i History of gaming in India
India has a complicated and lengthy history with gaming. Archaeologists have found dice made from cubes of sandstone and terracotta that date back to the Indus Valley civilization in 3300 BC, and there is evidence that the Indus Valley people engaged in cockfighting and betting.2 Some of the ancient Indian mythologies also have a strong reference to gaming.
Gambling during Diwali (an Indian religious festival) has religious connotations and is considered auspicious.3 The courts in India recognise gambling on Diwali, provided it takes place among friends and not in a public place. In the case of Nimmagadda Raghavalu & Others v. Unknown,4 the Madras High Court held that:
Gambling is not an offence and it becomes one only when it takes place in a common gaming house or a public place. The mere fact that occasionally people used to play cards and perhaps for money does not necessarily make it a common gaming house. The presumption of gambling on Diwali is not so strong as the gambling at other times . . . . A person simply allowing the use of his house to gamblers during Diwali festival without any idea of demanding rent etc, cannot be said to be keeping a common gaming house. Gambling on Diwali day should not be considered to be an offence.
ii British India and gaming
Prior to the promulgation of the Constitution of India, gambling in India was governed by the Public Gambling Act 1857. The Public Gambling Act 1857 was likely derived from the Gaming Act 1845 and the Betting Act 1853, enacted by the Parliament of the United Kingdom. The British Acts of 1845 and 1853 sought to make wagering contracts unenforceable but repealed the Unlawful Games Act 1541, where games of skill such as bowling and tennis were deemed unlawful. This approach seems to be reflected in the Indian Public Gambling Act 1857, which prohibited public gambling and the keeping of the common gaming houses, but made an exception for games of skill.
Prior to the promulgation of the Constitution, horse racing in India was licensed in the Bombay Presidency under the Bombay Race-Courses Licensing Law 1912. Similarly, in the Bengal Presidency, Act VIII of 1867 allowed for subscription, prizes and staking on horse races.
Besides this, the British government in India used to run lotteries and used funds from them to develop towns.5 It can thus be stated that while public gambling was prohibited during the British rule in India prior to the Independence of India, horse racing and lotteries were largely permitted.
iii Independent India and gaming
After the promulgation of the Constitution of India and its coming into effect on 26 January 1950, the issues pertaining to gaming were divided. Betting and gambling were listed under Entry 34 of the State List (i.e., List II of the Seventh Schedule). This means that only the state legislature has the power to make laws pertaining to betting and gambling. Lotteries are mentioned in Entry 40, List 1 of the Union List, meaning that the Parliament of India is the appropriate body to make laws pertaining to lotteries. In addition, the state legislature has the power under Entry 62 of the State List to make laws pertaining to taxation of betting and gambling.
After the Constitution of India came into effect, most states adopted the principles of the Public Gambling Act 1857 with certain amendments, and each state has its own act on gambling.
iv The Indian gaming market
A perception exists worldwide that gaming in India is illegal or unregulated. However, this is not true. The gaming industry in India is estimated to be worth US$60 billion – this includes regulated and unregulated gaming. The gaming industry of India can broadly be classified into the following:
- horse racing;
- prize competitions;
- sports betting;
- games of skill; and
- games of chance.
Lotteries are specifically excluded from the ambit of gambling through the states' gambling acts. Until 1998 there was no law with respect to regulation of lotteries. Parliament enacted the Lotteries (Regulation) Act 1998 with the object of regulating lotteries, and to provide for matters connected therewith and incidental thereto. On 1 April 2010, the government of India issued the Lotteries (Regulation) Rules 2010, further regulating the lotteries in the country with regards to number of draws, minimum prize payout, etc.
'Lottery' has been defined in the Lotteries (Regulation) Act 1998 under Section 2(b), as follows: 'lottery' means a scheme, in whatever form and by whatever name called for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets.'
Most states have adopted the Public Gambling Act 1867 with an amendment pertaining to horse racing, whereby it has been specifically excluded. Under the amended gambling acts of the states, the following definition of gambling is given:
'Gaming' includes wagering or betting on any figures or numbers or dates to be subsequently ascertained or disclosed, or on the occurrence or non-occurrence of any natural event, or in any other manner whatsoever except wagering or betting upon a horse-race when such wagering or betting upon a horse-race takes place:
(a) on the day on which such race is to be run; and
(b) in any enclosure where such race is to be run, and sanction of the Provincial Government set apart from the purpose, but does not include a lottery.
