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2020 (10) TMI 763 - HC - GSTGambling/Betting on the Cricket Team or not - respondent No.5- Dream 11 Fantasy Private Limited provides a platform to its users for playing sports and games on a virtual platform, such as fantasy cricket, football, kabaddi, basketball and hockey - prohibited act or not - violation of Rule 31(A) (3) of the CGST Rules, 2018 or not? - HELD THAT - The result of the fantasy games offered by respondent No.5 is not determined merely by chance or accident, but the skill of the participant determine the result of the game having predominant influence on the outcome of the fantasy game. Whether any particular team in the real world match wins or loses, is also immaterial as the selection of virtual team by the participant involves choosing players from both the teams playing in the real world. It is also clear that offering the fantasy games of Dream-11 involving substantial skills is a business activity and not wagering having protection granted by Article 19(1)(g) of the Constitution. The SLP filed by said Varun Gumber against the above judgment was dismissed by the Hon'ble Supreme Court vide its order dated 15.09.2017. The Union of India has neither filed SLP against the said judgment dated 18.04.2017 of the Punjab Haryana High Court nor filed any review of the order dated 15.09.2017 and have thus, accepted the findings contained therein - the issue whether the fantasy games played on the platform of respondent No.5 are or are not gambling/betting activities was thus closed and decided in favour of respondent No.5. We have also considered the submission of the respondent No.5 that the online fantasy games of respondent No.5 are not operating in total regulatory vacuum and on affidavit it has been submitted that they are subject to self-regulation by the industry body known as Federation of Indian Fantasy Sports (FIFS) founded in 2017, of which respondent No.5 is a member. The FIFS is a Section 8 Company incorporated under the Companies Act, 2013 for the purpose of self-regulation and promotion of best practices in online fantasy sports services and contests offered in India, which has issued a Charter for Online Fantasy Sports Platforms - The rules and regulations contained in the said Charter are to ensure that the games run by its members are 'games of skill' and are not in the form of any gambling/betting. The FIFS has also framed Ombudsman Rules, which mandate the Ombudsman to be a retired Judge of the Hon'ble Supreme Court or of a State High Court, to ensure that any disputes or grievances of the members of public who participate in the online fantasy games are redressed promptly and in a fair and transparent manner. The fantasy sports industry is regarded as the next sunshine industry of India which is growing exponentially and already contributing thousands of crores to the Government exchequer. They also contain safeguards to ensure that persons below 18 years of age are not allowed to participate and that the public is not being misled or cheated and that there is transparency in financial matters, prizes etc. The FIFS has also issued Self-Regulation Guidelines on Advertising Online Gaming by adopting IAMAI Guidelines to ensure that the advertisements are fair, transparent and not misleading. The guidelines prohibit advertisements by members suggesting any gambling/betting activities and there is a penalty clause as well for violation. We also agree with the submission of respondent No.5 that the fantasy sports formats like that of Dream-11 are globally recognized as a great tool for fan engagement, as they provide a platform to sports lovers to engage with their favorite sports along with their friends and family. This legitimate business activity having protection under Article 19(1)(g) of the Constitution contributes to Government Revenue not only vide GST and income tax payments, but also by contributing in increased viewership and higher sports fan engagement, thereby simultaneously promoting even the real world games. Whether the online fantasy sports games offered on Dream-11 platform are gambling/betting ? - HELD THAT - The issue is decided against the PIL petitioner - Since the result of fantasy game depends on skill of participant and not sheer chance, and winning or losing of virtual team created by the participant is also independent of outcome of the game or event in the real world, we hold that the format of online fantasy game offered by respondent No.5 is a game of mere skill and their business has protection under Article 19(1)(g) of the Constitution of India. Whether Dream-11 is wrongly classifying its virtual online games under wrong entry for GST and is also violating Rule 31A (3) of CGST Rules, 2018 to evade GST is concerned? - HELD THAT - It is deemed appropriate to leave the said second issue for the GST authorities to consider in accordance with law. Thus, the PIL has been filed without any real public interest, without disclosing the relevant facts and without proper research - the PIL is misconceived - PIL petition dismissed.
Issues Involved:
1. Whether online fantasy sports games offered on Dream 11 platform are "gambling/betting"? 2. Whether Dream 11 is wrongly classifying its virtual online games under the wrong entry for GST and, therefore, violating Rule 31(A)(3) of the CGST Rules, 2018 in order to evade GST? Issue-wise Detailed Analysis: 1. Whether online fantasy sports games offered on Dream 11 platform are "gambling/betting"? The petitioner alleged that Dream 11's platform constitutes "betting" on cricket teams and that online fantasy sports games are games of chance, thus constituting illegal gambling. However, the court referenced multiple judgments to determine the nature of Dream 11's games. The Punjab & Haryana High Court in Varun Gumber Vs. Union Territory of Chandigarh (2017) and the Bombay High Court in Gurdeep Singh Sachar Vs. Union of India (2019) had previously held that the fantasy games offered by Dream 11 are games of mere skill and not gambling. The Supreme Court dismissed the Special Leave Petition against the Punjab & Haryana High Court’s judgment, affirming that fantasy games are protected under Article 19(1)(g) of the Constitution of India. The court reiterated that the test for gambling is whether the result of the game is determined by chance or accident. The Supreme Court has consistently held that games of skill are distinct from gambling and are protected under Article 19(1)(g). The court highlighted that Dream 11's fantasy games involve substantial skill, judgment, and discretion in selecting virtual teams, which are influenced by real-world player performance and statistics. Thus, the court concluded that Dream 11's fantasy games are games of skill, not chance, and do not constitute gambling or betting. 2. Whether Dream 11 is wrongly classifying its virtual online games under the wrong entry for GST and, therefore, violating Rule 31(A)(3) of the CGST Rules, 2018 in order to evade GST? The petitioner argued that Dream 11 is evading GST by paying 18% instead of 28% on the amount retained as platform fees, alleging that GST should be paid on the entire amount received from participants. The court noted that the Bombay High Court had already addressed this issue, holding that Dream 11 correctly classifies its services under entry 998439, which attracts 18% GST, and not under entry 999692, which pertains to online gambling services. The court acknowledged that the GST Department had issued a show cause notice to Dream 11, but it noted that the Department itself had classified Dream 11's games as games of skill. The Supreme Court had also limited the scope of review to the GST issue, which is pending before the Bombay High Court. Therefore, the court decided to leave the GST classification issue to the GST authorities to determine in accordance with the law. Conclusion: The court dismissed the PIL, finding no merit in the allegations. It held that Dream 11's fantasy games are games of skill and not gambling/betting, thus enjoying protection under Article 19(1)(g) of the Constitution. The issue of GST classification was left to the GST authorities to address. The court also noted that the PIL lacked genuine public interest and was filed without proper research, dismissing it with costs.
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