Alagh & Kapoor Law Offices

A Writ Petition was filed by Myteam11 Fantasy Sports Pvt. Ltd. before the Hon’ble Rajasthan High Court challenging a Show Cause Notice by the GST Department alleging that the company has misclassified their supply as ‘service’ instead of ‘actionable claims’ which are goods and hence, while indulging into betting has avoided taxes.

Before analyzing the issue at hand, it is essential to know the games which are being offered by Myteam11 Fantasy Sports Pvt. Ltd:

a) Rummy;
b) Poker;
c) Fantasy; and
d) Casual games.

Contentions raised by Myteams

Myteams have stated that the issue with respect to the games being offered by it are not res integra and have been decided by multiple courts, including the Hon’ble Supreme Court of India, holding that the games are games of skill.

It has also contended that in view of the settled position of law, the GST Department had no jurisdiction to issue the Show Cause Notice.

Contentions of the Department

The Department has stated that the games offered by Myteams are not in the nature of skill but are pure betting and gambling. Therefore, there is no illegality in the action undertaken by the Department.

Observation of the Hon’ble Rajasthan High Court

The Hon’ble High Court while passing the Interim Order has placed its reliance upon the following judgments, the study of which would assist us to correctly understand the view of the Hon’ble High Court:

  • Chandresh Sankhla vs. St. of Rajasthan & Ors. – holds that fantasy games are not in the nature of betting/ gambling.
  • Ravindra Singh Chaudhary vs. Union of India – the Hon’ble Rajasthan High Court held that fantasy games are games of skill and are not betting and gambling.
  • Dr. K.R. Laxmanan vs. State of Tamil Nadu – [physical] game of rummy is a game of skill.

The Hon’ble High Court while relying upon the aforementioned judgments has observed:

“In view of the totality of the facts and circumstance of the case, we are prima facie satisfied that some of the games offered by the petitioner online have already been held to be game of skill rather than that of chance or that of betting/ gambling. Thus, when the matter is so settled by various courts, the issuance of impugned show cause notice is nothing but an abuse of the process of law.”

Whilst the Department has been restrained from proceeding against the Myteam11 for recovering money, Myteam11 has been directed to file a response to the Show Cause Notice.

Order passed by the Hon’ble Andhra Pradesh High Court

The Hon’ble Andhra Pradesh High Court, in a Writ Petition before it, filed by multiple online gaming companies, has taken note that the physical game of Rummy might differ from the online game of Rummy and in this regard has formed a committee to submit a report on the gameplay of online game of Rummy.

CONCLUSION

No judgment of any Court in India has yet examined and held that online game of Rummy is a game of skill. The carefully worded order of the Hon’ble High Court wherein it observes that “some of the games offered by the Plaintiff have already been held to be game of skill” read alongwith the judgments assessed by the Hon’ble Court further sheds light that they have restrained from giving any opinion on the game of online Rummy. Further, the order of the Andhra Pradesh High Court has further brought clarity to minds of the gaming companies as well as the players with respect to the status of the online game of Rummy.

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