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  • Allahabad High Court Refuses to Entertain Belated Writ Petition; Holds Statutory Appeal Deadline Under GST Act Cannot Be Circumvented

    Allahabad High Court Refuses to Entertain Belated Writ Petition; Holds Statutory Appeal Deadline Under GST Act Cannot Be Circumvented

    PRAYAGRAJ, May 26, 2026 — In a judgment that reinforces the principle that writ jurisdiction cannot be used as a backdoor to bypass statutory limitation periods, the Allahabad High Court has dismissed a writ petition challenging an assessment order that was nearly a year old, holding that the petitioner’s failure to file a timely statutory appeal under the GST Act was fatal to his case.

    A division bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary was hearing a petition filed by M/s Mishra Security Services, whose proprietor Smt. Sunita Mishra had sought to quash an assessment order dated June 4, 2025, and the preceding show-cause notice dated March 17, 2025.

    The petitioner had earlier filed a writ petition in January 2026 — itself beyond the limitation period — which was dismissed as withdrawn with liberty to file afresh with better particulars. The present petition was the second attempt.

    The court expressed its inability to countenance how the petitioner could file a writ petition at such a belated stage “merely to bypass the limitation prescribed for filing a statutory appeal under Section 107(1) of the GST Act.”

    Section 107(1) provides for filing an appeal within three months from the date of communication of the order, with a further condonable period of one month under Section 107(4). The court noted that the outer limit had long since expired.

    Relying on the Supreme Court’s authoritative pronouncements in Singh Enterprises vs. C.C.E., Jamshedpur (2008) and Commissioner of Customs and Central Excise vs. Hongo India Private Limited (2009), the bench held that the appellate authority under the GST Act has no power to condone delay beyond the statutorily prescribed period. The court also drew from the coordinate bench ruling in Atlantis Intelligence Ltd. vs. Union of India (2025), where Justice Saraf himself had distilled the principles governing maintainability of writ petitions after expiry of the statutory appeal period.

    The Atlantis Intelligence ruling had established, among other things, that when a statute prescribes a maximum condonable delay (here, one additional month), Section 29(2) read with Section 3 of the Limitation Act applies, and courts have no power to condone any further delay — even in writ jurisdiction under Article 226 of the Constitution.

    “We are rather surprised,” the bench observed, noting that the petitioner had been “a fence sitter” who had not been diligent in pursuing his rights. The court underscored the Latin maxim quando aliquid prohibetur ex directo, prohibetur et per obliquum — what cannot be done directly cannot be done indirectly.

    The court, however, clarified that if the petitioner files an appeal, the observations made in the order shall not affect the decision of the appellate forum.

    The judgment serves as a cautionary reminder to litigants that the extraordinary writ jurisdiction of the High Court is not a substitute for statutory remedies, and that courts will not readily assist those who sleep over their rights.

  • Allahabad High Court Strikes Down ITC Blocking Order: “Reasons to Believe” Must Be Recorded in Writing Before Invoking Rule 86-A

    Allahabad High Court Strikes Down ITC Blocking Order: “Reasons to Believe” Must Be Recorded in Writing Before Invoking Rule 86-A

    PRAYAGRAJ, May 26, 2026 — In a significant ruling reaffirming procedural safeguards for taxpayers, the Allahabad High Court has set aside an order blocking the Input Tax Credit (ITC) of a private dairy company after finding that the tax authorities failed to record “reasons to believe” in writing — a mandatory precondition under the GST framework.

    A division bench comprising Justice Saumitra Dayal Singh and Justice Vivek Saran quashed the order dated April 9, 2026, passed by the Joint Commissioner (Corporate-2), State Tax, which had blocked the ITC of M/s Mohan Milkfoods Private Limited in its Electronic Credit Ledger under Rule 86-A of the Uttar Pradesh Goods and Services Tax Rules, 2017.

    The petitioner, represented by Senior Advocate Rakesh Ranjan Agarwal along with counsel Nitin Kumar Kesarwani and Suyash Agarwal, contended that the essential precondition for exercising jurisdiction under Rule 86-A had not been fulfilled, as no “reason to believe” was recorded in writing before the extreme action of blocking ITC was taken.

    During the proceedings, the court directed the Standing Counsel for the revenue to produce clear written instructions confirming the existence of such recorded reasons. When the written instructions dated May 25, 2026, were produced, the court found that while several paragraphs offered reasoning to support the blocking order, the impugned order itself contained no recital of such reasons — it merely stated the conclusion that the petitioner had fraudulently availed ITC.