In the case of Dr KR Lakshmanan v. State of Tamil Nadu,6 the Supreme Court of India recognised that horse racing, football, chess, rummy, golf and baseball are games of skill. It further held that betting on horse racing was a game of skill as it involved judging the form of the horse and jockey, and the nature of the race, among other variables.
The exception created in the gambling acts and the Supreme Court case of Dr KR Lakshmanan v. State of Tamil Nadu have crystallised the legal position of horse racing and wagering on horse racing. The 11 states that allow horse race betting are Andhra Pradesh, Assam, Delhi, Haryana, Karnataka, Maharashtra, Meghalaya, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal. However, active horse racing currently takes place at the turf clubs in Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, Mysore, Pune and Ooty.
Prize competitions in India are regulated under the Prize Competitions Act 1955. 'Prize competition' has been defined under Section 2(d) of the Act:
'Prize competition' means any competition (whether called a cross-word prize competition, a missing-word prize competition, a picture prize competition or by any other name) in which prizes are offered for the solution of any puzzle based upon the building up, arrangement, combination or permutation, of letters, words, or figures.
The Prize Competition Act's applicability extends to the following states: Andhra, Bombay, Madras, Orissa, Uttar Pradesh, Hyderabad, Madhya Bharat, Patiala and East Punjab States Union, and Saurashtra, all erstwhile Part C States, and Pondicherry, Dadar and Nagar Haveli, Goa, Daman and Diu.
The status of sports betting, whether it is a game of skill or a game of chance, has not been clarified by the Supreme Court of India or a High Court of a state. In the absence of a judgment on this, a grey area exists pertaining to the legal status of sports betting in India. Sikkim has taken the initiative of legalising online sports betting within the state, with the promulgation of the Sikkim Online Gaming (Regulation) Act 2008. Under this Act, a licence for placing bets on sports games such as football, cricket, lawn tennis, chess, golf and horse racing can be issued.
In Meghalaya, the sport of teer (a form of archery) has been excluded from within the ambit of the state's Gambling Act, and betting on it is licensed.
Games of skill
Games of skill are identified as a separate category because various states in India (excluding Assam,7 Odisha (Orissa)8 and Telangana9) have gambling acts that exclude games of skill from the ambit of gambling. In the absence of a legislative definition of a game of skill, the Supreme Court in Dr KR Lakshmanan v. State of Tamil Nadu;10 State of Andhra Pradesh v. K Satyanarayana;11 and State of Bombay v. RMD Chamarbaugwala12 has laid down that a game of chance is where the element of chance predominates over the element of skill, whereas a game of skill is where the element of skill predominates over the element of chance. The card games of rummy and bridge, along with other sports like golf and chess, have been classified as games of skill. In R Shankar Creation Association v. State of Karnataka,13 the Karnataka High Court classified poker, darts, carom and chess, among others, as games of skill.
The government of Nagaland under the Prohibition of Gambling and Regulation and Promotion of Online Games of Skill Act 2015 (the Nagaland Act) has defined games of skill as:
Games of skill shall include all such games where there is preponderance of skill over chance, including where the skill relates to strategizing the manner of placing wagers or placing bets or where the skill lies in team selection or selection of virtual stocks based on analyses or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.
All games enumerated in Schedule A of the Nagaland Act will be classified as games of skill. Schedule A includes games such as chess, sudoku, quiz, bridge, poker, rummy, nap, virtual sports, virtual games like monopoly or racing, and virtual fantasy games.
Games of chance
Games of chance for stakes fall within the ambit of the gambling acts of the states and are largely prohibited. Some states, for example Goa, have created exceptions within their gambling acts, allowing for authorised gaming. Thus licences are issued in the state of Goa for games of chance in casinos, which are operated on land as well as offshore. The state of Sikkim has also promulgated the Sikkim Casino Games Act 2004, which allows for casino operations within the state.
v State control and private enterprise
Under the Lotteries (Regulation) Act 1998, it is the state governments that have the power to organise, conduct and promote lotteries, subject to the conditions prescribed. The lotteries department of each state, generally established under their revenue departments, are in charge of running lotteries. States have appointed agents that are private companies, to operate and promote lotteries on their behalf within the state and to other states. Lotteries in India14 are permitted in the following states: Maharashtra; Mizoram; Bodoland Territorial Council;15 Goa; Sikkim; Andhra Pradesh; Nagaland; Kerala (only paper lottery); Punjab; and West Bengal.
