Betting can never be a game of skill, Centre tells Supreme Court

Centre argues in SC that all betting, even on games of skill, qualifies as gambling and must attract 28 per cent GST under the law, regardless of game classification

The Centre on Tuesday reiterated its stand that gambling, irrespective of whether it is on a game of skill or chance, will still be categorised as gambling and therefore taxed accordingly.

 

“Not running on the horse, but when you bet on a horse, is it a game of skill or chance? Horse racing is a competition of speed depending on a variety of changes and uncertain factors. Thus, horse racing has an element of gambling. Betting can never be a game of skill,” Additional Solicitor General (ASG) N Venkataraman, appearing for the Centre, argued.

 

Gambling on a game of skill is still gambling, he added.

   

The Supreme Court, in response, observed that jockeys could also make a horse run by virtue of the skill of the animal. A two-judge Bench of Justices J B Pardiwala and R Mahadevan is hearing a batch of pleas moved by online gaming companies challenging the 28 per cent Goods and Services Tax (GST) on all forms of online real-money gaming.

 

Earlier, on Monday, the Centre told the Supreme Court that it makes no distinction between online games of skill or chance when it comes to taxation under the GST law. It argued that any form of betting on an outcome falls under gambling, regardless of the nature of the underlying game.

 

The classification of the game — whether skill-based or chance-based — is irrelevant for the purpose of determining tax liability, the Centre told the apex court. Even states such as Nagaland, which offer legal protections to games of skill, treat betting on the outcomes of such games as gambling, the Centre said.

 

Drawing a parallel with fantasy football bets placed internationally — where people bet on how many goals a football player will score, without having any influence over the result — the Centre said that players are enticed by the prospect of rewards, which could lead to addictive behaviour.

 

In an earlier hearing, the court had directed the Centre and the GST department to file their responses to the petitions submitted by online gaming companies.

 

The Bench had then issued notices in petitions filed by online gaming firms such as Head Digital Works, Games24x7, and Dream11, challenging the government’s decision to retrospectively impose tax on the full value of online bets placed, rather than on the gross gaming revenue. The GST department has also sought to transfer all related cases from various High Courts to the Supreme Court.

 

Traditionally, the online gaming industry was paying GST at 18 per cent, considering its activity as a service. This was disputed by the GST authorities, who characterised it instead as betting and gambling, thereby attracting a 28 per cent tax rate.