    Drawing on established constitutional jurisprudence, the court cited the Supreme Court’s landmark decision in Mohinder Singh Gill & Anr. vs. The Chief Election Commissioner, New Delhi & Ors. (1978), famously holding that “orders are not like old wine becoming better as they grow older” — an order must stand on its own strength and cannot be supplemented by subsequent affidavits or reasoning.

    The bench also placed strong reliance on a coordinate bench ruling in M/s Pilcon Infrastructure Pvt. Ltd. vs. State of U.P. & Anr. (2025), which had elaborated extensively on what constitutes a valid “reason to believe.” That ruling emphasised that there must be a rational basis for the belief, that the grounds must be germane to the formation of the belief, and that the belief must be held in good faith and not as a mere pretence.

    “It may not be forgotten, granting ITC and maintaining its chain is the soul of a successful GST regime,” the court had observed in Pilcon Infrastructure, a sentiment echoed by the present bench. “Any doubt or suspicion alone may not lead an action by the authorities to block the ITC of the assessee and disrupt the entire value addition chain.”

    The court declared the impugned order “jurisdictionally deficient” and set it aside, while granting liberty to the revenue to pass a fresh order strictly in accordance with law.

    The ruling underscores the judiciary’s consistent position that the requirement to record “reasons to believe” in writing is a non-negotiable, mandatory condition — even when the power is exercised ex-parte against the assessee.

  • Calcutta HC Quashes ₹6.28 Crore GST Demand: Omission of Rule 96(10) Wipes Out Pending IGST Refund Proceedings

    Calcutta HC Quashes ₹6.28 Crore GST Demand: Omission of Rule 96(10) Wipes Out Pending IGST Refund Proceedings

    Kolkata, June 2026 – The Calcutta High Court has quashed a ₹6.28 crore tax demand against Techno Waxchem Private Limited, holding that the Government’s October 2024 decision to omit Rule 96(10) of the CGST Rules leaves no legal basis for continuing any pending enforcement proceedings under that provision. The ruling by Justice Raja Basu Chowdhury adds to a growing body of High Court jurisprudence that has effectively sounded the death knell for all outstanding show-cause notices, adjudication orders, and appeals rooted in the now-deleted anti-double-benefit restriction.

    The Dispute

    Techno Waxchem, a manufacturer and exporter of chemical products primarily used in the rubber industry — including modified formaldehyde resins, resorcinol blends, and related compounds — had, between October 2017 and March 2022, claimed and received IGST refunds totalling ₹6,28,27,407 on goods exported under the Advance Authorisation Scheme.

    Under the Advance Authorisation framework, exporters are permitted duty-free import of inputs. The rub, according to the revenue authorities, was Rule 96(10) of the CGST Rules, 2017. That provision barred an exporter who had availed duty-free imports under specified Customs notifications from simultaneously claiming a refund of IGST paid on the exported finished goods. The logic was to prevent “encashment” of input tax credit accumulated on domestically procured goods against exports manufactured using duty-free imported inputs — a species of double benefit that the rule was designed to foreclose.

    The Director General of GST Intelligence (DGGI) alleged that Techno Waxchem had done exactly that. A show-cause notice dated 27 September 2023 was issued under Section 74 of the CGST Act for the periods 2017–18 through 2021–22. The adjudicating authority confirmed the demand in an order-in-original dated 4 February 2025, directing recovery along with interest under Section 50 and penalty under Section 122(2)(b).

    The Rule That Vanished

    Between the issuance of the show-cause notice and the adjudication order, however, the legal landscape shifted fundamentally. In its 54th meeting, the GST Council accepted the Law Committee’s recommendation to do away with Rule 96(10), observing that the restriction had caused unnecessary complications without yielding any commensurate benefit. On 8 October 2024, the Central Government issued Notification No. 20/2024-Central Tax, which — at Serial No. 10 — simply stated: “In the said rules, in rule 96, sub-rule (10) shall be omitted.”

    No saving clause was inserted. No transitional provision was made. No language preserved pending proceedings. The rule was simply taken off the statute book.

    Techno Waxchem, during the personal hearing before the adjudicating authority, specifically drew attention to this development and argued that the demand could no longer survive. The Proper Officer, however, took the view that the omission was prospective — effective only from 8 October 2024 — and that since the refund was availed and the show-cause notice issued during the rule’s subsistence, the demand remained valid.

    The High Court’s Reasoning

    Justice Raja Basu Chowdhury disagreed. Drawing on two seminal Supreme Court decisions — Rayala Corporation (P) Ltd. v. Director of Enforcement (1969) and Kolhapur Canesugar Works Ltd. v. Union of India (2000) — the Court reaffirmed a proposition that, while well-settled in criminal and excise jurisprudence, is only now being tested in the GST context: Section 6 of the General Clauses Act, 1897, which saves proceedings initiated under a repealed enactment, applies only to the repeal of a Central Act or Regulation. It has no application to the omission of a rule.