In addition to the above, the national lottery of Bhutan is also sold in India. This has been allowed through the Trade, Commerce and Transit Agreement between the Republic of India and the Royal Government of Bhutan.16
Horse racing in India is primarily controlled by the six turf clubs, namely:
- the Royal Calcutta Turf Club;
- the Royal Western India Turf Club Ltd;
- the Madras Race Club;
- the Bangalore Turf Club Ltd;
- the Delhi Race Club; and
- the Hyderabad Race Club.
These turf and race clubs lay down the rules of racing, as well as control their enforcement. The licences to conduct horse races were issued to them by their respective state governments. The totalisator and the bookmakers at these race clubs, including for off-course betting, are licensed under the respective state's act on entertainment and betting tax. In Delhi it is the Delhi Entertainments and Betting Tax Act 1996, and in Andhra Pradesh it is the Andhra Pradesh (Telangana Area) Horse Racing and Betting Tax Regulation 1358F.
Prize competitions in India are offered under a licence issued by states under the Prize Competition Act 1955. A prize competition can be offered by a person who has procured the licence from the state, provided that the maximum prize that can be offered in such a competition does not exceed 1,000 rupees and there are not more than 2,000 entries.
The legal status of sports betting (i.e., whether it is a game of skill or a game of chance) is not clear in India. The only state where sports betting can be offered is Sikkim. Licences have been issued to private operators to offer sports bets.
In Meghalaya, bets can be placed on teer (a traditional game of the state) under a licence. These licences are issued under Section 14A of the Meghalaya Amusement and Betting Tax (Amendment) Act 1982.
Games of skill
Games of skill are outside the ambit of states' gambling acts. Whereas games of skill for stakes, like horse racing and teer, require a licence from state governments, other games of skill like rummy and bridge can be offered without a licence in most states.
Nagaland has sought to regulate and license games of skill throughout India, through the Nagaland Act. The Nagaland Act contemplates the regulation and promotion of games of skill through the issuance of licences. A licence can be procured by a person, firm, company or limited liability company incorporated in India that is substantially held and controlled in India. A licensee is allowed to offer games of skill across India, in states where such games are not classified as games of chance and in states where an exception for games of skill exists in the state's gambling act.
Games of chance
Games of chance like casino games can be offered in Goa and Sikkim under a licence. Licences have been issued to private entities within these states.
vi Offshore gambling
Foreign direct investment (FDI) in India is governed by the Foreign Exchange Management Act 1999 (FEMA) and the regulations made thereunder. FDI is subject to the Foreign Direct Investment Policy (the FDI Policy), as amended. The FDI Policy was formed by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, and is implemented by the Reserve Bank of India (RBI). The DIPP has a practice of issuing a consolidated version of the FDI Policy encompassing the contents of all the press notes, press releases, circulars and clarifications issued by it from time to time.
Under the FDI Policy, FDI remains prohibited in certain sectors, including lottery business, gambling and betting. Besides FDI, any form of foreign technology collaboration, such as licensing for franchise, trademark, brand name, management contract, etc., for lottery business, gambling and betting activities has also been prohibited under the prevailing FDI Policy. The rationale of prohibiting FDI and technological collaboration in the aforesaid sectors is to discourage foreign investments in lottery, gambling and betting businesses that have been judicially held to be mere 'games of chance', as opposed to 'games of skill'. Thus, while FDI for games of chance and lotteries is prohibited, there is a lack of clarity on whether the same prohibition applies for games of skill, sports betting, horse racing, teer and prize competitions.
Under FEMA, the Foreign Exchange Management (Current Account Transactions) Rules 2000 (the Current Account Rules) were framed to impose reasonable restrictions for current account transactions. The Current Account Rules provide that transactions included in Schedule I are prohibited. Remittance from lottery winnings, racing or riding, purchase of lottery tickets, football pools, sweepstakes, etc., are included within Schedule I, which essentially means that all foreign exchange gaming transactions are prohibited. Thus, an offshore gaming operator is unlikely to be able to offer his or her services from outside India within India.
If the public has access to a foreign gaming website within India, then the courts would be able to exercise jurisdiction as per the principle in Banyan Tree Holding (P) Limited v. A Murali Krishna Reddy and Anr.17 This jurisdiction would be exercised on the basis that the site is an interactive website and seeks to target website users in India. The authorities could look at initiating action for violation of the applicable Indian laws (a website offering a game of chance would be in violation of a state's gambling Act). Under Section 69A of the Information Technology Act 2000, the government has the power to direct its agency or an intermediary to block access to the infringing website. Intermediaries under the Information Technology (Intermediaries Guidelines) Rules 2011 and the registrar accredited with the Internet Corporation for Assigned Names and Numbers have blocked access to gaming websites coming from outside India.
