By: Gunjan Basrani
In the Supreme Court of India
|NAME OF THE CASE||Skill Lotto Solutions Pvt. Ltd. v. Union of India|
|CITATION||writ petition (civil) no.961 of 2018|
|DATE OF THE CASE||3 December, 2020|
|APPELLANT||Skill Lotto Solutions Pvt. Ltd.|
|RESPONDENT||Union of India & ors.|
|BENCH/JUDGES||Hon’ble Justice Ashok Bhushan, Hon’ble Justice R. Subhash Reddy, Hon’ble Justice M.R. Shah|
|LEGAL PROVISIONS||The Constitution of India, 1949 (Articles 32, 19(1)(g), 301 and 304) The Central Goods and Services Tax Act, 2017 (Sections 2(52) and 15) Lotteries (Regulation) Act, 1998|
Lottery is a game of fortuity in which individual wrap-up prize money or other artefacts if their numbered lottery ticket is chosen by chance. It is rather a game of luck affected by mere chance and not being controlled by a fair process. Lotteries can take the form of gambling in which folks are lure to stake their money or other valuables solely on their luck to hit a jack-pot.
Lotteries has been defined in Section 2(b) of the Lotteries (Regulation) Act, 1998 as follows, “lottery means a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets.” The lottery is a type of gambling which is not under the strict rules and regulations as The Public Gambling Act, 1867 declares all Gambling activities illegal except the games where skill is needed as held in RMD Chamarbaugwala v. Union of India.
In the case of Skill Lotto Solutions Pvt. Ltd. v. Union of India, the legitimacy of imposing tax on lottery, betting and gambling was questioned in the Supreme Court. In this case the petitioner knocked the door of Supreme Court against the definition of ‘goods’ enshrined under Section 2(52) of Central Goods and Services Tax Act, 2017 and it was also contended that the imposition of taxes on lottery is a violation to the Articles 14, 301 and 304 of the Constitution of India.
Prior to the parliamentary enactment various legislations were made to administer the activities of lottery, betting and gambling. Enormous laws were made by the state governments such as Bengal Finance Sales Tax Act, 1941, Madras General Sales Tax Act, 1939 and Bombay Lotteries (Control and Tax) and Prize Competitions Tax Act, 1958 to levy taxes on lottery.
The Parliament sanctioned the Lotteries (Regulation) Act,1998 to manage and control the affairs related to lotteries. In addition, Finance Act, 1994 was also enacted to impose Service Tax on lottery ticket. The Central Government also issued the Lotteries (Regulation) Rules in 2010 which includes rules and regulations for the lotteries conducted by the States. The Parliament also enacted 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 concerning matters thereto.
In the aforesaid case, i.e., Skill Lotto Solutions Pvt. Ltd. v. Union of India the issue of taxation on lottery tickets was challenged. The petitioner, an authorized agent, for sale and distribution of lotteries organized by the 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 a tax on lotteries.
FACTS OF THE CASE
In the case of Skill Lotto Solutions Pvt. Ltd. v. Union of India, a writ petition was filed by an authorized agent who administered the affairs related to the lotteries in the State of Punjab. The petition questioned the legality of imposing tax on the lotteries, betting and gambling as specified under The Central Goods and Services Tax Act, 2017.
It was contended by the petitioner that GST can only be imposed on goods and not on actionable claims and lottery, betting and gambling are actionable claims as Transfer of Property Act, 1882 defines actionable claims as claims only. Article 366(12) of the Indian Constitution defines goods as all materials, commodities and articles and excludes actionable claims. The case of Sunrise Associates v. Government of NCT of Delhi also highlights the fact that sale of lotteries does not mean the same as sale of goods. Therefore, the petitioner argued that the Parliament possess no authority to levy or impose tax on actionable claims like lottery, betting and gambling.
Moreover, it was also contended that it is discriminatory to impose GST on lottery, betting and gambling out of all actionable claims.
ISSUE RAISED BEFORE THE COURT
- Whether the writ petition involving lottery is justifiable under article 32 of the Constitution of India as it is res extra commercium?
- Whether Section 2(52) of Central Goods and Services Tax Act, 2017 is unconstitutional?
- Whether imposing tax on lottery, gambling and betting is discriminatory?
- Whether while determining the face value of the lottery tickets for levy of Goods and Services Tax (GST), prize money is to be excluded for purposes of levy of GST?
Arguments from the Petitioner’s Side:
- The learned counsel from the petitioner’s side contended to negate the definition of goods which is enshrined in Section 2(52) of Central Goods and Services Tax Act, 2017 as it violates Article 19(1)(g), 301, 304 of the Constitution of India.
- It was also argued that the definition of goods in Section 2(52) of Central Goods and Services Tax Act, 2017 includes actionable claims which is unconstitutional as Article 366(12) of the Constitution of India defines goods as to include all materials, commodities and articles and excludes actionable claims.
- The learned counsel also asserted that in the case of Sunrise Associates v. Govt. of NCT of Delhi and Others, the Supreme Court did not regarded lottery as goods and hence Section 2(52) of Central Goods and Services Tax Act, 2017 clashes with the decision of the Supreme Court.