    The distinction is not merely semantic. As the Supreme Court held in Rayala Corporation:

    “Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a rule.”

    And in Kolhapur Canesugar Works, the Constitution Bench reaffirmed the principle, rejecting the Gujarat High Court’s attempt to distinguish Rayala Corporation. The rule, the Court held, takes its colour from the definition in the General Clauses Act — it is not a “statute,” and equating the two is impermissible.

    The consequence is stark: when a rule is omitted without a saving clause, the rule is treated as having never existed. All pending proceedings — show-cause notices awaiting adjudication, orders under challenge before appellate authorities, even writ petitions contesting demands — stand ipso facto terminated.

    A National Consensus Emerges

    Justice Chowdhury’s ruling does not stand alone. The Calcutta High Court drew express support from three other High Courts that have addressed identical questions in recent months.

    The Bombay High Court, in Hikal Limited v. Union of India (2025), held that following the omission of Rules 89(4B) and 96(10), and in the absence of saving clauses, “all pending proceedings — such as undisposed show cause notices, orders disposing of show cause notices issued after 08 October 2024, or even orders made before 08 October 2024 but not yet finalised due to appeals … are not preserved and will stand lapsed.”

    The Gujarat High Court in Addwrap Packaging (P.) Ltd. v. Union of India (2025) arrived at the same conclusion.

    Most recently, the Delhi High Court in Vinayak International Housewares Pvt. Ltd. undertook a comprehensive survey of the precedents and crystallised the position into four clear propositions: the GST Council itself acknowledged that Rule 96(10) caused unnecessary complications; the omission applies to all pending proceedings; anything short of a “transaction past and closed” is caught by the omission; and appeals, pending adjudications, and even show-cause notices all fall within the protective sweep of the deletion.

    “Transactions Past and Closed”

    The operative distinction, as the Bombay High Court framed it, is between proceedings that are alive and those that have attained finality. A demand confirmed by an order that has not been appealed — a “transaction past and closed” — may well stand. But a show-cause notice awaiting adjudication, an order under appeal, or a writ petition against an order — none of these constitutes a concluded transaction. For these, the omission of the underlying rule pulls the rug from under the entire proceeding.

    Since Techno Waxchem’s writ petition was filed against the order-in-original dated 4 February 2025, the matter was very much alive. The Court had little difficulty concluding that “on the omission of Rule 96(10), the order dated 4th February, 2025 no longer survives.”

    Implications for the Field

    The judgment is significant beyond its immediate facts. Rule 96(10) had been one of the most heavily litigated provisions in the GST refund universe. Exporters across sectors — pharmaceuticals, chemicals, engineering goods, textiles — had been hit with demands running into hundreds of crores on the allegation that they had availed the IGST refund route while also holding Advance Authorisation licences or having procured inputs under specified exemption notifications.

    The 54th GST Council meeting may have been motivated by administrative pragmatism — the rule, as the Council observed, created enormous compliance friction without meaningful revenue protection — but the legal effect of a simple omission, unaccompanied by a saving clause, appears to have been more far-reaching than perhaps anticipated. By operation of the principle laid down in Rayala Corporation and Kolhapur Canesugar, the omission has effectively wiped the slate clean.

    Unless the revenue authorities persuade the Supreme Court to take a different view — and the consistent, multi-jurisdictional weight of High Court authority makes that an uphill task — thousands of pending IGST refund demands premised on Rule 96(10) now stand on legally unsustainable ground.

    The Road Ahead

    With four High Courts now speaking in one voice — Bombay, Gujarat, Delhi, and Calcutta — the question is whether the revenue will accept the settled position or attempt to carry the issue to the Supreme Court. The adjudicating authority, in its order, had noted pointedly that “the instant issue has not yet attained finality and the department has opportunity to appeal before Hon’ble Supreme Court against the aforementioned order of Hon’ble Kerala High Court.” That observation, however, concerned the constitutional validity of Rule 96(10) — a question rendered academic by the rule’s omission. The surviving question — the effect of omission without a saving clause — rests on Supreme Court decisions that are over five decades old and have never been doubted.

    For exporters who have been fighting Rule 96(10) demands, the Calcutta High Court’s judgment is the latest — and one of the most lucidly reasoned — endorsements of a position that increasingly looks unassailable.

  • GSTAT Upholds Profiteering Charge for Retaining Benefit of GST Reduction on Movie Tickets

    GSTAT Upholds Profiteering Charge for Retaining Benefit of GST Reduction on Movie Tickets

    The GST Appellate Tribunal (GSTAT) has passed an ex parte order against M/s ASR Cinemas LLP, holding the multiplex operator guilty of profiteering to the tune of ₹9,67,589 by failing to pass on the benefit of a GST rate cut on cinema admission tickets to consumers. The Tribunal, in a strongly worded order, directed the Respondent to deposit the profiteered amount in the Central and State Consumer Welfare Funds along with interest at 18% per annum.