II Legal and regulatory framework
The Supreme Court of India in BR Enterprises v. State of UP 18 has held that a lottery is a game of chance and is not a business or trade; rather, it is in the nature of res extra commercium. The Supreme Court also held, while interpreting Section 5 of the Lotteries Act 1998,19 that a state could not exclude other states from its own lottery. Either the state had to declare itself as a lottery-free zone or permit lotteries from other states. In a subsequent judgment, in All Kerala Online Lottery Dealers Associations v. State of Kerala,20 the court distinguished from the principle of the earlier judgment (the BR Enterprises case) and held that paper lotteries and online lotteries fell in different classes. Therefore a state would be permitted to ban online lotteries and allow paper lotteries or vice versa, without violating the provisions of Section 5 of the Lotteries Act 1998.
Horse racing and betting on horse racing has been classified as a game of skill by the Supreme Court in Dr Lakshmanan v. State of Tamil Nadu,21 therefore it is considered outside the ambit of gambling. Horse racing and betting on horse racing is permitted in licensed premises.
In News Television India Ltd v. Ashok Waghmare,22 the Bombay High court held that prize competitions do not include skill games, and even popular TV quiz shows like Kaun Banega Crorepati (a version of 'Who Wants to be a Millionaire') are excluded from its ambit.
The status of betting on sports, and whether it is a game of skill, has not been addressed by the High Courts of the States or the Supreme Court. However, the Supreme Court has directed the Law Commission of India to consider whether betting on sports can be regulated in India.
The Law Commission of India published a report titled 'Gambling and Sports Betting including Cricket in India'23 whereby it proposed the legal framework and certain recommendations pertaining to sports betting in India. The Committee made recommendations regarding the power of the legislature at the Centre, to regulate betting and gambling along with recommendations on the structure of the said proposed regulations while observing the advantages of the same and noting that said regulations would serve to regularise an existing, thriving and rampant unofficial industry.
Games of skill
The issue of games of skill for stakes, and whether they fall within the ambit of a state's gambling act, has not been adjudicated upon by the Supreme Court. In absence of an express judgment of the Supreme Court, contrary opinions exist among the High Courts of the states. In the case of D Krishna Kumar v. State of AP,24 the Andhra Pradesh High Court held that since games of skill fall outside the ambit of Andhra Pradesh's Gaming Act, games of skill for profits and stakes would, therefore, also fall outside the Gaming Act. However, the Madras High Court in DG of Police, State of Tamil Nadu v. Mahalakshmi Cultural Association,25 held that while games of skill at physical premises fall outside the ambit of the state's gambling act, games of skill for stakes and profit fall within its ambit and are therefore prohibited. An appeal against this decision was filed by the Mahalakshmi Cultural Association in the Supreme Court.26 This appeal was withdrawn by the appellants on the ground that the criminal case against them had been dismissed, thus the appeal had become infructuous. The government of Tamil Nadu, however, took a stand that the state government had not initiated any action against the online operators, as it had not taken a decision as to whether an online game of rummy fell foul of the law or not.
The Punjab and Haryana High Court, in its decision dated 18 April 2017 in Varun Gumber v. Union Territory of Chandigarh and Ors,27 held the fantasy game format offered by one of the fantasy game operators to be a game of skill. The Punjab & Haryana High Court decision was appealed vide a special leave petition (SLP) to the Supreme Court of India captioned as Varun Gumber v. Union territory of Chandigarh and Ors.28 The Supreme Court vide its order dated 15 September 2017 dismissed the SLP in limine, namely, the Court dismissed the SLP at the outset without going into the merits of the case and without giving any reasons for the said dismissal.
The Telangana Gaming Act, 1974 amended vide the Telangana Gaming (Amendment) Act, 2017 dated 7 November 2017 prohibits the residents of Telangana to organise, provide, participate and play games of skill (including online games of skill) in and from the state, for stakes.
The Gujarat High Court, in its decision dated 4 December 2017 in the case of Dominance Games Pvt Ltd v. State of Gujarat and Ors,29 held that poker is a game of chance, and hence prohibited in the State of Gujarat. However, an appeal is pending before the division bench of the same High Court.
