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GST on offline/online games such as Rummy - game of skill versus game of chance - principle of nomen-juris

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Dated: 23-5-2023



Validity of show cause notice (SCN) issued to demand GST on the activity of offline/online games such as Rummy

The main question/issue that arises for consideration in these petitions is, whether offline/online games such as Rummy which are mainly/preponderantly/substantially based on skill and not on chance, whether played with/without stakes tantamount to ‘gambling or betting’ as contemplated in Entry 6 of Schedule III of the Goods and Services Act, 2017.

The petitions challenging a mere show cause notice is premature and not maintainable and is liable to be dismissed.

In the case of State of Madras vs. Gannon Dunkerley & Company (Madras) Ltd - [1958 (4) TMI 42 - SUPREME COURT], the issue before the Apex Court was whether the provisions of the Madras General Sales Tax Act are ultra vires, insofar as they seek to impose a tax on the supply of materials in execution of works contract treating it as a sale of goods by the contractor. In this context, the Apex Court interpreted the words “sale of goods” in Entry 48 in List II of Schedule VII to the Government of India Act, 1935 and applied the principle of nomen-juris to come to the conclusion by holding that the expression “sale of goods” in Entry 48 cannot be construed in its popular sense but that it must be interpreted in its legal sense. The Court held that if the words “sale of goods” have to be interpreted in their legal sense, that sense can only be what it has in the interpretation that words of legal import occurring in a statute should be construed in their legal sense is that those words have, in law, acquired a definite and precise sense, and that, accordingly, the legislature must be taken to have intended that they should be understood in that sense.

Based on the jurisprudence [1958 (4) TMI 42 - SUPREME COURT], the words “gambling”, “game of chance”, “game of skill” have developed meanings in judicial parlance. Therefore, applying the principle of nomen-juris, the words should be construed in their legal sense, instead of general parlance. While “gambling” or “game of chance” have been held to involve chance as a predominant element, on the other hand “game of skill” has an exercise of skill which can control the chance. The element of chance cannot be completely overruled in any case but what is to be seen is the predominant element. In a game of rummy, certain amount of skill is required because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards. Therefore, a game of rummy is a game of skill as held in Satyanarayana [1967 (11) TMI 109 - Supreme Court].


The terms “betting” and “gambling” under in Entry 6 of Schedule III of the CGST Act must be given the same interpretation given to them by the courts, in the context of Entry 34 of List II of the Seventh Schedule to the Constitution and the Public Gambling Act, 1867. Therefore, the terms “betting” and “gambling” appearing in Entry 6 of Schedule III of the CGST Act does not and cannot include games of skill within its ambit and must be so held as per the dictum set out above.

After having dealt with the rival contentions as stated supra, it is significant to state that a perusal of the impugned show cause notice as well as contentions and submissions of the respondents will clearly indicate that the same are an outcome of a vain and futile attempt on the part of the respondents to cherry pick stray sentences from the judgments of various Courts including the Apex Court, this Court and other High Courts and try to build up a non-existent case out of nothing which clearly amounts to splitting hairs and clutching at straws which cannot be countenanced and is impermissible in law.

Consequently, the impugned Show Cause Notice issued by the respondents to the petitioners is illegal, arbitrary and without jurisdiction or authority of law and deserves to be quashed.

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