    The Backdrop: GST Rate Cut and the Obligation to Pass It On

    The Central Government, acting on the recommendation of the GST Council, reduced the GST rate on cinema admission tickets priced at ₹100 or below — from 18% to 12% — with effect from 1 January 2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31 December 2018.

    Under Section 171(1) of the CGST Act, 2017, every supplier is statutorily obligated to pass on any reduction in tax rate to the end consumer by way of a commensurate reduction in prices. The provision was conceived as a legislative anti-profiteering shield, ensuring that tax cuts announced by the Government actually reach the public rather than being pocketed by businesses.

    What ASR Cinemas Did

    According to the investigation report submitted by the Director General of Anti-Profiteering (DGAP) on 30 April 2024, ASR Cinemas did precisely the opposite of what the law required. Instead of lowering the effective selling price to reflect the 6% GST reduction, the multiplex increased its base ticket prices across all categories — Platinum, Gold Class, and Silver Class — thereby maintaining the identical cum-tax selling price that prevailed before the rate cut.

    The DGAP’s analysis, covering the period 1 January 2019 to 30 September 2019, revealed an average base price increase of approximately 5.37% across ticket categories. The following table from the DGAP report illustrates the pattern:

    Ticket Category Pre-Cut Price (incl. 18% GST) Post-Cut Price Charged (incl. 12% GST) What Should Have Been Charged
    Platinum (70mm) ₹100 ₹100 ₹94.92
    Platinum (35mm) ₹90 ₹90 ₹85.42
    Gold Class (70mm) ₹70 ₹70 ₹66.44
    Silver Class (70mm) ₹30 ₹30 ₹28.47

    The total profiteered amount was computed at ₹9,67,589, comprising a base profiteering of ₹8,63,919 plus GST of ₹1,03,670 collected on that excess realization.

    The Respondent’s Defence — and the Tribunal’s Rejection

    ASR Cinemas sought to justify its pricing by invoking an order dated 8 February 2019 passed by the Hon’ble High Court of Telangana in W.P. No. 2482 of 2019, which permitted theatres to collect their proposed fares pending adjudication of pricing disputes by Government-appointed committees.

    The Tribunal rejected this argument outright. Citing the Telangana High Court’s own ruling in Sudarshan Theatre 35MM v. Union of India (W.P. Nos. 4760 and 5351 of 2021), the Tribunal held that any liberty granted under the State’s cinema regulatory framework is conditional and cannot override the statutory mandate of Section 171 of the CGST Act. The High Court had itself observed:

    “A plain reading of the said provision of law clearly indicates that the said provision has been introduced to ensure that the supplier of goods and services should not make profit from the reduction of the tax rate under the GST law.”

    The Tribunal further noted that ASR Cinemas had placed no material on record to demonstrate compliance with the conditions attached to the High Court’s order, even assuming the order applied to it.

    Ex Parte Proceedings: A Pattern of Non-Cooperation

    The proceedings before the Tribunal were marked by the Respondent’s persistent non-participation. Despite notices served through multiple modes — email, speed post, and through the jurisdictional Commissionerate — and despite confirmed service of notice (including an acknowledgment dated 13 February 2026 from a Partner of the Respondent company), ASR Cinemas neither appeared for any of the five hearings (held between December 2025 and May 2026) nor filed any written submissions.

    The Tribunal, satisfied that principles of natural justice had been complied with, proceeded to adjudicate the matter ex parte under Order IX Rule 6 and Order XVII Rule 2 of the Code of Civil Procedure, 1908.

    Interest: 18% — But Only Prospectively

    The Tribunal ordered interest at 18% per annum on the profiteered amount under Rule 133(3)(c) of the CGST Rules, 2017. However, relying on the coordinate Bench decision in DGAP v. Proctor & Gamble Group (2025), it held that the interest provision — inserted vide Notification No. 31/2019-Central Tax dated 28 June 2019 — operates only prospectively. Accordingly, interest runs from 28 June 2019 and not from the commencement of the profiteering period (1 January 2019).

    Penalty: No Retrospective Application

    On the question of penalty under Section 171(3A) — which prescribes a penalty of 10% of the profiteered amount — the Tribunal declined to impose it. The penal provision was brought into force only on 1 January 2020, whereas the entire period of profiteering in this case (1 January 2019 to 30 September 2019) predated its enforcement. Applying the settled principle that penal provisions operate prospectively unless made expressly retrospective, the Tribunal held that penalty was not leviable.