The Division Bench of the Kerala High Court in Ramachandran. K vs. Circle Inspector of Police Mallapuram District30 held that playing rummy for stakes is not excluded under the Kerala Gaming Act, 1960 and that the same amounts to a 'gambling activity'.
ii The regulator
Lotteries are regulated by the Directorate of Lotteries under the Finance Department of each state. Horse racing, and betting on horse racing, is regulated by the relevant turf authority or club. The entertainment tax inspector performs a limited role of inspecting the books for detecting tax evasion, if any, however, this is likely to change with the Central Goods and Services Act 2017.
For prize competitions, states have formulated rules where the manner of procuring the licence has been laid down. Applications are to be made to the authorities designated by the states.
The licensing and regulator under the Sikkim Online Gaming Act 2008 is the officer designated by the Lotteries Department (government of Sikkim).
The regulator for casinos in Sikkim is the authorised officer, appointed by the Department of Tourism (government of Sikkim). However, in Goa, a gaming commissioner is to be appointed under Section 13C of the Goa Public Gambling (Amendment) Act 2012.
The regulator for the online games of skill under the Nagaland Act is the Finance Commissioner or any other authority designated and empowered on his or her behalf.
iii Remote and land-based gambling
Lotteries are offered in a paper format as well as online, across states where lotteries are permitted. Paper lotteries are generally offered through lottery shops and stalls. Kerala has made a distinction between paper lotteries and online lotteries, prohibiting online lotteries within its territory.
Horse racing and betting on horse racing is permitted only in licensed premises. Betting on horse racing takes place at the race clubs, for the races held at that particular track, as well as races broadcast from other tracks. Certain states like Maharashtra, Tamil Nadu and Andhra Pradesh have also allowed off-course betting shops.
The Prize Competition Act 1955 does not make a distinction between paper-based and online prize competitions. These competitions are generally conducted through dailies and posts.
Online sports betting offered through parlours on an intranet network is permitted in Sikkim.
The principal law that governs gaming is the Public Gambling Act 1867. This Act does not make a distinction between premises-based and online gaming. The states that have permitted casinos allow the offering of casino games only at the premises, whether they are on land or on ships or cruises.
Online games of skill can be offered across India under the Nagaland Act.
III Licensing process
i Application and renewal
Lotteries are operated and promoted by state governments. States invite private enterprises to partner with them to promote and market the state's lottery through a tendering process. The request for proposal document is generally released on a payment basis by each state for such tendering. Some of the tender conditions are:
- operations must continue in India for five years;
- the applicant must have been a profitable vendor for three years;
- the applicant must a minimum experience of one year in the past three years;
- the applicant must have a state government certificate supporting the experience of the vendor;
- there must be a deposit of earnest money; and
- there must be an advance payment of sale proceeds.
No new licences for horse racing have been issued in the past two decades. Thus, the opportunity to procure a horse-racing licence is limited. Punjab has enacted the Punjab Horse Race (Regulation and Management) Act 2013. The tender on a design, build, operate and transfer basis for a proposed race course was floated, but no bids were received for it.31
Licences for sports betting are issued in Sikkim. An application for a licence needs to be made to the government of Sikkim. The designated authority, as per the notification of the Sikkim government dated 11 June 2009, is the Secretary to the government of Sikkim (Finance, Revenue and Expenditure Department). The application needs to be made using Form 1 accompanied by a bank draft of 500 rupees in favour of the director, Sikkim state Lotteries. After examining the application and making due enquiries (no time period is provided), the government can grant a provisional licence on the payment of fee of 100,000 rupees in Form 2. The provisional licence is granted to enable the licensee to set up the infrastructure and comply with other licensing requirements. Subject to compliance with the licensing terms, a regular licence in Form 2A is issued for a period of five years on the payment of a fee of 10 million rupees.
Licences for teer bookmakers can be issued under Section 14(3)A of the Meghalaya Amusement and Betting Tax Act. Further, under Section 14A(1)m of the Meghalaya Amusement and Betting Tax Act, terms and conditions for a licence are to be prescribed. Details pertaining to the licensing conditions and the process to be followed for licensing, are not readily available.
Under the prize competition rules of states,32 the application for running a prize competition needs to be made in Form A and should be submitted personally or sent by registered post to the licensing authority. The licence is effective throughout the state. The fee for granting a licence is 25 rupees where an entry fee is charged, and 10 rupees where no such fee is charged. The fee for renewal is half of the initial fee.
