Online Gambling and Its Aspects
Author:- Neelkanth Vyas, 1st Year LLM Student Co-Author :- Sreejoni Baruah , a Law student and Shweta Nair, 1st Year LLM Student
Introduction:
‘Gambling’ in simple terms means participating in any games or in any activities in which the element of risk is involved.
Online gambling in simple terms means participating in any competition where online games are played or in any online activity where money and the element are involved as both go hand in hand in Online Gambling.1
Online Gambling includes the terms like the game of Poker in Virtual Mode, Virtual Casino Competitions and any type of sports betting which is through Online Mode.
It is a platform which promotes Online Betting and it involves real money which means competitors pay real money for participation in any Online gaming event and either they win a big amount or they lose the amount they invested. There are some cases in which the person faces heavy loss in terms of money because of not giving appropriate performance which was expected from that person.
How Online Gambling Works?
The main objective of online gambling or the main motive why Online Gambling is becoming famous across the world, is because it is a term where the participants who participate in online gambling make predictions of an event which is unknown to everyone, which may or may not happen but the same has been predicted by the participants. If it is found that the predictions which were made by the participants are true, then they win the entire money in the form of a reward. This is because they took the risk by investing their money for the purpose of making predictions of the unknown event and because of the fact that their prediction went right, they will be rewarded in terms of money and this is how Online Gambling works in reality.
1 An Introduction to Online Gambling, National Online Safety, https://nationalonlinesafety.com/webinars/an- introduction-to-online- gambling#:~:text=Online%20gambling%20refers%20to%20betting,phone%20with%20an%20internet%20conn ection.
Online Gambling made everyone’s life very easy as every single person can participate in online gambling from anywhere, be it their home or office or any other place because it is not necessary to visit the actual place physically where the events of gambling take place. The term Online Gambling successfully eliminated the problem of the participants who were unable to participate in online gambling because of the jurisdiction issues from their house to the place where the events of online gambling take place. Online Gambling had also eliminated the Travelling Cost which one has to pay to reach the destination where the events of online gambling take place.
Opinion of Indian Law about Online Gambling:
There is an act which governs gambling laws which is known as Public Gambling Act, 1867 and in the recent scenario, our country has only one central law that takes care of gambling and its various aspects.
7th Schedule of Indian Constitution states that gambling in India is a state subject which means that states are expected to create their own laws for Gambling. It states that every single state has a liberty and required privilege to decide whether the term Gambling is Legal or Illegal. For Example: If Maharashtra wants to make the term gambling valid in the jurisdiction of Maharashtra, then they will make the gambling valid because Maharashtra has liberty to decide whether they should consider gambling as valid or invalid. Similarly, every single state has liberty to decide whether gambling should be valid or void in their jurisdiction.
Let us distinguish between Game of skill and Game of chance:
Game of skill in layman’s term means any game in which an Individual skill is involved and because of that Individual skills which the person possesses either by birth or by working hard and develop the skill within him or her is called as Game of skill. For example, games like Cricket, Football, Volleyball, Basketball, Carrom, Chess, Badminton and various other games where Individual showcase his or her talent and shine in that game.
On the other hand, when we speak about game of chance, it is the term where skills, consistency and hard-work are not required, the person wins the game completely on the basis of Luck Factor. Game of chance means either you win or you lose it all depends on the Luck Factor.2
Certain case laws which create distinguish between Game of Skills and Game of Chance.
- In the landmark case of ‘Law of State of Bombay Vs. R.M.D. Chamarbaugwala’3, the Honourable Court gave its decision by stating that the games in which pure hard-work is involved and luck is absent is not included in the term Gambling. The term Gambling can be used only and only when it involves luck factor. So, from this case law we understand that games of skill can never come under the category of game of chance.
- In another landmark case of ‘Manoranjithan Manamyil Mandaram Vs. State Of Tamil Nadu’4, the Honourable Court gave it decision by stating that the Determination of game of skill and game of chance will be completely dependent on the facts and circumstances of the case which means that initially we have to analyse the facts and circumstances and then we have to decide whether it is game of skill or game of chance.
As Online Gambling has been in news since last few years, the Information Technology Act also got amended by the Ministry of Electronics and Information Technology.
