Preity Zinta bats for legalising betting

Popular Bollywood actress and co-owner of the Kings XI Punjab franchise in the Indian Premier League (IPL), Preity Zinta, suggested that betting should be legalised as it would be an important source of revenue and curtail corruption and fixing in cricket.

“I think it would be important if the government legalises betting because it will be a good source of revenue and stuff and secondly, we can stop all this crap because how many people can you control. So, that’s why I said let’s do a random lie detector test, BCCI should just make it part of the policy, it will be amazing. Because of the fear of knowing that I can get caught, that’s what you need. You can’t police people that much,” she is quoted as having said  India Today.

Zinta made the remarks while participating in a fireside chat in the India Today Conclave East 2018 last week. Zinta has advocated legalising and regulating sports betting in her past media appearances as well.

Apart from Zinta, several experts and legal luminaries have also endorsed the idea of legalising betting. However, despite period utterances by prominent personalities, the government has so far shown little interest in discussing the issue at present.


Lottery companies refute charges of GST evasion

One day after it was reported that the central GST authorities in Punjab investigated four major lottery companies in the country, the Times of India in a follow-up story has reported that lottery companies have refuted the allegations leveled against them and have claimed that only 12% GST is applicable on lottery tickets sold in the same state where it originates, irrespective of whether it is marketed by private distributors or not.

Roop Singh, general manager of Sugal & Damani owned M/s. Skill Lotto said, “Ever since the implementation of GST, we have been paying tax as per rules, according to which licensees authorized by the Punjab government for sale of its lotteries are liable to charge and pay 12% GST if they sell them within Punjab, and 28% if they sell them in other states. But CGST department wants us to pay 28% in all cases, which is unjustified as there is no such rule, and even the Department of Lotteries, Punjab, is of the view that we are liable to pay only 12%.”

Martin Group officials also claimed that the tax department had wrongly made them liable for 28% GST. Prem Raj Bamboli, sales head of Future Gaming and Hotel Services Pvt. Ltd. noted, “GST of 28% is applicable if we sell lotteries of other state governments in Punjab or lotteries of Punjab government in other states.”

Suresh Arora, Vice President (Sales) of Essel Group’s E-Cool Gaming Solutions Pvt. Ltd. also supported these contentions and told Times of India, “We have been paying our taxes as per law, and at the rate of 12% for sale of Punjab State Lotteries within Punjab. We have not flouted any norms. Moreover, the Rs. 50 lakhs deposited by us at the time of search was not any kind of penalty or differential tax, but pending GST, which was due during that period when the department was conducting the investigation.”

Business Gaming

Top lottery conglomerates slapped with GST evasion cases

India’s top three lottery distributors: Essel Group, Martin Group and Sugal & Damani Group have been slapped with cases for evasion of Goods and Services Tax (GST) as per a report in the Times of India.

As per the news report, the Central GST (CGST) Commissionerate-Ludhiana registered cases against Future Gaming and Hotel Services Pvt. Ltd. (Martin Group); E-Cool Gaming Solutions Pvt. Ltd. (Essel Group); Pan India Network Limited (Essel Group) and M/s. Skill Lotto (Sugal & Damani Group).

The GST evasion cases were reportedly registered by the central tax department in Punjab for non-payment of the correct rate of GST; non-filing of GST returns and collection of GST from customers but not depositing it to the treasury.

In the case of Future Gaming, the company failed to pay GST at the rate of 28% and instead computed its GST liability at the rate of 12%. It further did not deposit GST collected from customers and also failed to file its GST returns. The total liability for the lapses by the company is said to be around Rs. 6.91 crores.

As per media sources, the company gave an undertaking to pay the differential amount and also stated that going forward, it would pay tax at the rate of 28% on online and paper lotteries sold by it in Punjab and other states.

E-Cool Gaming Solutions on the other hand, allegedly did not pay GST at the rate of 28% and instead computed tax at 12%. The liability for this incorrect computation was around Rs. 4.30 crores.

Tax officials also detected an anomaly of Rs. 28 lakhs in the computation by Pan India. Officials of Essel Group reportedly admitted their total liability of Rs. 4.58 crores and paid Rs. 50 lakhs while giving an undertaking to pay the balance arrears at the earliest.

The central GST officials also detected a liability of at least Rs. 2.50 crores in the case of M/s. Skill Lotto which had under payed taxes. Probe on the exact nature of the evasion by M/s. Skill Lotto is ongoing.

In June 2017, the GST Council had announced a dual rate of GST for lotteries, wherein state lotteries distributed by private companies would attract a 28% GST on the face value of lottery tickets, while lotteries marketed and distributed by state governments directly would see a 12% tax rate on the face value of tickets.

Private lottery companies have made several representations against this discriminatory and high rate of tax, and claimed that the taxation structure would cripple and destroy their business. The central government and GST council have so far, however, not yielded to the lottery companies’ demands.