    The Directions

    The Tribunal issued the following directives:

    1. Deposit of ₹9,67,589 — 50% in the Central Consumer Welfare Fund and 50% in the State Consumer Welfare Fund, Telangana (since the individual recipients are not identifiable);
    2. Interest at 18% per annum from 28 June 2019 till the date of actual deposit;
    3. The amounts to be deposited within 60 days of the order;
    4. The jurisdictional CGST/SGST Commissioner to ensure compliance and submit a report within three months.

    Commentary: A Signal to the Entertainment Sector

    This order reinforces a principle that has been consistently applied by GST adjudicatory bodies: regulatory pricing powers under State law do not exempt a supplier from anti-profiteering obligations under the CGST Act. The two operate in parallel, and a High Court order permitting collection of “proposed fares” is not a license to absorb a GST rate cut.

    For the cinema exhibition industry — where ticket pricing is often governed by State-level regulatory mechanisms — the ruling serves as a clear warning that the anti-profiteering provisions cut across regulatory silos. The obligation to pass on tax benefits is absolute, non-delegable, and enforceable irrespective of the pricing regime that governs the underlying service.

    The matter now shifts to the jurisdictional Commissionerate for enforcement. Whether ASR Cinemas will challenge the order before a higher forum remains to be seen.

    – DG Anti Profiteering, Director General… vs. ASR Cinema LLP, 2026-juristway.com-1361-GSTAT(New Delhi)-GST

  • Supreme Court: 28% GST on Full Stake Valid for Online Gaming, Fantasy Sports & Casinos

    Supreme Court: 28% GST on Full Stake Valid for Online Gaming, Fantasy Sports & Casinos

    In a sweeping constitutional verdict, a two-judge bench holds that all forms of online staking — regardless of skill or chance — constitute “betting and gambling” for GST purposes, and that the entire amount wagered, not just platform fees, is the taxable value.

    The Supreme Court of India on Tuesday delivered one of the most consequential fiscal rulings in the history of India’s digital economy, unanimously upholding the government’s right to levy a 28 percent Goods and Services Tax on the full face value of stakes placed on online gaming platforms, fantasy sports contests, and casino tables — rejecting arguments that only the platform’s commission or net profit constitutes the taxable value.

    Justices J.B. Pardiwala and R. Mahadevan, sitting as a two-judge bench, dismissed a clutch of writ petitions and transferred cases filed by major operators including GamesKraft Technologies, Dream11, Games24x7, Head Digital Works, and casino operators. The bench simultaneously set aside a May 2023 Karnataka High Court order that had quashed show cause notices against GamesKraft, restoring the notices and directing adjudication within tight timelines.

    The Central Legal Question

    At the heart of the litigation was a deceptively simple question: when a player deposits ₹100 into an online rummy, fantasy cricket, or casino app, should GST attach to the entire ₹100 (the gross betting value approach) or only to the ₹5–₹10 the platform retains as commission (the gross gaming revenue approach)? The difference is enormous — roughly 10 to 20 times the tax liability.

    The gaming companies argued that their platforms merely provide a technology service, that players transact with each other, and that classifying games involving skill — such as rummy, poker, or fantasy sports — as “betting and gambling” is constitutionally impermissible. They also challenged the 2023 amendments to the CGST Act and new valuation Rules 31B (online gaming) and 31C (casinos) as imposing a fresh levy retrospectively, in violation of fundamental rights.

    “The essential element of betting and gambling lies in staking money or money’s worth upon uncertain outcomes. The character of betting and gambling does not depend exclusively upon whether the underlying activity is a game of skill or a game of chance.”

    — Supreme Court of India, paragraph 84(i)

    Skill vs. Chance: A New Legal Framework

    The Court made a sharp doctrinal departure from prior High Court rulings that had protected fantasy sports and card games as “games of skill.” The bench held that the skill-versus-chance distinction — relevant under State gaming statutes and for Article 19(1)(g) trade rights — is simply irrelevant for the purpose of GST taxation.

    What matters for GST, the Court explained, is whether money is staked upon an uncertain outcome. Once a player places real money at risk — regardless of how much skill is involved — the transaction assumes the character of “betting and gambling” under the GST framework. A wager on a chess game, the judgment observed, remains a wager.

    The bench also clarified that earlier Supreme Court dismissals of Special Leave Petitions in the Gurdeep Singh Sachar, Varun Gumber, and Avinash Mehrotra matters — which had implied fantasy sports were settled as games of skill — did not constitute binding declarations of law under Article 141 of the Constitution, having been made without speaking orders or comprehensive adjudication on the GST question.