The main intention and the idea behind why the concept of online gambling is in news and why amendments are introduced is because it will be great if we enforce greater due diligence. There are many fake and false information related to the government business which misleads many persons.
2 Manya Sharma, Online Gaming Regulations in India and Online Gaming (Regulation) Bill, 2022, Legal Service India, https://www.legalserviceindia.com/legal/article-8807-online-gaming-regulations-in-india-and- online-gaming-regulation-bill- 2022.html#:~:text=Games%20of%20skill%20v.&text=34%20(Betting%20and%20Gambling)%20of,of%20skill
%20from%20the%20ambit.
3 The State of Bombay V. R. M. D. Chamarbaugwala (1957) AIR 699, 1957 SCR 874
4 Manoranjitham Manamyil Mandram v. State of Tamil Nadu AIR 2005 MAD 26
States in which Online Gambling is allowed:
There are various states which gives green signal for the concept of online gambling wherein it is encouraged by large numbers of persons.
- Sikkim: Sikkim is the state where Online Gambling is allowed. The Local Government of Sikkim stated that the state is in the position to give licenses of online gambling sports which includes casinos and sports betting to online operators. According to the Government of Sikkim, Online Gambling is allowed and considered as Legal in both the concepts of game of skills and game of chance.
- Goa: Goa is also one of the states which allows the concept of Online Gambling. The Government of Goa states that Goa is very famous and popular tourist destinations for the one who shows massive interest in online gambling. According to Government, Goa is famous for many things like beaches, forts, churches and for gambling as well.
- Daman And Diu: Daman and Diu allow the concept of online gambling but it has some restrictions as well in some places.
- Meghalaya: Meghalaya is the state where Online Gambling is practiced in large numbers. Online Gambling Games like poker, rummy, bridge and other games are played on larger basis and government have stated that Online Gambling is Valid in Meghalaya.
- Mizoram: Mizoram is the state where Online Gambling is encouraged in large numbers. Online Gambling be it of any nature is played there by maximum people and government have not put any restrictions.5
- Nagaland: Nagaland allows the concept of online gambling but it has some restrictions as well in some places.
- Punjab: Punjab is the state where Online Gambling is practiced in large numbers. Online Gambling Games like poker, rummy, bridge and other games are played on larger basis and government have stated that Online Gambling is Valid in Punjab
- Maharashtra: Maharashtra is the state where Online Gambling is allowed. The Local Government of Maharashtra stated that the state is in the position to give licenses of online gambling sports which includes casinos and sports betting to online operators.
5 Shivam Bhateja, Lottery Laws in Manipur, Betting Guide, 10th March 2023, https://bettingguide.com/in/online-lottery/manipur/
According to the Government of Maharashtra, Online Gambling is allowed and considered as Legal in both the concepts of game of skills and game of chance.6
- Manipur: Manipur allows the concept of online gambling but it has some restrictions as well in some places.
- Arunachal Pradesh: Arunachal Pradesh is the state where Online Gambling is practiced in large numbers. Online Gambling Games like poker, rummy, bridge and other games are played on larger basis and government have stated that Online Gambling is Valid in Arunachal Pradesh.
- Kerala: Kerala is the state where Online Gambling is encouraged in large numbers. Online Gambling be it of any nature is played there by maximum people and government have not put any restrictions.7
States in which Online Gambling is prohibited:
- Tripura: Tripura is the state where Online Gambling is prohibited. According to the Government of Tripura, Online Gambling is void and the place where online gambling is practiced are completely banned.8
- West Bengal: West Bengal is the place where Online Gambling is prohibited. According to the Government has seized all the places where Online Gambling is practiced.9
- Tamil Nadu: Government of Tamil Nadu has put restrictions on the gambling activities and the persons involved in these activities are penalized.10
6 Is Online Casino legal in Maharashtra, Nagpur Today Nagpur News, March 28th 2023, https://www.nagpurtoday.in/is-online-casino-legal-in-maharashtra/03281253
7 Correspondent, Indian States where Online Gambling is Legal, The Daily Guardian, February 24, 2023, https://thedailyguardian.com/indian-states-where-online-gambling-is-legal/
8 Surbhi Soni, Tripura Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/tripura/
9 Anish Bargad, The Legality of Online Gambling Laws in India, Legal Service India, https://www.legalserviceindia.com/legal/article-8465-the-legality-of-online-gambling-apps-in- india.html#:~:text=West%20Bengal%20has%20no%20laws,of%202000%20governs%20these%20acts. 10 No More Bets: Tamil Nadu Takes a Stand Against Online Gambling, Deccan Herald, 30th May 2023,
https://www.deccanherald.com/brandspot/sponsored/no-more-bets-tamil-nadu-takes-a-stand-against-online- gambling- 1223265.html#:~:text=The%20ban%20on%20online%20gambling,%E2%82%B910%20lakh%20or%20both.
