Levy of GST on lotteries not ultra vires to the Constitution – Supreme Court

Levy of GST on lotteries not ultra vires to the Constitution, prize money not to be abated for determining value of taxable supply– Supreme Court

ABCAUS Case Law Citation
ABCAUS 3427 (2020) (12)

Important case law relied upon by the parties:
Sunrise Associates Vs. Govt. of NCT of Delhi and Ors. 2006)
M/s. Gannon Dunkerley and co. and others vs. State of Rajasthan and others,1993(1) SCC 364
State of   Bombay Vs. R.M.D. Chamarbaugwala and Anr
Union of India and Ors. vs. Martin Lottery Agencies Limited, (2009) 12 SCC 209

In this case, the petitioner was an authorized agent for sale and distribution   of lotteries organized by the State Government.

The petitioner challenged the definition of goods under Section 2(52) of Central Goods and Services Tax Act (CGST), 2017 and consequential notifications levying GST on lotteries.

The Petitioner relied upon various judgments of the Hon’ble Supreme Court

And contended that lottery is not a goods and under the Central Goods and Services Tax Act,2017, GST is levied only on goods, hence levy of GST on lottery is ultra vires to the Constitution.

the petitioner sought declaration that the levy of tax on lottery is discriminatory and violative of Articles 14, 19(1)(g), 301 and 304 of the Constitution of India.

Supreme Court upholds levy of GST on lotteries 

The Hon’ble Supreme Court observed that it had an occasion to consider levy of service tax on the lottery tickets. The Court had held that law as it stood recognised lottery to be gambling, which was res extra commercium.

The Hon’ble Supreme Court further observed that lottery, betting and gambling are well known concepts and have been in   practice in the country since before independence and were regulated and taxed by different legislations.

The Hon’ble Supreme Court stated that When CGST 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.

The Hon’ble Supreme Court stated that gmabling, betting were never accorded recognition of trade, business or commerce and were always   regulated and taxing the lottery, gambling and betting was with the objective as noted by the Constitution Bench.

The Hon’ble Supreme Court opined that there is no hostile discrimination in taxing the lottery,   betting and gambling and not taxing other actionable claims. 

The Court rejected the contention of violation of Article 14 of the Constitution.

The petitioner had also contented that price money should be abated from the face value of the lottery ticket for levy of GST as the prices are paid to the winner of the lottery ticket by the distributer/ agent.

The Hon’ble Supreme Court observed that for determining the value of the lottery, there are statutory provision contained in Section 15 read with Rule 31A. Section 15 of the CGST Act,2017 by sub-section (2) it is provided what shall be included in the value of supply.

The Court rejected the contention stating that when there are specific statutory provisions enumerating what should be included in the value of the supply and what shall not be included in the value of the supply it cannot be accepted that prize money is to be abated for determining the value of taxable supply.

Accordingly, the Hon’ble Supreme Court held that the petitioner is not entitled to reliefs as claimed in the writ petition.

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