Legal Narrative
Abstract : In this era of digital revolution and expansion in the online gaming sector and its impact upon people, economy and the security of a nation it has become important to acknowledge, recognise and regulate this sector. This article analyses the steps the government has taken to regulate the sector and look into the constitutional and legal framework.
Key words : Online gaming, online money gaming, betting and gambling, GST upon online betting and gambling.
I. Introduction
Online gaming is not a new or recent phenomenon. The first E sports competition was played in 1972 as per the available record.1 However, in recent times the online gaming activity has become a significant part of our digital economy.2 Therefore it was very important to frame legislation to regulate this fastest growing gaming industry. However, the State Governments had enacted laws governing online gaming as well as betting and gambling in physical or online mode, these States are Sikkim (2008), Nagaland (2015), Telangana (2017), Andhra Pradesh (2020), Karnataka (2021), Meghalaya (2021) and Tamilnadu (2022)3. But after digital revolution and expansion in digital technology it had become difficult to regulate this gaming sector only by the State Government as it expanded beyond the state jurisdictions and involved expansion in gaming activities even beyond national jurisdiction.Therefore the Central Government enacted The Promotion and Regulation of Online Gaming Act, 20254. To give effect to this Act the Central
Government enacted rules namely the Promotion and Regulation of Online Gaming Rules, 2026 which came into effect from 01st May, 20265.
II. Analysis
A. The Promotion and Regulation of Online Gaming Act, 2025: Legislative competence pertaining to sports including online gaming.
This Act basically deals with e sports, online gaming and online money gaming. It regulates the online gaming industry.
In simple words, e-sport means an online game where individuals and teams participate in organised competitions in which they may also get prizes.
Online social gaming means an online gaming activity which is played for recreational or educational purposes which does not involve money is staking, betting and gambling.
Online money game means online games whether based on skill or chance or both but which necessarily involves depositing money or other money stakes in expectation of winning but it does not include e sports.
“Chapter 1 of the Part XI of the Constitution”6 deals with legislative competence. The legislative power of the state is divided between the Parliament and the state legislatures on two basis:
(i) Territorial jurisdiction : The State Legislatures have competency to enact laws for their territory and the Parliament has competency to make laws for the whole or any part of the territory of India.7
(ii) Subject matter of laws : under schedule 7 of the constitution the subject matters are also distributed between the centre and state. This seven schedule consists of three lists, namely:- Union list, State list and Concurrent list. In respect of matters falling in the Union list, the Parliament has exclusive power to make laws and in respect to the State list, only the State Legislatures have power to make laws subject to the provisions of the constitution. In respect to subject-matters falling in the Concurrent list, both Centre and State have power to legislate8.
A legislature can legislate on the subject matter which is conferred expressly to it under the list provided in the seven schedule. However, if there is a subject matter which is not covered under List II and III, in respect to that subject matter the Parliament has been given power to legislate9.
Parliament can also have competence to legislate in certain situations like:- (i) In National interest : The Parliament can legislate with respect to matters covered under List II in national interest if the Rajya Sabha passes a resolution by not less than two thirds of the members present and voting making declaration that it is necessary in national interest that the law may be made by the Parliament with respect to a matter covered under the State list10.
(ii) In case when proclamation of emergencies in operation the Parliament can legislate over a subject matter covered under the state list11.
(iii) By consent of two or more States and adoption of the law made by Parliament by States12.
The subject-matter “Sports” is covered under Entry 3313 and “betting and gambling” under Entry 34 of the List II provided under the 7th Schedule14.
The states had enacted laws to regulate sports and batting and gambling activities. After revolution in technology and digitalisation the sports have not remained confined within the territorial boundaries. Online gaming activities have implications beyond state jurisdictions and even beyond national jurisdiction. Online gaming activities and online betting and gambling activities are not expressly covered under the State list or the Concurrent list. Therefore, it would be covered under the residuary powers of the Parliament under Article 248 and under Entry 97 of the Union List. This interpretation does not affect the federal structure of the constitution. It does not snatch away the power of the state legislature to enact laws with respect to sports, betting and gambling activities. It covers only that area which is not covered by State Laws. The States have limited jurisdiction as their jurisdiction is limited to their own territorial jurisdiction while such games go beyond States territory as well as the national territory. There are different states and differences in law create issues at international level and therefore there is also a requirement of uniform laws pertaining to online gaming throughout the country.