- Karnataka: Karnataka is the state where online gambling is not practiced and the government has seized all the places where gambling is practiced.11
- Rajasthan: Rajasthan is the state where online gambling is prohibited to maximum extent. The people who practice online gambling are penalized with hefty amount of fine.12
- Gujarat: Gujarat is the state where maximum restrictions on Online Gambling are imposed. Government of Gujarat has stated that Online Gambling should never be practiced.13
- Jharkhand: Government of Jharkhand has made certain rules and regulations for Online Gambling and has stated that online gambling shall not be practiced as this will create maximum loss of everyone’s money.14
- Madhya Pradesh: Online Gambling in Madhya Pradesh is prohibited as government does not encourage the concept of Online Gambling.15
- Orrisa: Orrisa is the state where the Government made the concept of the Online Gambling as null and void and the one who practices is penalized.16
- Telangana: The Government of Telangana has imposed restrictions on Online Gambling and has made rules and regulations which was against online gambling.
- Assam: Assam has prohibited the concept of Online Gambling and had prohibited the practice of Online Gambling.
- Andhra Pradesh: The state of Andhra Pradesh has made the rules which are not in favour of Online Gambling and has prohibited the concept of Online Gambling.17
11 Karnataka urges Centre to pass law banning online gaming, Times of India, November 5, 2022, https://timesofindia.indiatimes.com/city/bengaluru/karnataka-urges-centre-to-pass-law-banning-online- gaming/articleshow/95315342.cms
12 Surbhi Soni, Rajasthan Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/rajasthan/
13 Surbhi Soni, Gujarat Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/gujarat/
14 Surbhi Soni, Jharkhand Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/jharkhand/
15 Ravish Pal Singh, Online Gaming will soon be banned in Madhya Pradesh: State Home Minister Narottam Mishra, India Today, November 20, 2022, https://www.indiatoday.in/india/story/online-gaming-ban-in-madhya- pradesh-soon-narottam-mishra-2299636-2022-11-20
16 Soumya Prakash Pradhan, New rules for online gaming in India: Here is what you need to know, Odishatv.in, 10th April 2023, https://odishatv.in/news/technology/new-rules-for-online-gaming-in-india-here-is-what-you- need-to-know-201310
17 The legality of Online Gambling in India: Current Regulations and What’s Ahead, India Legal Live, January 16, 2023, https://www.indialegallive.com/legal/the-legality-of-online-gambling-in-india-current-regulations- and-whats-ahead/
- Himachal Pradesh: Himachal Pradesh has prohibited the concept of online gambling and has stated that there will be penalization of Online Gambling.18
The online gaming world has shown exponential growth in the recent few days, and the growth shows no sign of slowing. Also there are projections which show that the industry will skyrocket by an enormous value of $5 billion. The ‘Ministry of Electronics and Information Technology’s (MeitY)’ which has been appointed as the Nodal Ministry has given legitimacy by notifying regulations for permissible games.
What we will focus on this part is GST on online gaming:
So basically, a fair tax policy is needed for this industry to flourish and to fulfil the vision of India rising to a global position in this sector.
Though the next GST council is expected to happen in July, let’s look at the history of taxation in India, and also what could possibly be a fair tax regime.
A brief history on the taxation of online gaming:
In India, the internet gaming market has been around for around 15 years. Online gaming companies were taxed as an Online Information Data Access or Retrieval (OIDAR) service under the previous Service Tax regime before India adopted GST.