Games of skill
No licence is required to operate a game of skill outside the state of Nagaland. Licences have been issued under Section 7 of the Nagaland Act. Licences for a period of five years can be issued to individuals, firms or companies provided:
- they are not engaged in gambling;
- they do not have a criminal history;
- the controlling stake and exercise of executive decisions is within India; and
- the technology and support platforms are within India.
Under the Nagaland Act, rules have been formulated to govern the licensing process. Under Rule 4(3) an application needs to be made accompanied by documents supporting the credentials of the promoters, audited financials, note on software technology platform, business plan and financial projections. A non-refundable application fee of 50,000 rupees through a demand draft also needs to be deposited. The details are then forwarded to the empanelled firm, which then makes an enquiry and issues a certification or recommendations for compliance. If a certification is issued by the empanelled firm, the licensing authority is bound to issue a licence within 14 days. In the event that recommendations are received from the empanelled firm, the recommendations shall be referred to an ad hoc committee or expert committee formed under the Nagaland Act for its recommendations, which are not binding on the licensing authority.
Under the Nagaland Act licences can be issued for a game or bouquet of games (three or more games). An annual licence fee of 1 million rupees per game per annum or 2.5 million rupees for a bouquet of games per annum for the first three years is payable. For the subsequent two years, 2 million rupees per game per annum or 5 million rupees for a bouquet of games per annum is payable. In addition, the licensee is required to pay an amount of 0.5 per cent of the gross revenue generated as royalty to the state government.
Games of chance
Under Section 13A of the Goa, Daman and Diu Public Gambling Act 1976, the government may authorise any electronic amusement games or slot machines in five-star hotels (and such table games and gaming on offshore vessels as may be notified) subject to certain conditions, including payment of recurring and non-recurring fees. The validity of licences granted by the government of Goa is generally five years. The annual licence fees for onshore Goan casinos are as follows:
- up to 100m2 – 100 million rupees (hiked by 60 million rupees);33
- 100m2 to 300m2 – 200 million rupees(hiked by 150 million rupees);34
- 300m2 to 500m2 – 250 million rupees (hiked by 195 million rupees);35
- 500m2 to 750m2 – 320 million rupees;36
- 750m2 to 1000m2 – 360 million rupees;37 and
- over 1000m2 – 400 million rupees.
For offshore casinos (passenger capacity-based), the fees are:
- up to 100 passengers – 80 million rupees;
- 100 to 200 passengers – 250 million rupees (hiked by 150 million rupees;
- 200 to 400 passengers – 300 million rupees (hiked by 190 million rupees); and
- over 400 passengers –400 million rupees (hiked by 288 million rupees).38
The renewal fee for both onshore and offshore casinos has been increased from 3 million rupees to 10 million rupees.
Under the Sikkim Casino Games (Control and Tax) Rules 2007, an application for a licence needs to be made through Form A. Provisional licences under these Rules are granted for a period of five years and can be renewed. A licence fee of 50 million rupees is payable for a casino licence.
Lotteries used to be subject to a lottery tax or charge. The states of Kerala, Punjab, West Bengal and Maharashtra imposed lottery taxes. Maharashtra imposed a tax of 50,000 rupees per draw for online lottery companies. Provisions under the Maharashtra Tax on Lotteries Act 2006 were applied while assessing lottery tax.39 However, with the promulgation of the Central Goods and Services Tax 2017 (GST), a dual rate of tax on lotteries was introduced on 18 June 2017. While the state-run lotteries would attract a GST of 12 per cent on the face value of the ticket, lotteries authorised by a state government would attract a tax of 28 per cent on the face value of the ticket.40 In addition, as per Section 115BB of the Income Tax Act, winnings on lotteries in the hands of an individual are taxed at 30 per cent.
ii Horse racing
Previously, different states had different rates of taxes on horse racing. In Delhi and Andhra Pradesh, an entertainment tax of 15 per cent was levied on all money paid to the totalisator and the bookmakers.
In Maharashtra, the rate of taxation is 10 per cent on the investment in the case of the totalisator and 20 per cent on the investment in the case of the bookmaker.41
In July 2017, the government introduced the GST, which subsumed the services tax, the entertainment tax and all other state indirect taxes. The GST council placed gambling and totalisator services provided by a racecourse as well as betting with licensed bookmakers in racecourses in the 28 per cent tax band. Further, the GST Council on 18 January 2018 provided clarification pertaining to GST on horse racing,42 which stated that GST would now be leviable on the entire bet value (i.e., total of face value of any or all bets paid into the totalisator or placed with licensed book makers, as the case may be).
