Financial Performance
In May 2024, Nazara Technologies reported a net profit of Rs 0.18 crore. This is a sharp decline from the Rs 9.4 crore net profit reported in the same quarter the previous year. The significant decrease was mainly due to a Rs 16.87 crore loss from discontinued operations, including write-offs in legacy businesses like real-money gaming.
Nazara Technologies is currently dealing with a substantial GST notice for its subsidiaries, Openplay Technologies and Halaplay Technologies. While the tax demand is significant, the overall financial impact on the company might be limited due to the relatively small contribution of these subsidiaries to Nazara’s total revenues and profits. The company is in the process of reviewing these notices with legal and tax advisors to decide the next steps.
