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Fantasy Gaming's Tax Classification Under Scrutiny in India

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In a significant legal development, the Gujarat High Court has taken up the issue of whether fantasy gaming should be classified as an actionable claim amounting to betting and gambling or as a skill-based activity.

The court has issued a notice to the Goods and Services Tax (GST) department and temporarily halted any further action on the adjudication of a show cause notice, granting relief to the petitioner, NXGN Sports Interactive.

The case revolves around the classification of fantasy gaming activities for tax purposes. NXGN Sports Interactive challenged a show-cause notice issued by the GST department, asserting that the online claims offered by the petitioners should be considered actionable claims other than lottery, betting, and gambling.

The crux of the matter lies in Section 2(52) of the GST Act, read in conjunction with Section 7 and Schedule (III). This section stipulates that certain activities or transactions should not be treated as a supply of goods or services. It specifically mentions actionable claims other than those related to lottery, betting, and gambling.

The petitioner argues that the show-cause notice wrongly categorizes their gaming platform as an actionable claim akin to betting and gambling, which they believe is not the case. NXGN Sports Interactive maintains that its activities fall outside the purview of actionable claims associated with betting and gambling.

Gujarat High Court's Crucial Decision

In response to the petitioner's plea, the Gujarat High Court has issued a notice for a hearing scheduled for January 17, 2024. Until a final decision is reached, the court has granted ad-interim relief to NXGN Sports Interactive by restraining the GST department from advancing any further in the adjudication of the show-cause notice. The court has also allowed the petitioner to file a response to the show-cause notice during this period.

This legal battle raises important questions about the classification of fantasy gaming under India's GST regime. The outcome of this case could have far-reaching implications for the taxation of similar online gaming platforms and the broader legal framework surrounding fantasy sports and related activities.

The distinction between games of skill and games of chance has long been a topic of legal debate, and this case adds a new dimension by involving the GST. While some argue that fantasy gaming is primarily skill-based and should not be equated with traditional forms of betting and gambling, others contend that it still carries elements of chance and risk.

As the Gujarat High Court delves into this complex issue, the verdict is eagerly awaited by both the gaming industry and tax authorities. The outcome will determine whether fantasy gaming remains subject to GST and to what extent it is categorized as an actionable claim linked to betting and gambling.

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