Gaming platforms that fall under the IT/ITeS category of service tax have registered and paid tax on the platform fee they charge users, known as Gross Gaming Review (GGR).
The prize pool’s contributions were regarded as actionable claims and were exempt from service tax and value-added tax (VAT). In actuality, actionable claims are expressly disallowed by VAT legislation. On the other hand, betting and gambling fell under the jurisdiction of state law for taxes purposes and were not subject to the service tax.
18 Surbhi Soni, Himachal Pradesh Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/himachal-pradesh/
The GST regime retained the skill gaming platforms’ operational model. Gaming firms continued to pay GST on GGR as taxes on income produced from providing technology services to support skill-based games for consumers as India made the switch to the GST.
However, as the GoM was discussing taxation on lottery enterprises, a new discussion of GST on internet gaming, horse racing, and casinos was also started during the 35th GST Council meeting. A GoM was then appointed to provide recommendations in response.19
Recent GST Council Meetings and decisions taken:
On the 47th GST Council Meeting, the GoM submitted a report which recommended a 28 percent GST on the total consideration or Contest Entry Amount (CEA). Finally, on the 50th GST On 11th July, the Goods and Services Tax (GST) council approved a 28% tax on internet gambling, horse racing, and casinos, according to Finance Minister Nirmala Sitharaman. Several industry insiders have expressed their worry over the decision taken by the ministry in interviews with various media sources, and some think it could result in significant losses for the online gaming sector. According to a Forbes India study, India has over 400 million internet gamers, of which 90 to 100 million play regularly.
The GoM report on the 47th GST Council Meeting, suggested that any differentiation between “games of skill” and “games of change” is immaterial for GST purposes. However, there was a substantial difference between online gaming and gambling and betting under the service tax framework. While betting and gambling were not subject to service tax, online gaming was taxed as an OIDAR service.
What online gamers should know about the 28% GST?
In terms of online gaming particularly, the tax will be enforced at full value regardless of whether the game is based on skill or chance. What does this entail for online players who buy their games with real money, then?
19 Angshuman Hazarika, Is GST on total consideration for online gaming fair? Money Control, July 3, 2023, https://www.moneycontrol.com/news/business/economy/is-gst-on-total-consideration-for-online-gaming-fair- 10893701.html
In plain English, this means that for every Rs 100 a player spends on an online game, they will be required to pay Rs 28. The game could depend on skill or chance. The GST rates are uniform throughout. In addition, players must pay a 30% TDS if they win more than Rs 10,000 in a single game. The new GST rates may force players to restrict the amount of online gaming they do.20
Social Effects of Online Gaming:
Online multiplayer games enable the formation of lasting relationships
The majority of online multiplayer games promote player contact, and some even demand it. Making advancement in a game may need teamwork with other players, or the game may focus more on player competition.
It is possible to play most online games quite independently without actively seeking out other players. Siitonen claims that social contact is a significant driver of both multiplayer game play and the development of long-lasting interpersonal bonds with other players.
Interacting for the period of very long time causes the commencement for affection of the group.
Members of multiplayer communities often interact in ways that are comparable to those found in face-to-face groups. A shared understanding and a sense of community are based on shared values and objectives.
A community’s whole existence is one long process of negotiating its values and objectives. They are reflected, for instance, in how the community welcomes newcomers and how responsibilities crucial to the group’s functioning are filled. Conflicts over these topics may arise within communities, but resolving them has the potential to enhance or transform the community’s foundations.
20 Divyansi Sharma, Govt imposed 28 per cent GST on online games, what this really means for gamers? India Today, July 13, 2023, https://www.indiatoday.in/technology/news/story/govt-imposes-28-per-cent-gst-on- online-games-what-this-really-means-for-gamers-2405926-2023-07-13
21 David Jones, The Economic Impact of Online Gaming: A Deep Dive, June 23, 2023, https://marketbusinessnews.com/economic-impact-of-online- gambling/337481/#:~:text=Tax%20revenues%3A%20Increased%20profitability%20for,contributing%20to%20 overall%20economic%20development.
