In a fresh blow to India’s fintech giant Paytm, its parent company One97 Communications has received a goods and service tax (GST) demand notice of ₹3.73 crore from the Central Goods and Service Tax (CGST) department. The notice, issued on February 4, 2025, comes with an additional penalty matching the original amount, plus applicable interest, bringing the total liability to ₹7.47 crore.
The tax order, pertaining to the financial year 2017-18, has been issued under Section 74 of the Goods and Services Tax Act, 2017, citing alleged irregularities in input tax credit claims by the company. This development adds to the mounting regulatory challenges faced by the fintech major in recent months.
One97 Communications has taken a firm stance on the matter, with a company spokesperson stating, “Based on our assessment and expert advice, we believe the demand is not maintainable. We are currently evaluating all options, including filing an appeal against the order.” The company’s shares showed resilience in response to the news, climbing 2.3% to ₹799.45 per share during early trading on February 4.
Deepak Kumar, Senior Partner at Tax Advisory Services LLP, explains the broader implications: “This scrutiny of input tax credits in the fintech sector signals increased regulatory attention on digital payment companies. Companies need to ensure robust compliance mechanisms, particularly in complex areas like GST credit utilization.”
The latest notice follows a series of tax-related challenges for Paytm. Just a day earlier, Delhi GST authorities imposed a fine of ₹59.94 lakh on Paytm founder and CEO Vijay Shekhar Sharma, along with an additional penalty of ₹1.19 crore on One97 Communications for alleged tax norm violations. The clustering of these notices suggests intensified regulatory oversight in the fintech sector.
The impact extends beyond Paytm, as evidenced by similar notices to other tech companies. Zomato’s Blinkit has received a fresh GST demand notice of ₹5.9 crore from Haryana GST authorities, indicating a broader pattern of increased tax scrutiny in the digital economy sector.
Despite these regulatory challenges, Paytm has shown improvement in its financial performance. The company reported a 6% reduction in consolidated net loss to ₹208.5 crore in Q3 FY25, though revenue from operations declined 36% to ₹1,827.8 crore compared to the same quarter last year.
For Tamil Nadu’s burgeoning startup ecosystem, these developments carry significant implications. “The increased regulatory scrutiny could impact investment sentiment in the fintech sector,” notes Priya Raman, President of the Tamil Nadu Startup Association. “However, it also presents an opportunity for emerging startups to build stronger compliance frameworks from day one.”
The situation underscores the growing pains of India’s digital payment sector as it matures and faces greater regulatory oversight. While established players like Paytm navigate these challenges, the outcomes of these cases will likely set important precedents for the broader fintech industry.