Gaming Legal & Regulatory

SC rejects appeal to initiate criminal action against Dream11, does this end the debate on fantasy sports legality?

In April 2017, a single judge bench of the Punjab & Haryana High Court rejected a complaint by an advocate, Varun Gumber, to initiate criminal proceedings against online fantasy sports website Dream11.

The court while passing the order noted that playing fantasy sports online does not amount to gambling and involves a substantial degree of skill. Justice Amit Rawal in his order also stated that the user has to be adroit and skillful in continuously monitor the sporting event, statistical performance of the players and previous track record, weather conditions etc.

The order of the Punjab and Haryana High Court was seen as a significant boost to the nascent and burgeoning fantasy sports industry, since it was the first order of any High Court in the country that had analysed the format of daily fantasy sports and passed observations ruling daily fantasy sports to be a game of skill and holding it to be completely legal, even if there was stakes or money involved. The court in its order clearly and unequivocally rejected the plea of initiating criminal charges against Dream11.

It now turns out that the complainant, Varun Gumber, being dissatisfied with the order of the High Court, had approached the Supreme Court through a Special Leave Petition in August 2017.

A Supreme Court division bench comprising of Justices Rohinton F. Nariman and Sanjay Kishan Kaul, through a terse order dated 15th September, 2017, had summarily dismissed Gumber’s petition.

This order is seen as a major victory for getting clarity on the legality of daily fantasy sports and one that puts to rest questions about the element of skill involved in fantasy sports.

However, the question that needs to asked is whether the non-reasoned and summary dismissal of the petition, which does not go into the facts and legal issues involved, is an unequivocal carte blanche from the apex court to fantasy sports operators and gives them a go ahead to run operations pan India?

The answer to this question would be in the negative. A summary dismissal by the Supreme Court without going into the facts and legal arguments of the matter cannot create a binding precedent. It can certainly be argued that the dichotomy in the 1967 Supreme Court judgment on rummy that rules that profit or gain made by the clubs in a game of skill could possibly be construed as an offence under the Gaming Acts has not been addressed in either by the High Court or by the Supreme Court.

Further, it is within the realm of possibility that just like Telangana, other states can also amend their Gaming Acts to remove the exemption given to games of skill and bring even games like fantasy sports within the ambit of gambling.

In conclusion, it can be said that while the Supreme Court order dismissing the complaint against Dream11 indicates that the findings and conclusions of the Punjab and Haryana High Court ruling hold good, the entire issue of the model adopted by fantasy sports websites could possibly be revisited by the apex court, should any matter come up before it in future.


Federation of Indian Fantasy Sports launched in Mumbai

A registered not-for-profit trade body, the Federation of Indian Fantasy Sports (FIFS), was officially launched with 13 Indian Fantasy Sports operators attending its inaugural workshop on the ‘Impact of GST & Taxation for Fantasy Sports’ in Mumbai on 24th October, 2017.

FIFS is a self-regulatory body formed to protect the interests of all Indian users by creating regulations for fantasy sports operators in India and aims to promote fantasy sports as a game of skill that is exempt from the anti-gambling legislations. Building on the Punjab and Haryana High Courts’ approval of the fantasy sports format where users use their sports knowledge and skill to pick the same number of players in their fantasy sports team that an actual selector will pick in a starting lineup for a real-life match, FIFS has created a Charter that lays down the legal principles & framework of operating a Fantasy Sports business in India. This charter is available on FIFS’ official website.

Some of the salient features of the FIFS charter that all operators have to adhere to are given below:

  • Provide services only to users aged 18 and above
  • Follow the Fantasy Sports format approved by the Indian Courts, wherein users pick the same number of players in their fantasy team as are present in the starting line-up of one team in the real sports match, eg. 5 in kabaddi/basketball, 11 in cricket/football, etc.
  • Ensure that the duration of each contest offered is a minimum of 1 complete real-life sports match
  • Operate with complete transparency while listing contests, declaring winners, updating their point mechanism and other terms & conditions, etc.
  • Ensure user funds are kept separate and not utilised for running business operations

The Federation is managed by Genesis Burson Marsteller (GBM), a leading public advocacy firm, and the inaugural workshop was led by Vinay Jha, ex-IAS officer and Principal Advisor, Public Affairs at GBM. FIFS also invited Utkarsh Sanghvi, Partner-Tax & Regulatory Services, Ernst & Young, to take the attendees through the impact of GST on the fantasy sports industry.

Commenting on the launch, Vinay Jha said, “The workshop was a great opportunity to meet the leading Fantasy Sports operators of India. A self-regulatory body supported by its members is the strategic way forward to address the issues and opportunities of the Fantasy Sports industry in an efficient manner.”