In addition, all winnings of a player or individual are taxed under Section 194BB of the Income Tax Act at 30 per cent.
iii Prize competitions
Under Section 194B of the Income Tax Act, all winnings from prize competitions, such as crossword puzzles, are taxed at 30 per cent.
iv Games of skill and games of chance
Under entry 34 of the Central Goods and Service Tax notification dated 28 June 2017, all services rendered pertaining to an entry into a casino would be chargeable with a GST of 28 per cent on the gross amount collected as admission charge or entry fee. In a subsequent circular dated 4 January 2018, it was clarified that the tax of 28 per cent would apply on entry to casinos as well as on betting and gambling services being provided by casinos on the transaction value of betting (i.e., the total bet value), in addition to GST levy on any other services being Circular No. 27/01/2018-GST provided by the casinos (such as services by way of supply of food and drinks, etc., at the casinos).
Under Section 194B of the Income Tax Act, all winnings from card games and other games of any sort, betting and gambling are taxed at 30 per cent.
V Advertising and marketing
The regulatory framework with regard to TV shows and advertisements, and possible electronic dissemination of material projecting gaming, is envisaged in the Code for Self-Regulation in Advertising (the Code), the Cable Television Network Rules 1994 and the Consumer Protection Act 1986.
The Advertising Standards Council of India issues the Code for specifically dealing with various issues regulating advertisement content. The Code permits advertisements pertaining to prize competitions and lotteries, wherein it requires that all material conditions should be stated for the consumer to obtain a true and fair view of their prospects in such activities.43
Under the Cable Television Network Rules 1994, advertisement of gambling is prohibited, but the advertisement of games of skills, such as horse racing, rummy and bridge, is not prohibited.
Under the Consumer Protection Act 1986, unfair trade practices are prohibited. This would include the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest.
VI The year in review
Owing to the Indian Premier League's betting and fixing scandal, the Supreme Court formed a Committee under the aegis of Justice Mukul Mudgal to determine the facts. This Committee recommended to the Supreme Court that betting in sports should be legalised and regulated. The Committee formed under the aegis of the former Chief Justice of India, Justice RM Lodha, confirmed this recommendation. The Supreme Court in its judgment dated 18 June 2016 in BCCI v. Cricket Association of Bihar 44 has made a reference to the Law Commission of India to consider legalisation of sports betting. The Law Commission sought opinions from Indian and international stakeholders and recommended that betting in sports be regulated.
The decisions of the Gujarat High Court on poker, the Madras High Court (Division Bench) and the Kerala High Court (Division Bench) on rummy for stakes classifying them as games of chance in the respective states, thus prohibiting it, has the operators worried. The industry bodies of the operators are likely to consider an appeal of these judgments to the Supreme Court of India. These bodies are:
- the All India Gaming Federation, which seeks to conduct advocacy and regulate the entire gaming industry of India;
- the Rummy Federation, which seeks to conduct policy advocacy for the rummy industry, particularly after the Telangana Gaming (Amendment) Act 2017 prohibiting rummy for stakes in the state, as well as seeking to self-regulate the industry; and
- the Indian Federation of Sport Gaming, which seeks to self-regulate the sports gaming industry of online sport-based games of skill including e-sports, fantasy sports and casual sport games.
There has been much debate on the regulation of sports betting in India. The Law Commission of India's recommendation of legalisation could be taken up by the government after the elections in May 2019.
The petitioners in the judgment classifying poker as a game of chance have filed an appeal before the division bench of the High Court of Gujarat. The rummy service providers from the state of Telangana have filed a writ petition in the High Court of Andhra Pradesh challenging the constitutional validity of the Telangana Gaming (Amendment) Act 2017, classifying game of skill for stakes as betting. The judgments of the Division Bench of both the Madras High Court and the Kerala High Court has held that rummy for stakes are likely to be challenged in the Supreme Court of India. If successful it will galvanise the industry however, if unsuccessful, it will lead to a massive set-back to the games of skill industry in India.
1 Vidushpat Singhania is the managing partner of Krida Legal.
2 'Primary History – Indus Valley: Games and Toys', accessed on 3 April 2016 at www.bbc.co.uk/schools/primaryhistory/indus_valley/games_and_toys/.
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6 Dr KR Lakshmanan v. State of Tamil Nadu (1996) 2 SCC 226.