    Key Holdings of the Court

    1. Skill is irrelevant to GST liability. Online gaming, fantasy sports, and casino activities all constitute “betting and gambling” for GST purposes once money is staked upon uncertain outcomes, regardless of the degree of skill involved.
    2. Full stake is taxable, not just the platform fee. The amount deposited by a player for participation in gameplay constitutes “consideration” under Section 2(31) CGST Act. There is no statutory basis to deduct prize pools, winnings, or payouts while computing taxable value.
    3. Online gaming companies are suppliers, not mere intermediaries. They create and operate the entire commercial ecosystem; players do not independently transact with each other.
    4. Actionable claims validly arise from staking. Contingent beneficial interests in pooled stake funds constitute actionable claims under the Transfer of Property Act, and their supply is taxable under the GST framework.
    5. 2023 CGST amendments are retrospective. The CGST (Amendment) Act, 2023 and Rules 31B and 31C are clarificatory in nature and operate retrospectively — the industry cannot argue these created a fresh levy applying only from October 2023 onwards.
    6. Rules 31A, 31B, and 31C are constitutionally valid. These valuation rules are intra vires the CGST Act and bear a rational nexus with the taxable event.
    7. Casino valuation to be redetermined under Rule 31C. While the broad challenge by casino operators fails, actual tax computation must be reconsidered using Rule 31C (total chips/tokens purchased), replacing the Department’s earlier “House Advantage Method.”

    The Actionable Claims Analysis

    A substantial portion of the 413-page judgment is devoted to establishing that online gaming transactions generate actionable claims — a legal category of goods under the Transfer of Property Act, 1882, and therefore taxable as goods under GST. An actionable claim requires a beneficial interest in movable property, outside the claimant’s possession, and recognisable by civil courts.

    The Court held all three ingredients are satisfied: pooled stake funds form present movable property; players relinquish control over funds once committed to gameplay under the platform’s contractual terms; and the organised gaming framework creates legally cognisable rights and obligations between players and the platform, even if direct enforcement between players inter se may be barred by Section 30 of the Contract Act. The voidness of the wager per se does not obliterate the proprietary interest for tax purposes.

    The Court also invoked the doctrine of approbation and reprobation: the Federation of Fantasy Sports had itself successfully argued, in earlier service tax proceedings, that fantasy sports involve supply of actionable claims — thereby avoiding service tax. That position cannot now be reversed to escape GST liability.

    What Happens Next — Sector by Sector

    Online gaming & fantasy sports

    GST payable at 28% on the full deposit amount under Rule 31B. Pending show cause notices revived; operators must reply within 8 weeks; authorities to adjudicate within 12 weeks thereafter.

    Casinos

    GST on total chips or tokens purchased (Rule 31C), not on net earnings retained. Actual tax quantum to be recomputed by adjudicating authorities; factual objections kept open.

    GamesKraft & Karnataka HC

    Karnataka HC order quashing show cause notices is set aside. Notices restored. GamesKraft to file reply; authority to pass fresh orders on the facts in accordance with this judgment.

    Bombay HC / Criminal Appeal

    Bombay HC ruling that fantasy sports fall outside GST betting provisions is set aside to that extent. Criminal appeal by the Union allowed; proceedings may be revived in line with the new judgment.

    Law and the Digital Economy

    The bench closed with a broader observation about the relationship between technology and law. Noting that India stands at an “unprecedented technological transformation driven by artificial intelligence, digital platforms, fintech ecosystems, and blockchain infrastructures,” the Court emphasised that technological innovation cannot operate in a constitutional vacuum insulated from regulation, taxation, and public accountability.

    The judgment — running to over 400 pages and authored jointly by Justices Pardiwala and Mahadevan — is expected to trigger fresh GST demands running into tens of thousands of crores against the online gaming industry, which until the 2023 amendments had largely been paying GST at 18 percent on commission income alone. All interim stays granted by various courts in connected matters stand vacated. There is no order as to costs.

    Disclaimer: This article is a journalistic summary of the judgment in 2026 INSC 595 (GamesKraft vs. DGGI). It does not constitute legal advice. Readers are advised to consult the full text of the judgment and qualified legal counsel before acting on any information contained herein.

     

  • No “Right to Visibility” on AI Platforms: Calcutta High Court Dismisses IndiaMart’s Plea Against ChatGPT

    No “Right to Visibility” on AI Platforms: Calcutta High Court Dismisses IndiaMart’s Plea Against ChatGPT

    IndiaMart Inter Mesh Limited v. Open AI Inc. & Ors. | IP-COM/57/2025 | Calcutta High Court | Justice Ravi Krishan Kapur | May 20, 2026

    Kolkata, May 2026 — In a landmark ruling at the intersection of artificial intelligence, intellectual property, and digital commerce, the Calcutta High Court has dismissed an application for interim relief filed by IndiaMart Inter Mesh Limited — one of India’s largest B2B e-commerce platforms — against Open AI Inc., the company behind the globally popular generative AI tool ChatGPT. Justice Ravi Krishan Kapur held that IndiaMart had failed to demonstrate any legally recognisable right that had been infringed, and that no private enterprise can be compelled to promote or display another party’s business on its platform merely because it is commercially convenient to that party.

