Digital payments giant faces second GST notice within 24 hours, raising concerns about regulatory compliance as authorities intensify scrutiny of fintech operations in India
In a significant development that could impact India’s fintech landscape, One 97 Communications Limited (OCL), the parent company of Paytm, has been served with its second GST demand notice in two days. The latest order, received on February 4, 2025, demands Rs 7.47 crore for allegedly wrongful input tax credit claims during FY 2017-18, bringing the company’s total GST liability to Rs 8.66 crore.
This fresh demand follows closely on the heels of a previous notice issued on February 3, which sought Rs 1.19 crore for alleged non-compliance with tax invoice regulations spanning three financial years from 2020 to 2023. The development marks an intensification of regulatory scrutiny on one of India’s leading fintech players.
The Central Goods and Services Tax (CGST) Department’s actions have raised eyebrows in Tamil Nadu’s burgeoning fintech ecosystem, where numerous startups have been closely watching regulatory developments in the sector. The department alleges that Paytm violated multiple provisions of the GST Act, 2017, particularly concerning input tax credit claims and invoice documentation.
“The timing and magnitude of these GST demands signal a broader regulatory tightening in the fintech space,” notes Dr. Ramesh Kumar, Director of the Chennai Fintech Forum. “This could have ripple effects across Tamil Nadu’s startup ecosystem, particularly for early-stage fintech companies that may need to strengthen their compliance frameworks.”
The regulatory action has also resulted in personal implications for Paytm’s leadership, with CEO Vijay Shekhar Sharma facing a separate penalty of Rs 59.9 lakh. In response to the notices, Paytm has maintained its position that the demands lack legal merit.
A company spokesperson stated, “We are thoroughly evaluating all available options, including filing appeals against these orders. Our operations continue uninterrupted, and we remain committed to maintaining the highest standards of regulatory compliance.”
This isn’t Paytm’s first brush with regulatory challenges. In August 2024, the company was directed to pay a penalty of Rs 47.12 lakh by the Office of Collector of Stamps, New Delhi, for stamp duty violations related to equity share allotments. The recent GST demands add to the mounting regulatory pressure on the fintech giant.
For Tamil Nadu’s startup ecosystem, which has seen significant growth in fintech ventures over the past few years, these developments serve as a crucial learning moment. “This situation underscores the importance of robust compliance mechanisms from day one,” explains Priya Venkataraman, Managing Partner at Chennai Angels. “We’re advising our portfolio companies in the fintech space to conduct thorough internal audits and strengthen their tax compliance processes.”
The implications for Tamil Nadu’s startup ecosystem are particularly relevant as the state positions itself as a fintech hub. With over 200 fintech startups operating in the region and investments exceeding Rs 2,000 crore in the sector last year, regulatory compliance has become a critical focus area for both entrepreneurs and investors.
These regulatory actions against Paytm highlight the increasing scrutiny of fintech operations in India and the need for startups to prioritize regulatory compliance alongside growth and innovation.
As the situation continues to develop, it serves as a watershed moment for the fintech industry, potentially leading to more stringent compliance requirements and increased regulatory oversight.