B. GST imposition by Centre and States : Skill v. Chance debate ends. Goods and services tax was introduced by 101 amendments to the Constitution in 2016. By this Constitutional amendment article 246A was added to the Constitution. It provided that both centre and state can impose tax on goods and services. The Parliament is given exclusive power to make laws with respect to goods and services where the supply of goods or of services or both take place in the course of inter state trader commerce15.
No tax can be levied or collected unless authorised by law16. The Parliament enacted Central Goods and Services Tax Act, 2017 and similarly State Legislatures also enacted State Goods and Services Tax Acts. Under these laws GST was imposed on online betting and gambling on the ground that it is covered under the terms “supply of actionable claim”. Under these laws notices were sent to people for payment of the GST. Therefore these legislations were challenged by various Writ petitions and by filing SLPs.
The petitioners challenge the constitutional validity of levy of tax upon online betting and gambling under the CGST Act and other State GST Acts and of the rules made thereunder. These issues were considered in Directorate General of Goods and Services Tax Intelligence v. Gamecraft Technologies Private Limited17 and the court held that CGST Act and other State GST laws are not unconstitutional as:
(1 ) As per article 265 a tax can be imposed only when it is authorised by a law. In the present case, the GST has been levied according to the law. (2) The law could not be challenged under article 19(1)(g) because betting and gambling is res extra commercium and has no protection under the constitution and pertaining to article 14, the tax levied has a connection with the object of the act. The classification is also not arbitrary. The Act classified actionable claim under two heads one that arises from betting and gambling which is the subject matter of levy and the other is actionable claim which arises from other activities which is out of the purview of this Act. The challenge on the ground of article 21 was also rejected because it is a dispute related to fiscal law. The tax imposed here is not upon batting and gambling activities but a phone supply of actionable claims arising from betting and gambling of online gaming.
The amendment made in 2023 in CGST was held to be retrospective as it had neither levied any fresh tax nor did it introduce any new taxable event; the amendment was only of clarificatory nature and therefore it could be given retrospective effect.
Earlier in RMDC I, RMDC II and other cases, the supreme court focused on skill based and chance based distinction to decide whether the activity would be covered under betting and gambling or not. Now the definition is clear that it does not depend upon the game whether it is skill based or chance based or both, it would be considered as betting and gambling if it involves money or other stakes.
II. Conclusion
1 While testing constitutional validity the legislative competence and the relevant provisions of the Constitution are considered.
2 While testing the delegated legislation it is examined on the basis of manifest arbitrariness, inconsistency with the parent act, excessive delegation and lack of statutory authority.
3. While examining the amendment it is examined “what is the implication of the amendment”. Whether it is of substantive nature or mere clarificatory nature. An amendment can be given retrospective effect if it is clarificatory in nature.
FOOTNOTES
1https://www.britannica.com/sports/esports
2https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=158400&ModuleId=3®=48&lang=2
3https://prsindia.org/files/policy/policy_committee_reports/LCI%20Report%20Summary%20-%20Betting% 20and%20Gambling_ST_For%20Upload.pdf
4 The Promotion and Regulation of Online Gaming Act, No. 32 of 2025. available at : https://indiacode.gov.in/pdf-viewer/08c961e9-dbcd-4702-bb14-81e1eb71df64/c39f46f8-689e-4de5-ab32-5 f827499a04c
5 The Promotion and Regulation of Online Gaming Rules, 2026. Available
at:https://www.meity.gov.in/static/uploads/2026/04/7e0b02d37fd07f81fa48578a9996aa85.pdf.
6INDIA CONST. Part XI.
7INDIA CONST. art. 245.
8INDIA CONST. art. 246.
9INDIA CONST. art. 248.
10 INDIA CONST. art. 249.
11INDIA CONST. art. 250.
12 INDIA CONST. art. 252.
13 INDIA CONST. entry 33 of list II.
14 INDIA CONST. entry 34 of list II.
15 INDIA CONST. art. 246A.
16 INDIA CONST. art. 265.
17 2026 INSC 595. Available at:
https://api.sci.gov.in/supremecourt/2023/30797/30797_2023_7_1505_71652_Judgement_27-May-2026.p df.
