Exchange22, an online gaming platform owned by M/S Hulm Entertainment Private Limited, has received a significant legal relief as the Allahabad High Court issued a stay on a ₹253 crore GST demand. The writ petition filed by the company challenges the GST liability under the Goods and Services Tax (GST) Act, claiming that the demand should not apply retroactively.
The core issue of the case revolves around the applicability of the 28% GST rate to online gaming companies. Exchange22, along with other gaming companies, argues that the 28% GST rate should only apply from October 1, 2023, when the revised tax structure officially came into effect. The government, however, maintains that this revision merely clarified an existing law, implying that GST demands are not retrospective.
The Allahabad HC’s ruling comes amidst an ongoing debate over the GST obligations of online gaming firms. The court’s order was based on the ongoing consideration of similar issues by the Supreme Court in the case of Director General of Goods and Services Tax Intelligence vs. Gameskraft Technologies Private Limited. As a result, the Allahabad High Court stayed the show-cause notice issued on November 13, 2024, and has scheduled further hearings for May 8, 2025.
Exchange22’s legal team includes counsels Abhishek Ghosh, Prashant Mishra, and others, while the government is represented by Additional Solicitor General Naveen Chandra Gupta and state counsels. The legal dispute is part of a broader issue involving over 71 show-cause notices issued to online gaming companies for allegedly evading GST payments totaling ₹1.12 lakh crore during the 2022-23 financial year and the first seven months of 2023-24.
A key aspect of the ongoing dispute is whether the GST demands should apply retroactively to the period before October 2023. While the government argues that the new taxation structure only clarified existing law, online gaming companies believe they should not be held accountable for backdated GST payments. The outcome of these cases, particularly the Supreme Court’s ruling, will significantly impact the industry, potentially setting a precedent for how future GST assessments on online gaming companies will be handled.
Reference: https://www.storyboard18.com/gaming-news/exchange22-gets-gst-relief-as-allahabad-hc-stays-%e2%82%b9253-crore-demand-order-58960.htm
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