Commenting on the launch of the federation, Harsh Jain, CEO of Dream11 and the founding member of FIFS, said, “We look forward to working with all the Indian fantasy sports operators in this exponentially growing industry to protect all Indian user’s interests via a self-regulatory framework.”

Legal & Regulatory

Punjab & Haryana HC rules fantasy sports to be a game of skill

The Punjab and Haryana High Court in an order dated 18th April, 2017 has ruled that playing fantasy sports online does not amount to gambling and involves a substantial degree of skill.

The ruling was made by a single judge bench of Justice Amit Rawal while hearing a petition filed by Advocate Varun Gumber and was reported in The Times of India today.

The petitioner, Varun Gumber, claimed that he had deposited Rs. 50,000/- on fantasy sports website Dream11 and lost the deposited money while creating his fantasy teams on two games. He further wanted the court to direct investigation under the Public Gambling Act, 1867 against Dream11 for promoting gambling.

The court however rejected the petitioner’s contentions and held that a great deal of user’s knowledge, adroitness, judgment and discretion is required in creating his/her own league team. The court also noted that the user had to continuously monitor the sporting event, statistical performance of the player and previous track record, weather conditions etc.

Justice Rawal in his order examined Dream11’s terms and conditions, game rules and the format of the league while noting that substantial skill, efforts and statistics is required to track the performance of players in sporting events. The order also quoted the Supreme Court judgment in Dr. KR Lakshmanan v. State of Tamil Nadu which held horse racing and betting or wagering on it to be a game of skill and noted that the judgment squarely applies in the present case to fantasy sports.

The court also held that the company operating Dream11 has been regularly paying service tax and income tax and is duly registered as an incorporated entity with the registrar of companies and none of these authorities have found anything amiss in its business model.

Importantly, the court also noted that since fantasy sports is not gambling, it is a business activity that is afforded the protection of right to free trade and commerce guaranteed under Article 19(1)(g) of the Constitution.

This order of the Punjab and Haryana High Court assumes significance as it is the first order ever by an Indian High Court on the legality of fantasy sports and the element of skill involved in online fantasy games. The order will considerably boost the nascent fantasy sports industry, which has been reiterating the position that it is a skill-based game and is outside the ambit of gambling.

Gaming Legal & Regulatory

Punjab government increases paper lottery draws, proposes legal horse-betting in bid to bolster fiscal health

The Parkash Singh Badal-led Punjab government is banking on revenues from lottery and horse-betting to improve the state’s financial condition and implement various social schemes. Some reports indicate that the Punjab government is reeling under a severe debt of more than Rs. 1.25 lakh crores and among other things, the government has proposed increasing the number of lottery schemes as well as introducing horse betting are to bridge the gap between revenue and expenditure.

A report in Chandigarh-based daily The Tribune indicates that the government has increased the number of draws of the lottery schemes run by the state government from 42 to 48. It is estimated that the total revenues that the state government will earn from lottery sales and taxes will be in excess of Rs. 125 crores this year.

In a related development, the Punjab government had also floated tenders to develop a race course near Ludhiana. The idea has received some traction with US-based Stronach group bidding for the Rs. 300 crore project, but with a rider that they would first like to experiment with off-course horse-betting by broadcasting other Indian and International races on a pilot basis and based on the numbers generated from the activity proceed with developing the race course.

It may be noted that the Punjab legislative assembly has already passed a law to create a race course and allow betting thereof in November 2013. The state government is also said to have earmarked 171 acres of land, belonging to the state Animal Husbandry Department, for the project at Mattewara village in Ludhiana. Earlier, Deputy Chief Minister Sukhbir Singh Badal was mulling permitting Las Vegas style casinos at the same location, but the proposal turned out to be a non-starter due to opposition by certain religious groups.

Historically, governments across the globe have tapped on gaming and lotteries to raise funds for social schemes and reduce fiscal deficit. The Punjab government’s decision will therefore not only ease the financial strain faced by the state government, but will also eliminate illegal gambling activities and generate employment for thousands of youth.


Karnataka exploring the option of allowing offshore casinos

A recent report in The Times of India indicates that the Congress-led Karnataka government may be amenable to allowing offshore casinos in the state’s territorial waters to compete with Goa’s tourism industry. According to unnamed sources quoted by news reports, the Karnataka government is exploring two options to allow offshore casinos: the first option is to have a 3 day-4 night cruise ship from Mangaluru to different parts of the state. The second option is to allow casino vessels to be permanently stationed on the coast of either Karwar Belekeri, Tadri, Malpe, Old and New Mangaluru ports in the state.

On the record however, Principal Secretary (Tourism), Pradeep Singh Kharola is said to have denied any plan to permit casinos. However other sources suggest that the casino plan could be mooted during the Invest Karnataka 2016 event that the state government is slated to organise in February next year.