- An Introduction to Online Gambling, National Online Safety, https://nationalonlinesafety.com/webinars/an-introduction-to-online- gambling#:~:text=Online%20gambling%20refers%20to%20betting,phone%20with% 20an%20internet%20connection.
- Manya Sharma, Online Gaming Regulations in India and Online Gaming (Regulation) Bill, 2022, Legal Service India, https://www.legalserviceindia.com/legal/article-8807- online-gaming-regulations-in-india-and-online-gaming-regulation-bill- 2022.html#:~:text=Games%20of%20skill%20v.&text=34%20(Betting%20and%20Ga mbling)%20of,of%20skill%20from%20the%20ambit.
- The State of Bombay V. R. M. D. Chamarbaugwala (1957) AIR 699, 1957 SCR 874
- Manoranjitham Manamyil Mandram v. State of Tamil Nadu AIR 2005 MAD 26
- Shivam Bhateja, Lottery Laws in Manipur, Betting Guide, 10th March 2023, https://bettingguide.com/in/online-lottery/manipur/
- Is Online Casino legal in Maharashtra, Nagpur Today Nagpur News, March 28th 2023, https://www.nagpurtoday.in/is-online-casino-legal-in-maharashtra/03281253
- Correspondent, Indian States where Online Gambling is Legal, The Daily Guardian, February 24, 2023, https://thedailyguardian.com/indian-states-where-online-gambling- is-legal/
- Surbhi Soni, Tripura Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/tripura/
- Anish Bargad, The Legality of Online Gambling Laws in India, Legal Service India, https://www.legalserviceindia.com/legal/article-8465-the-legality-of-online-gambling- apps-in- india.html#:~:text=West%20Bengal%20has%20no%20laws,of%202000%20governs
%20these%20acts.
- No More Bets: Tamil Nadu Takes a Stand Against Online Gambling, Deccan Herald, 30th May 2023, https://www.deccanherald.com/brandspot/sponsored/no-more-bets- tamil-nadu-takes-a-stand-against-online-gambling-
- Karnataka urges Centre to pass law banning online gaming, Times of India, November 5, 2022, https://timesofindia.indiatimes.com/city/bengaluru/karnataka-urges-centre-to- pass-law-banning-online-gaming/articleshow/95315342.cms
- Surbhi Soni, Rajasthan Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/rajasthan/
- Surbhi Soni, Jharkhand Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/jharkhand/
- Ravish Pal Singh, Online Gaming will soon be banned in Madhya Pradesh: State Home Minister Narottam Mishra, India Today, November 20, 2022, https://www.indiatoday.in/india/story/online-gaming-ban-in-madhya-pradesh-soon- narottam-mishra-2299636-2022-11-20
- Soumya Prakash Pradhan, New rules for online gaming in India: Here is what you need to know, Odishatv.in, 10th April 2023, https://odishatv.in/news/technology/new-rules- for-online-gaming-in-india-here-is-what-you-need-to-know-201310
- The legality of Online Gambling in India: Current Regulations and What’s Ahead, India Legal Live, January 16, 2023, https://www.indialegallive.com/legal/the-legality-of- online-gambling-in-india-current-regulations-and-whats-ahead/
- Surbhi Soni, Himachal Pradesh Gambling Laws, Seven Jackpots, 12th April 2022, https://www.sevenjackpots.com/gambling-laws/himachal-pradesh/
- Angshuman Hazarika, Is GST on total consideration for online gaming fair? Money Control, July 3, 2023, https://www.moneycontrol.com/news/business/economy/is-gst- on-total-consideration-for-online-gaming-fair-10893701.html
- Divyansi Sharma, Govt imposed 28 per cent GST on online games, what this really means for gamers? India Today, July 13, 2023, https://www.indiatoday.in/technology/news/story/govt-imposes-28-per-cent-gst-on- online-games-what-this-really-means-for-gamers-2405926-2023-07-13
- David Jones, The Economic Impact of Online Gaming: A Deep Dive, June 23, 2023, https://marketbusinessnews.com/economic-impact-of-online-
gambling/337481/#:~:text=Tax%20revenues%3A%20Increased%20profitability%20f or,contributing%20to%20overall%20economic%20development.
