World
India
The Supreme Court, in a landmark ruling on Tuesday, reaffirmed the constitutional principle that lottery distributors are not subject to service tax imposed by the Union government, thereby dismissing the Centre’s appeal against a judgment of the Sikkim High Court.
A bench composed of Justices B.V. Nagarathna and N.K. Singh rejected the Centre’s contention that service tax could be levied on lottery transactions, holding instead that such activities fall exclusively under state taxation purview.
“Given the absence of a principal-agent relationship, the respondents (lottery distributors) cannot be held liable for service tax. However, they remain obligated to pay gambling taxes as prescribed under Entry 62, List II of the Constitution,” Justice Nagarathna stated in the court’s ruling.
The bench further elaborated, clarifying that “service tax is not applicable to transactions between purchasers of lottery tickets and the issuing firms. After due deliberation, we find no merit in the appeals presented by the Union of India and others. Consequently, these appeals are dismissed.”
By upholding the Sikkim High Court’s judgment, the Supreme Court reaffirmed that the constitutional mandate unequivocally vests the authority to impose taxes on lotteries with state governments, thereby precluding the Centre from claiming jurisdiction in this domain.
The Union government had argued that it retained the power to levy service tax on such transactions, a position ultimately rejected by the court.
The ruling aligns with prior judicial interpretations that categorize lotteries under “betting and gambling,” an area explicitly covered by Entry 62 of the State List in the Seventh Schedule of the Constitution. This designation firmly establishes that only state legislatures possess the competence to enact taxation statutes governing lotteries and related gambling activities.
The Centre initially moved the Supreme Court in 2013, challenging the Sikkim High Court’s decision, which stemmed from a petition filed by Future Gaming Solutions Pvt. Ltd., a lottery firm contesting the imposition of service tax.
This latest decision by the Supreme Court thus fortifies the constitutional demarcation between state and central taxation authorities concerning regulatory frameworks for gambling and betting enterprises.
Read More: Delhi High Court Grants Engineer Rashid Custody Parole; Son Calls It ‘Positive Development’
