JUNE 03, 2026
From Dice to Device: The Government Wins
A lawyer friend recently asked me what the outcome of the online gaming case in the Supreme Court would be. I took a chance - no skill and said, "Revenue will win" and it did. Had I bet on that, I too could have been a winner. I will try Las Vegas soon and try my chance - without GST.
There were two entries in List-II-State List in the Seventh Schedule to the Constitution, pertaining to Betting and gambling and there was an interesting discussion on these entries in the Constituent Assembly.
34. Betting and gambling.
62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
So, Betting and Gambling, could be taxed only by the States and not the Centre.
In the Constituent Assembly, Prof. Shibban Lal Saksena said,
"Sir, betting and gambling are being legalised by this entry in the Schedule. I thought that gambling was a crime and so I am surprised to see that gambling and betting are provided for as a legitimate field of activity under this Schedule. In fact, I was sorry that entry No.78 in List I was passed without any opposition, [Lotteries organised by the Government of India or the Government of any State.]
I think that this is against the principles to which we are committed. Gambling and betting should be banned. Sir, I strongly oppose this entry."
Shri Lakshminarayan Sahu said:
Mr. President, I am opposing this for the reason that when we are going to build the entire structure of our State on the foundations of truth and non-violence, when we are guided by the lofty ideals of Mahatma Gandhi, there should be no mention at all of betting and gambling in the Constitution we are to frame. The very mention of these words would indicate that our National Government favours the idea of encouraging betting and gambling and seeks to have its own control on them. Have we forgotten the lessons of the Mahabharat? Taxation on such items does not appear proper. The clause relating to lottery laid down in the Constitution, is also not proper.
The Constitution Assembly, which is making the rules now, should prohibit it. Therefore, Mr. President, I oppose it.
And Dr. Ambedkar gave a brilliant, but obvious answer:
Sir, I am very much afraid that both my friends, Mr. Shibban Lal and Mr. Sahu, have entirely misunderstood the purport of this entry and they are further under a great misapprehension that if this entry was omitted, there would be no betting or gambling in the country at all.
I should like to submit to them that if this entry was omitted, there would be absolutely no control of betting and gambling at all, because if entry was there, it may either be used for the purpose of permitting betting and gambling or it may be used for the purpose of prohibiting them. If this entry is not there, the provincial governments would be absolutely helpless in the matter.
I hope that they will realise what they are doing. If this entry was omitted, the other consequence would be that this subject will automatically be transferred to List 1 under entry 91. The result will be the same, viz. the Central Government may either permit gambling or prohibit gambling.
The question therefore that arises is this whether this entry should remain here or should be omitted here and go specifically as a specified item in List I or be deemed to be included in entry 91. If my friends are keen that there should be no betting and gambling, then the proper thing would be to introduce an article in the Constitution itself making betting and gambling a crime, not to be tolerated by the State.
Entry 91 of the List 1 in the Seventh Schedule of the draft constitution read as:
91. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.
So, any subject, (including any tax) not mentioned in List II or List III would automatically fall in List I and come under the jurisdiction of the Central Government. There is no way that a subject can be eliminated from these lists, unless as Dr. Ambedkar stated, it is so done by an Article in the Constitution.
Thus started the official entry of betting and gambling in the Constitution and GST laws.
Last week, the Supreme Court delivered a marathon judgement running into 417 pages on the legality of GST on betting and gambling. DGGI Vs GAMESKRAFT TECHNOLOGIES PVT -
The Supreme Court judgement is being incisively analysed by tax experts of all verities. I will jest have a cursory look.
Everyone loses - except the taxman, who always wins. See how massive the case was.
1. Revenue demanded more than two lakh crore rupees together with interest and penalty against Gameskraft whose revenue was barely 4,650 crores.
2. Another demand against casinos of Rs. 16,822.97 crores, which along with interest and penalty would exceed Rs. 33,500 crores.
3. Notice by the DGGI demanding differential GST of Rs. 7549,14,12,382/-.
Before the Court spoke, the Additional Solicitor General presented his Ten Sutras, etched as pillars for the taxman's temple.
