Saturday, June 25, 2022

Supreme Court upholds constitutional validity of imposing of GST on lotteries & gambling [Read Judgment]

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Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations: Supreme Court

The Supreme Court today upheld the constitutional validity of imposing Goods and Services Tax (GST) on sale of lotteries across India. The Court has held that keeping lottery and gambling under GST’s ambit is legally valid, upholding validity of tax imposition on lottery tickets and the prize money.

A three-judge Bench of Justices Ashok Bhushan, Subhash Reddy and MR Shah had heard the extensive arguments and reserved its judgement on 4th November 2020. 

Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. When Act, 2017 defines the goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes. Regulation including taxation in one or other form on the activities namely lottery, betting and gambling has been in existence since last several decades. When the parliament has included above three for purpose of imposing GST and not taxed other actionable claims, it cannot be said that there is no rationale or reason for taxing above three and leaving others, said the Supreme Court in its order.

It further said, “It is a duty of the State to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life.”

The Court was answering to the question it formulated, “whether there is any rational reason for taking out only three actionable claims, i.e., lottery, betting and gambling while leaving other actionable claims from tax net? Whether the legislature has created a hostile discrimination by taxing only these three whereas leaving other actionable claims out of the tax net?”

The pleas were filed by various lottery dealers who contended that the petitions filed by lottery dealers, including Skill Lotto Solutions Ltd., argued that the Central GST Act of 2017 and notifications wrongfully viewed lotteries as goods when lotteries are actionable claims. Therefore it was not correct for the GST Council to recommend imposition of tax on lottery tickets  they were mere valueless pieces of paper.

The petitioners, including Skill Lotto Solutions Ltd, had argued before the Apex Court that under the GST Act, rates prescribed on the sale of lottery tickets are 12% if the lotteries are sold within the same State, and 28% if a State sells the lottery tickets in other States, which is arbitrary, discriminatory, unreasonable and clearly violative of Articles 14 of the Constitution. 

It was therefore alleged that imposition of 12% GST on lotteries sold within the same State and 28% GST for sale of tickets from other States was discriminatory.

Also Read: Supreme Court to continue hearing on loan moratorium pleas tomorrow

According to the petition, Section 2(52) of the Central Goods and Services Tax Act, 2017 and notifications levying tax on lottery is violative of the fundamental rights and contrary to a judgment of Supreme Court in Sunrise Associates Vs. Government of NCT of Delhi of 2006, where it was held that lotteries could not be defined as goods and were merely actionable claims.


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