7 The Assam Game and Betting Act, 1970
8 The Orissa Prevention of Gambling Act, 1955
9 The Telangana State Gaming (Amendment) Ordinance, 2017 dated 17 June 2017 and the Telangana State Gaming (Second Amendment) Ordinance, 2017 dated 8 July 2017.
10 See footnote 6, supra.
11 State of Andhra Pradesh v. K Satyanarayana (1968) 2 SCR 387, AIR 1968 SC 825.
12 State of Bombay v. RMD Chamarbaugwala AIR 1957 SC 699.
13 R Shankar Creation Association v. State of Karnataka, WP No. 16622/2012, decision dated 4 June 2012.
14 As of 30 November 2015.
15 The Bodoland Territorial Council is not a state as per the Indian constitution. This is an area in the north-eastern region of India, which was created recently by carving out areas from eight districts of Assam, namely, Kokrajhar, Dhubri, Bongaigaon, Barpeta, Nalbari, Kamrup, Darang and Sonitpur within the state of Assam. It is an autonomous administrative unit constituted under the Sixth Schedule of the Constitution of India covering an area of 8795km2 (provisional).
16 Reference to Article 1 of the Agreement: 'For the purpose of this Agreement, the term “free trade and commerce” in Article I shall be understood to include within its scope the sale of Bhutan lottery tickets in India and the sale of Indian government and state lottery tickets in Bhutan, subject to the relevant laws which may be in force in the territories of the Kingdom of Bhutan and India, as the case may be.'
17 2011 (5) RAJ 255(Del); CS (OS) No.894/2008 decided on 23 November 2009.
18 BR Enterprises v. State of UP (1999) 9 SCC 700.
19 Section 5, Lotteries Act 1998: 'A state government may, within the state, prohibit the sale of tickets of a lottery organised, conducted or promoted by every other state.'
20 Civil Appeal Nos. 3518–3520.
21 See footnote 6, supra.
22 News Television India Ltd v. Ashok Waghmare (2006) 2 MhLj 431.
23 Law Commission Report no. 276 dated 5 July 2018.
24 D. Krishna Kumar v. State of AP (2002) 5 ALT 806, 2003 Cr LJ 143.
25 DG of Police, State of Tamil Nadu v. Mahalakshmi Cultural Association, WA No. 2287 of 2011, decided on 22 March 2012.
26 SLP Civil No. 15371/2012.
27 CWP No. 7559 of 2017.
28 Diary No. 27511/2017.
29 Special Civil Application No. 6903 of 2017.
30 WP(C). No. ۳۵۵۳۵ of ۲۰۱۸ decided on ۲۴ January ۲۰۱۹.
31 Malik M, 'Horse race turn troublesome in Punjab', The Pioneer, 10 July 2015.
32 Bombay Prize Competitions Rules 1959 and the West Bengal Prize Competitions Rules 1958.
33 Official Gazette Extraordinary No. 2 Series I No. 51, Government of Goa, 28 March 2018).
34 Official Gazette Extraordinary No. 2 Series I No. 51, Government of Goa, 28 March 2018.
35 Official Gazette Extraordinary No. 2 Series I No. 51, Government of Goa, 28 March 2018.
39 Jore D, 'Maharashtra Government seeks to recover Rs 933 crores from untraceable lottery companies'; accessed 24 May 2016 at www.mid-day.com/articles/maharashtra-government-seeks-to-recover-rs-933-cr-from-untraceable-lottery-companies/16578161.
40 'Decisions taken by the GST Council in 17th Meeting-18th June 2017' accessed on 18 March 2018 at www.cbec.gov.in/resources//htdocs-cbec/gst/Decisions%20taken%20by%20the%20GST%20Council%20in%20the%2017th%20Meeting%20-%2018.06.2017.pdf.
41 'Entertainment Tax rate structure', accessed 6 April 2016 at http://mumbaisuburban.gov.in/html/entertainment.htm.
42 Government of India, Ministry of Finance, Department of Revenue, Tax Research Unit, Circular No. 27/01/2018-GST accessed on March 3, 2018 available at: http://www.cbec.gov.in/resources//htdocs-cbec/gst/circularno-27-gst.pdf;jsessionid=42E3FB9C54911DECD0C5CEC38DA713F1.
43 Example (f), Chapter 1 of the Code.
44 Civil (Appeal 4235 of 2014 with Civil Appeal 4236 of 2014).