GST is leviable on Lottery & gambling: SC

Skill Lotto Solutions Pvt. Ltd. v. Union of India & Ors. (Supreme Court)

The Hon’ble Supreme Court in Skill Lotto Solutions Pvt. Ltd. v. Union of India & Ors. [W.P. (C) No. 961 of 2018 dated December 3, 2020] held that lottery and gambling under GST’s ambit is legally valid, upholding validity of tax imposition on lottery tickets and the prize money.

Facts:

Skill Lotto Solutions Pvt. Ltd. (“Petitioner”), an authorised agent for sale and distribution of lotteries organised by State of Punjab filed the writ petition impugning the  definition of goods under Section 2(52) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) and consequential notifications to the extent it levies tax on lotteries.

The Petitioner seeks declaration that the levy of tax on lottery is discriminatory and violative of Article 14, 19(1)(g), 301 and 304 of the Constitution of India.

Petitioner’s contentions:

• Lottery is not a goods and under CGST Act, GST is only levied on goods, hence levy of GST on lottery is ultra vires the Constitution of India. Further, Article 366(12) of the Constitution of India defines goods to include all materials, commodities and articles, thereby excluding actionable claim. Therefore, the definition of goods under Section 2(52) of the CGST Act is unconstitutional.
• Further, submitted that the Constitutional Bench of the Hon’ble Supreme Court in Sunrise Associates v. Government of NCT of Delhi and Ors. [2006] 5 SCC 603] held that lottery is not a goods and therefore treating lottery as goods is contrary to the judgement of the Constitutional Bench in Sunrise Associates. Furthermore, argued that observation made in Sunrise Associates that lotteries are actionable claims are only obiter dicta and cannot be treated as ratio of the judgement.
• The Parliament dose not enjoy an absolute power to make an inclusive definition of something to be taxed which is not taxable otherwise.
• GST is being levied on the face value of the lottery tickets which is impermissible since the face value of the tickets also include prize money to be reimbursed to the winners of the lottery tickets.
• Entry 6 of the Schedule III of the CGST Act states that actionable claim other than lottery, betting and gambling are to be treated as neither supply of goods nor services, this amounts to discrimination as it is taxing only lottery, betting and gambling whereas all other actionable claims have been left out.

Issues: