No GST on Online Fantasy Sports Game : HC clarify

By | June 26, 2019
(Last Updated On: June 26, 2019)

Online Fantasy Sports Gaming is not a game of chance – Cannot be considered betting gambling for purpose of GST

In Criminal Public Interest Litigation Stamp No.22 of 2019 – Gurdeep Singh Sachar Vs Dream 11 Fantasy Pvt Ltd (Respondent No.3)– Decided on 30th April 2019, the Hon’ble Bombay High Court held that online fantasy sports gaming is not a game of chance. It involves skill and expertise of the users and hence cannot be called as betting and Gambling for the purpose of GST.

The petitioner had filed the petition claiming himself to be a public spirited advocate practising in the Bombay High Court, and sought directions to initiate criminal prosecution against the respondent No.3- a Company named “Dream 11 Fantasy Pvt. Ltd.”, firstly for allegedly conducting illegal operations of gambling/betting/wagering in the guise of Online Fanstasy Sports Gaming, which as per the petitioner shall attract penal provisions of Public Gambling Act, 1867, and secondly for alleged evasion of Goods & Service Tax (GST) payable by it by violating the provisions of Goods and Service Tax Act and the Rule 31A of CGST Rules, 2018

Issues Framed by Court

(a) Whether the activities of the respondent No. 3 amount to ‘Gambling’ \ ‘Betting’?
(b) Whether there is any merit in the allegation of violation of Rule 31A(3) of CGST Rules, 2018 and erroneous classification ?

On the first issue, the Hon’ble High Court held as under

“There is no merit in the submission that the result of their fantasy game/contest shall be considered as merely by chance or accident
notwithstanding involvement of substantial skill.

The petitioner claims that the result would depend largely on extraneous factors such as, who amongst the players actually play better in the real game on a particular day, which according to the petitioner would be a matter of chance, howsoever skillful a participant player in the online fantasy game may be.

The petitioner has lost sight of the fact that the result of the fantasy game contest on the platform of respondent No.3, is not at all dependent on winning or losing of any particular team in the real world game. Thus, no betting or gambling is involved in their fantasy games. Their result is not dependent upon winning or losing of any particular team in real world on any given day. In these circumstances, there is no plausible reason to take a contrary view than that taken by the Hon’ble Punjab and Haryana High court, which judgment has already been upheld by the Hon’ble Supreme Court in the SLP filed against the respondent No.3 itself. Moreover, the said issue is also covered by a judgment of 3 Judge Bench of the Hon’ble Supreme Court, to which detailed reference is made in the order of the Hon’ble Punjab and Haryana High Court. It is thus clear that the activity of the respondent No.3 do not amount to ‘gambling’ or ‘betting’ or ‘wagering’ even if the definition contained in Finance Act, 1994 is taken into consideration.”

On the second issue, the Hon’ble High Court held as under

“In the instant case, admittedly, there is no dispute that the amounts pooled in the escrow account is an ‘actionable claim’, as the same is to be distributed amongst the winning participating members as per the outcome of a game. But, as held hereinabove since the activities of the respondent No.3 do not amount to lottery, betting and gambling, the said actionable claim would fall under Entry 6 of the Schedule III under Section 7(2) of CGST Act. Therefore, this activity or transaction pertaining to such actionable claim can neither be considered as supply of goods nor supply of services, and is thus clearly exempted from levy of any GST.”

On the application of Rule 31A to the transaction of online gaming conducting by Dream11, the Hon’ble High Court held as under

“Since the actionable claim in the Online Fantasy Sport Gaming of the respondent No.3 are amongst such actionable claims as per Schedule III and Section 7(2) of the Act, which are not considered as ‘supply of goods’ or ‘supply of services’, Rule 31A has no application. Moreover, actionable claim referred to in Rule 31A is limited to only activities or transactions in the form of chance to win in “lottery” or “betting” or “gambling” or “horse racing in a race club”. Thus, Rule 31A which is restricted only to such four
supplies of actionable claim, has no application in this case.”

The PIL was thus dismissed by the High Court


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