The Hon’ble Supreme Court vide its order dated 3rd December,2020 in the case Skill Lotto Solution Pvt. Ltd. (WRIT PETITION (CIVIL) NO.961 OF 2018) has upheld the validity of imposing Goods and Service Tax (GST) on Lottery.
However the apex Court granted the petitioner the liberty to challenge the notifications dated
21.02.2020 / 02.03.2020 (by which rate of GST for lottery run by the State and lottery organized by the State have been made the same at 28%) separately in appropriate proceedings.
Facts of the Case:
- The petitioner, Skill Lotto Solution Pvt. Ltd. an authorized agent, for sale and distribution of lotteries organized by State of Punjab has filed this writ petition impugning the definition of goods under Section 2(52) of Central Goods and Services Tax Act, 2017 and consequential notifications to the extent it levies tax on lotteries.
- The petitioner sought for a 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.
- The Parliament enacted the Central Goods and Services Tax Act, 2017 to make provisions for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto.
- After the enactment of Central Goods and Services Tax Act, 2017 , Notification was issued by Government of India dated June 28, 2017 in exercise of power conferred by Section 9(1) notifying the rate of the integrated tax.
- By the notification with regard to lottery run by the State Government, value of supply of lottery was deemed to be 100/112 of the face value of the ticket or the prize as notified in the official gazette of the organising State, whichever is higher. With regard to lotteries authorised by the State Government value of supply of lottery was deemed to be 100/128. However later on uniform rate of 28% was made applicable on both.
Contention of the Petitioner:
- The petitioner contended that the 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 also submitted that the Parliament does not enjoy an absolute power to make an inclusive definition of something to be taxed which is not taxable otherwise.
- Lottery acquires property only when prize is declared. A ticket is only a chance and GST is levied on every sale of lottery ticket, which is not permissible since it is not an actionable claim.
- The petitioner has also relied on various taxing statutes of other countries, wherein the petitioner submits that prize money of the lottery ticket is not computing for levy of tax.
Order of Supreme Court: Deliberations and Ruling
- We are of the view that definition of goods under Section 2(52) of the Act,2017 does not violate any constitutional provision nor it is in conflict with the definition of goods given under Article 366(12). Article 366 clause(12) as observed contains an inclusive definition and the definition given in Section 2(52) of Act, 2017 is not in conflict with definition given in Article 366(12).
- The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions.
- The Constitution Bench judgment of this Court in Sunrise Associates has laid down that lottery is an actionable claim as proposition of law. The observation cannot be said to be obiter dicta.
- 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. Hence, we do not find any violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017.
- The value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme. When prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, we are not persuaded to accept the submission of the petitioner that prize money should be excluded for computing the taxable value of supply the prize money should be excluded. We, thus, conclude that while determining the taxable value of supply the prize money is not to be excluded for the purpose of levy of GST.
- When the levy of GST, determination of taxable value are governed by the Parliamentary Act in this country, we are of the view that legislative scheme of other countries may not be relevant for determining the issue which has been raised before us.
In view of above deliberations the three-judge bench of Justice Ashok Bhushan, Justice R. Subhash Reddy, and Justice M.R. Shah concluded that the petitioner is not entitled to reliefs as claimed in the writ petition.
However, the Court granted the liberty to the petitioner to challenge the notifications dated 21.02.2020 or 02.03.2020 by which rate of GST for lottery run by the State and lottery organized by the State have been made the same, which notification has not been challenged in the writ petition since the notifications were issued during the pendency of writ petition.
The Court thus ruled that the petitioner shall be at liberty to challenge the notifications dated 21.02.2020 /02.03.2020 (challenging the rate of levy tax uniformly at 28%) separately in appropriate proceedings.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