- It was also argued that actionable claims were purposefully included in the definition of goods to bring the lotteries under the ambit of GST.
- It was further contended that levying GST on the face value of the lottery ticket is not permitted as a lottery’s face value also includes the prize money to be reimbursed to the winners.
- According to the counsel the Parliament has no absolute power to tax something which is otherwise non-taxable.
- The petitioner also claimed that there is an absence of intelligible differentia as in the cases of Ayurveda Pharmacy v. State of Tamil Nadu and State of Uttar Pradesh v. Deepak Fertilizers & Petrochemical Corporation Ltd., it was held that when the commodities belong to the same class or category, then there must be some rational basis for discrimination between one and other for the purposes of imposing tax only on one particular commodity from the same class.
Arguments from the Respondent’s Side:
- The Learned Solicitor General for the Union of India, Shri Vikramjit Banerjee contended that the petition filed by the petitioner is not justifiable under Article 32 of Indian Constitution.
- The learned counsel argued that the lottery is ‘res extra commercium’ and the petitioner cannot be granted protection under Article 19(1)(g), 301, 304 of the Constitution of India.
- The learned counsel from the respondent side also argued that the writ petition of the petitioner should be dismissed as civil rights and economic activities are governed by different laws and they should be thus separated form each other.
- It was also asserted that levying tax on lottery, betting and gambling is not discriminatory.
- The GST Council validate the levying of taxes on lottery under Article 279A of the Constitution of India. Thus, Section 2(52) of Central Goods and Services Tax Act, 2017 is not contrary but in accordance with the legislative and taxing policy.
- The levying of GST on the face value of the lottery ticket is authorized by the 2017 Act under its section 15(1) read with section 15(5). Such levying on face value is not discriminatory nor is beyond the taxing powers of the state.
PROVISIONS RELATED TO THE CASE
- The Constitution of India, 1949
- Article 19(1)(g): Article 19(1)(a) of the Constitution of India guarantees all its citizens the right to practise any profession, or to carry on any occupation, trade or business.
- Article 301: Freedom of trade, commerce and intercourse. Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.
- Article 304: Restrictions on trade, commerce and intercourse among States Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law: (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
- The Central Goods and Services Tax Act, 2017
- Section 2(52): Goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
An Act to regulate the lotteries and to provide for matters connected therewith and incidental thereto.
An authorized agent who administered the affairs related to lotteries in the State of Punjab questioned the legality of levying tax on lotteries, betting and gambling out of all actionable claims as specified under Section 2(52) of the Central Goods and Services Tax Act, 2017 in the case of Skill Lotto Solutions Pvt. Ltd. v. Union of India. However, the Supreme Court justifying the constitutionality of imposing GST on lottery, gambling and betting held that it is neither contrary to any constitutional provision nor does it clash with any definition of goods as given under Article 366(12) of the Indian Constitution. Moreover, the Parliament was empowered to make laws related to GST under Article 246A via 101st Amendment Act, 2016.
The Supreme Court clarifying the queries raised by the petitioner pronounced that Article 279A endorse the GST council to impose or levy GST on lotteries, therefore the definition under Section 2(52) of the Central Goods and Services Tax Act, 2017 is not contrary to legislative, taxing policy and Supreme Court’s judgment in the case of Sunrise Association.
The court further stated that there is intelligible rational basis for including only these three which can be inferred from the case State of Bombay v. R.M.D. Chamarbaugwala where it was held that gambling activities are extra commercium. Although the external forms, formalities and instruments of trade may be employed but they are not protected either by Article 19(1)(g) or Article 301 of the Constitution. It was further contended that the law regarded lotteries not as a trade or commerce but as gambling which is res extra commercium. Therefore, the imposing of GST on lotteries is constitutional.
In the case of Skill Lotto Solutions Pvt. Ltd. v. Union of India, the Supreme Court on December 3, 2020 upheld the constitutionality of imposing GST on lotteries, gambling and betting.
As per my opinion, the government never encouraged lotteries, gambling and betting and imposed taxes on them even before the enactment of various acts as government is bond to look after the welfare of its citizens. By levying tax on these the citizens are discouraged to indulge themselves in these kinds of activities. Therefore, taxing lotteries is constitutional.
 https://www.iralr.in/post/constitutionality-of-levying-goods-and-services-tax-on-lottery-gambling-detailed-recapitulation [last visited on February, 28, 2022]
 Section 2(b) in the Lotteries (Regulation) Act, 1998.
 R. M. D. Chamarbaugwalla v. Union of India, 1957 SCR 930.
 Supra note 1.
 Sunrise Associates v. Government of NCT of Delhi, Appeal (civil) 4552 of 1998.
 Supra note 1
 https://lawwallet.in/whether-the-levy-of-gst-on-lottery-betting-and-gambling-constitutionally-valid/ [last visited on April 2, 2022]
 https://www.iralr.in/post/constitutionality-of-levying-goods-and-services-tax-on-lottery-gambling-detailed-recapitulation [last visited on April 2, 2022]
 Supra note 9.
 Article 19(1)(g) in The Constitution of India 1949.
 Article 301 in The Constitution of India 1949.
 Article 304 in The Constitution of India 1949.
 Lotteries (Regulation) Act, 1998.
 Supra note 10.