Karnataka joins a long list of states that are or have toyed with the idea of allowing casinos. Andhra Pradesh is said to be mulling a proposal to permit offshore casinos near Visakhapatnam city. States like Punjab, Haryana, Jammu & Kashmir, Odisha, Meghalaya etc. have also mulled over the idea but most of the proposals were shelved due to socio-political concerns. Maharashtra had passed a legislation allowing casinos way back in 1976, under the stewardship of Congress Chief Minister Shankarrao Chavan, but the law has not been implemented yet. The Bombay High Court has given the current government time till March 2016 to decide on the implementation of the law.

Karnataka Home Minister KJ George had made a statement in the legislative assembly in July this year indicating that a strong law to curb the menace of betting would be introduced. Interestingly however, George has been removed as the Home Minister recently and Dr. G Parameshwara has been given charge of the Home Department.

The term of the current Chief Minister Siddaramaiah is till 2018, leaving plenty of time to implement the casino proposal, if he desires to do so. It may be noted that legislation allowing casinos both in Goa as well as Maharashtra was passed by Chief Ministers belonging to the Congress party. As of now, there are more than half a dozen poker clubs operating in Bengaluru by virtue of a Karnataka High Court order directing the police not to interfere in the activities of poker clubs.

Business Gaming

Punjab government to start online lottery schemes in a bid to generate Rs.150 crore+ revenue

Undeterred by the recent Supreme Court judgment which passed certain adverse but non-binding strictures against online lotteries, the Punjab government through a press release announced its intention to start online lottery schemes in a bid to generate revenues for various welfare schemes.

According to media reports and a press release issued by the Directorate of State Lotteries, the Punjab government intends to earn at least Rs. 150 crores annually through the sale of online lottery tickets. Divulging details about revenues from lotteries, the Lotteries Department in the press release also noted that the state exchequer has earned over Rs. 615 crores through lottery sales till date, which have been used for social schemes to aid the poor and downtrodden.

Most states that allow paper lotteries also conduct online draws, including states like Maharashtra, Goa, Sikkim, Nagaland, Mizoram etc. Punjab government currently conducts two weekly draws and some bumper lottery draws. It remains to be seen however if this latest proposal of the Punjab government takes off, especially since the earlier tenders issued by the government in 2014 for online lottery distribution found no takers due to the high minimum assured bank guarantee and other stringent conditions.

Punjab has always toyed the idea of having allowing various forms of gaming activities in the state in a bid to boost revenues to fund its various agricultural and other subsidies, but somehow its plans have not achieved much success.

It may be noted that in 2012, Punjab Deputy Chief Minister Sukhbir Singh Badal mooted a proposal to allow casinos in Ludhiana district in the state, but the plan had to be shelved due to opposition from religious and social groups. Another Bill passed by the legislative assembly to allow licensed race courses and betting on horse races also seems to have gathered dust as there has been no further progress on the implementation of the proposal. However, the decision to allow online lotteries will still be seen as a significant positive step by gaming industry observers, though as they say, the devil is in the details.

Business Gaming

Punjab lottery operators go on strike over tax hike, impasse likely to end soon

India’s top three lottery operators, Pan India Network Limited, Sugal & Damani and Future Gaming (all three also hold lottery licenses from the Punjab government) have gone on strike in Punjab over the state government’s move to increase lottery tax. It is understood that the lottery operators are on a state-wide strike since 1st September. As per news reports, the Punjab government in a bid to earn additional revenue, had raised lottery tax on single digit draws from Rs. 55,000 to Rs. 80,000 per draw while for lotto and four digit lottery, the tax had been proposed to be raised from Rs 1 lakh to Rs 2 lakh and from Rs 85,000 to Rs 2 lakh respectively.

Justifying the strike, Rahul Tangri, President of Pan India Network Limited while speaking to Press Trust of India (PTI) said, “Last year, the state government had promised to reduce the tax to Rs 40,000 per draw while we agreed to increase the number of draws to 42 per day in order to give more revenue to the state government. But we are now shocked to know that instead of reducing tax, the state government is planning to increase the tax amount.”

Tangri further added that the state government earns Rs. 120 crores through lottery tax annually and the industry provides employment to over one lakh residents of the state.  While the lottery operators have taken an aggressive stand to push the state government to rollback the tax hike, sources familiar with the matter indicate that some kind of solution or compromise is expected soon and lottery operators may resume their services soon. A legal challenge to the tax hike if necessary is not ruled out by the lottery operators.

It may be noted that the Punjab Tax on Lotteries Act, 2005 governs the procedure for taxation of lottery draws while the Punjab State Lotteries Rules 1998 cover the procedure of conduct of lotteries.  In 2013, the Punjab & Haryana High Court dismissed a PIL challenging the number of lottery draws in the state stating that the state was conducting lotteries as per Central Lottery Rules and there was nothing illegal in carrying out lottery business.