    The Dispute — Selective Exclusion or Legitimate Business Decision?

    IndiaMart’s grievance was specific and pointed: when users queried ChatGPT for products available on IndiaMart, the AI tool would bypass IndiaMart’s platform links and instead provide direct links to individual sellers’ websites — while simultaneously providing full platform-level links for competing B2B platforms such as DHGate, Pinduoduo, Shopee, and Taobao. IndiaMart alleged that this constituted deliberate and intentional exclusion of its platform, causing significant loss of user traffic and business revenue. The petitioner characterised this as disparagement, dilution of its registered trademarks, unfair trade practice, and a violation of its fundamental rights under Articles 14, 19, and 21 of the Constitution of India.

    The reason for this exclusion, as it emerged during the proceedings, was that IndiaMart’s name appears on the United States Trade Representative’s (USTR) Review of Notorious Markets List 2024 — a list that Open AI had relied upon as an internal policy basis for restricting IndiaMart’s visibility on ChatGPT. IndiaMart contested this, arguing that the USTR List is a foreign document with no statutory force in India, and that blind reliance on it to discriminate against an Indian platform was impermissible — particularly when other platforms on the same USTR List continued to receive full visibility on ChatGPT.

    The Court’s Ruling — No Legal Right, No Cause of Action

    Justice Kapur dismissed the application on multiple grounds, each of which carries significant implications for the evolving law around AI platforms in India.

    On the most fundamental question, the Court held that IndiaMart had no legally enforceable “right to visibility” on ChatGPT — whether arising from contract, statute, or constitutional law. The loss complained of was pure economic loss — a potential reduction in user traffic translating into a potential loss of profit. Such loss, the Court held, does not by itself give rise to a cause of action. Quoting the Delhi High Court’s ruling in Google LLC v. DRS Logistics (P) Ltd. (2023), Justice Kapur observed: “No third party can compel a service provider to use its service in a manner to reflect its link or for its benefit.” Open AI’s decision to rely on the USTR List was characterised as an internal policy and business decision — one that courts cannot be called upon to second-guess in the absence of a demonstrated legal wrong.

    On the intellectual property claims, the Court was equally unsparing. It found no case of trademark disparagement, as disparagement requires publication of a false statement — and silence or omission cannot constitute disparagement. On trademark dilution under Section 29(4) of the Trade Marks Act, 1999, the Court held that mere referential use of the IndiaMart name does not satisfy the requirement of “use in the course of trade.” On copyright, the Court noted that no specific infringement of any copyrighted work had been pleaded or identified with particulars — arguments made from the Bar were entirely dehors the pleadings.

    The AI Classification Question — Originator or Intermediary?

    Perhaps the most intellectually significant portion of the judgment addresses a question that no Indian court has squarely confronted before: is ChatGPT an “intermediary” or an “originator” under the Information Technology Act, 2000?

    The distinction matters enormously. An intermediary enjoys conditional immunity — “safe harbour” — under Section 79 of the IT Act from liability for third-party content, provided it observes due diligence. An originator, by contrast, is the source of the electronic message and bears primary responsibility for it. IndiaMart had argued that ChatGPT is an intermediary and is therefore bound by the non-discrimination obligation under Rule 3(1)(n) of the IT Rules, 2021. Open AI countered that ChatGPT is an originator — it generates new content rather than merely transmitting existing content.

    Justice Kapur acknowledged that this is a “complicated and vexed question of both law and fact” that can only be finally determined after technical and expert evidence is led at trial. However, for the purposes of the interim application, the Court offered a considered prima facie view: ChatGPT, by virtue of its generative qualities — its ability to synthesise, curate, and produce entirely new content in response to user prompts, going well beyond the function of a search engine or a passive conduit — prima facie falls within the definition of an “originator” rather than an “intermediary.” The Court noted that unlike a search engine, which merely crawls and ranks existing web content, a Large Language Model applies independent algorithms to vast datasets and generates direct, synthesised responses. It can write poems, prepare research projects, generate images — functions that require going beyond existing electronic records and creating new content.