ASG's ten tenets:
1. There is no gambling if no stakes are involved, irrespective of whether the underlying game is a game of skill or game of chance as far as GST laws are concerned, since consideration is an essential ingredient for levy;
2. There is gambling, once stakes are involved, irrespective of whether the underlying game is a game of skill or game of chance;
3. A game of chance involving even a competition fee is gambling;
4. A game of skill is per se not gambling;
5. A game of skill, when played with stakes, makes it gambling;
6. A game of skill played with stakes, though gambling, does not re- characterize the underlying game from game of skill into game of chance;
7. Protection by some of the states on games of skill played with stake from penalty and prosecution is proof that the same is nothing but gambling; such an express carve-out exempting and protecting gambling on games of skill from penal consequences is called for only because it is otherwise "gambling". Games of skill played with stakes will not cease to be gambling merely because of a protection given from penal consequences;
8. May it be a game of skill or a game of chance, playing for stakes makes it gambling as the outcome is not in the control of the betters and gamblers in both forms of games;
9. The independent act of betting and gambling is only a chance and remains a chance irrespective of the fact as to whether the underlying game is a game of skill or game of chance. A chance on a game of chance and a chance on a game of skill will only remain a chance in both cases, and therefore, it is inappropriate to identify the chance of betting and gambling on a game of skill as not a chance but a skill, when the preponderance of uncertainty is the same in any form of game involving betting and gambling;
10. When time tested jurisprudence has benchmarked betting and gambling, as similar expressions, the new evolution that only betting on gambling makes it gambling, has no basis. The GST laws have not used the expression betting on gambling. it has used the expression betting and gambling.
I liked this sentence in page 33 of the judgement, "Games of skill played with stakes will not seize to be gambling merely because of a protection given from penal consequences."
Supreme Court's Key Conclusions on GST & Gambling
The Court listened, deliberated, and then shut every escape hatch with its own list of conclusions.
Issue / Point | Judgement | In plain words | |
|---|---|---|---|
1. | Skill vs. Chance irrelevant | If money is staked, GST calls it gambling | Whether chess or dice, the taxman sees only rupees rolling |
2. | Actionable claims taxable | GST applies to the supply of claims, not the play itself | The game is yours, but the claim belongs to Revenue |
3. | Levy is constitutional | Article 265 supports the tax | The Constitution may not guarantee happiness, but it guarantees GST |
4. | Hardship vs unconstitutionality | Losses don't invalidate a levy | Cry all you want, the taxman counts rupees, not tears |
5. | Rules stand firm | Valuation rules cannot be struck down separately | The fine print is as strong as the big print |
6. | No escape via "no transfer" | Even without a pre-existing claim, GST applies | If there's a stake, there's a take |
7. | Prize pools included | Winnings and payouts are taxable | Even the jackpot is taxed before you touch it |
8. | Rule 31A valid | It's machinery, not a new levy | The gears of taxation grind smoothly |
9. | 2023 amendments retrospective | Clarifications apply backwards | GST remembers everything, even what you forgot |
10. | Platforms are suppliers | Operators are the house itself | And the house always wins |
11. | Math extrapolation allowed | Statistics can support assessments | If you don't keep records, Revenue will do the math for you |
12. | Challenges rejected | All objections fail | The Court closed every escape hatch - Revenue walks away with the keys |
In short: The Court shut every escape hatch. Whether skill or chance, once money is staked, GST applies on the full value, retrospectively, constitutionally, and without sympathy.
Questions same - answers different
Albert Einstein supposedly administered an exam to an advanced physics class. As his teaching assistant collected the papers, the assistant noticed something highly unusual. He looked at the test, then looked at Einstein, visibly confused.
"Professor," the assistant hesitated, "isn't this exactly the same exam you gave to this very same class exactly one year ago?"
"Yes, it is," Einstein replied calmly.
"But Professor," the assistant countered, "how can you give the exact same test to the same students twice?"
Einstein smiled and said, "Because the answers have changed."
This is perhaps applicable to GST. The answers have changed.
Until next week
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