    The Court was careful to flag the deeper legislative gap: the IT Act was drafted in 2000, long before generative AI existed. Its definitions of “intermediary” and “originator” were conceived in a world where only humans or legal entities could originate messages. Generative AI does not fit neatly into either category, and the Court expressly called for legislative intervention — not merely government advisories — to create a distinct liability framework for AI platforms that recognises and distributes liability across developers and users in proportion to their control over the system.

    Balance of Convenience — Against IndiaMart

    Even on the question of balance of convenience, the Court found against IndiaMart. Any interim order directing ChatGPT to display IndiaMart’s links would, in effect, be compelling specific performance of a positive obligation — requiring continuous judicial supervision and being virtually impossible to monitor. The Court also noted a significant factual circumstance: at an earlier point in time, IndiaMart itself had blocked ChatGPT from crawling its website — a fact that considerably undermined its claim of irreparable injury from reduced visibility.

    The Ripple Effect — Does This Judgment Unsettle GST on AI Services Too?

    The judgment’s implications do not stop at the doors of the IP court. A pointed observation buried within it — that ChatGPT is not a search engine but a generator of entirely new content — quietly opens a significant question in Indian tax law: does ChatGPT, and generative AI more broadly, qualify as an Online Information Database Access and Retrieval (OIDAR) service under the GST framework?

    The question matters because under GST, foreign OIDAR service providers are required to register in India and pay GST on their B2C transactions — i.e., services supplied directly to individual consumers who are not registered businesses. Platforms like ChatGPT and Claude have, by default, been treated as OIDAR services and have been expected to comply with this obligation. But the Calcutta High Court’s characterisation of ChatGPT as a creator rather than a retriever puts that assumption under strain.

    The word “OIDAR” is not merely a label — it carries a precise definitional meaning. It refers to services involving access to or retrieval of information or a database. Both “access” and “retrieval” presuppose something pre-existing — a stored record, a queryable database, an archived piece of content waiting to be fetched. That is precisely what a search engine like Google does: it crawls, indexes, and retrieves pre-existing web content in response to a query. But that is not what a Large Language Model does. A generative AI does not retrieve your answer from a database — it synthesises it, token by token, in real time, producing a response that did not exist before you asked the question.

    The Finance Act 2023 did broaden the OIDAR definition by removing the earlier requirement of “minimal human intervention” — an amendment that was widely understood to bring more digital services within the GST net. But crucially, it left the words “access” and “retrieval” untouched. The definitional gap, therefore, remains very much alive.

    If a well-advised taxpayer were to press this argument in a tax dispute, the consequences could be considerable. For B2B transactions, the impact is limited — registered Indian businesses are already required to pay GST on reverse charge, regardless of the OIDAR classification. But for B2C transactions, the stakes are higher: if generative AI services fall outside the OIDAR definition, the obligation on foreign AI providers to register in India and collect GST from individual users may simply not apply. That would represent a significant revenue collection gap — and, more troublingly, a structural arbitrage against Indian digital service providers who are fully subject to GST on equivalent services.

    The deeper issue is one of conceptual architecture. OIDAR was designed for a retrieval economy — search engines, streaming platforms, database downloads. Generative AI is a creation economy. The law was built for a world where digital services delivered pre-existing content; it has not yet reckoned with a world where the service itself is the act of creation. The Calcutta High Court has, perhaps inadvertently, handed tax practitioners a powerful new argument. Interesting times lie ahead.

    Why This Judgment Matters

    This is the first Indian High Court ruling to substantively engage with the legal status of a generative AI platform under the IT Act framework, and its implications extend well beyond the parties before the Court. Three takeaways stand out for businesses, technologists, and policymakers alike.

    First, there is no “right to algorithmic visibility.” Businesses cannot claim a legal entitlement to appear in the results generated by an AI platform — or any private digital platform — merely because their exclusion causes them economic harm. The law of pure economic loss does not recognise such a claim in the absence of a specific legal duty owed by the defendant to the claimant.

    Second, the USTR List, while not a legally binding document in India, can inform the internal policies of private platforms operating in India. Courts will not ordinarily interfere with such internal policy decisions in the absence of a demonstrated violation of a substantive legal right.

    Third, and most significantly, India urgently needs a legislative framework for AI liability — and, as this judgment now suggests, AI taxation. The IT Act’s binary of “intermediary” and “originator” is ill-equipped to handle generative AI, and the GST framework’s OIDAR definition may be equally unprepared. Until Parliament acts on both fronts, courts and tribunals will be left to navigate this terrain case by case — a process that is neither efficient nor conducive to legal certainty for an industry growing at extraordinary speed.

    The suit itself has been directed to proceed to an expeditious final hearing, where these questions — particularly the intermediary/originator classification — will be decided conclusively on the basis of technical and expert evidence.

    With courtesy to Mr. Manish Sachdeva.