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Constitutionality of Levy of GST on Lottery, Betting and Gambling upheld by Supreme Court

‘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). As noted above the Parliament by the Constitution(One Hundred and First Amendment) Act, 2016 inserted Article 246A. a special provision with respect to goods and services tax. The Parliament was fully empowered to make laws with respect to goods and services tax. Article 246A begins with non obstante clause that is “Notwithstanding anything contained in Articles 246 and 254”, Which confers very wide power to make laws. 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. (Para.49)’




Skill lotto solutions pvt. Ltd. Vs union of india & ors

WRIT PETITION (CIVIL) NO.961 OF 2018

DECEMBER 03, 2020

Learned senior counsel for the petitioner - Ravindra Shrivastava

Learned Additional Solicitor General for the Union of India - Vikramjit Banerjee

Learned senior counsel for the intervenor - C.A. Sundaram


The Hon’ble Supreme Court Justices Ashok Bhushan, R.Subhash Reddy and M.R. Shah dismissed a writ petition which challenged the levy of tax on lottery as discriminatory and violative of Articles 14, 19(1)(g), 301 and 304 of the Constitution of India.


An authorized agent for sale and distribution of lotteries organized by State of Punjab has filed a writ petition impugning the definition of goods under Section 2(52) of Central Goods and Services Tax Act, 2017 and the consequential notifications to the extent it levies tax on lotteries.


The Parliament enacted the Lotteries (Regulation) Act, 1998. The said act defined lottery under Section 2(b) which provides that “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. It is a point to be noted that, prior to parliamentary enactment for regulating the lotteries, different States have enacted legislation regulating the lotteries which were the legislations even prior to the enforcement of the Constitution, levying tax on the sale of lottery tickets.


The Parliament enacted the Central Goods and Services Tax Act, 2017 (Act No.12 of 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.


The Learned Counsel for the petitioner has contended that, lottery is not considered to be goods. The Central Goods and Services Tax Act, 2017 levies GST only on goods, hence levy of GST on lottery is ultra vires to the Constitution.


The Sale of Goods Act, 1930 defines goods in Section 2(7) in following words:

Section 2.(7)"goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, 27 growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;” (Para.19)


It is further submitted that the Constitution,

Article 366 sub-article (12) defines goods to include all materials, commodities and articles.

This definition in the Constitution excludes actionable claims since it only refers to materials, commodities and articles.


Whereas, Central Goods and Services Tax Act, 2017 defines goods as,

“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 29 to or forming part of the land which are agreed to be severed before supply or under a contract of supply;”


The definition of goods given in Section 2(52) of Central Goods and Services Tax Act was contented to be unconstitutional since it is contradictory to the Constitution. It is further submitted that Constitution Bench of this Court in Sunrise Associates Vs. Govt. of NCT of Delhi and Ors., (2006) 5 SCC 603 has held that lottery is not a good. The Constitution Bench has held that lottery is not a good, but the provisions of Act, 2017 treats the lottery as goods is contrary to the judgment of Constitution Bench in Sunrise Associates (supra). It was stated that the lottery is not an actionable claim as is now sought to be included in the definition of goods given in Section 2(52). The provisions of Act, 2017 are self-contradictory as the definition of actionable claim is as per definition of Transfer of Property Act, which are only the claim and not the goods. Under the definition of goods, actionable claims have been included as goods under Section 2(52). It is further submitted that GST is being levied on the face value of the lottery tickets which is impermissible since the face value of the 10 tickets also includes prize money to be reimbursed to the winners of the lottery tickets.


“Item No.6 – Actionable claims other than lottery, betting and gambling.”

Since, Item No.6 under Schedule III to the Act,2017 treats all actionable claims except “lottery, betting and gambling” as neither goods nor supplies, it was contended that, there exists a hostile discrimination in taxing only lottery, betting and gambling whereas all other actionable claims have been left out of the taxing net. The taxing only three items has no nexus with the object sought to be achieved. And no rationale has been provided by the respondent.


The Learned Counsel for the Intervenor contends that the Constitution permits tax on goods and actionable claims being not taxed under the Constitution, the Parliament cannot have the power of taxing lottery. The legislature cannot enlarge its taxing power. He reiterated that the definition of goods under the GST Act would necessarily have to be guided by the definition of goods given under the Constitution. ‘The lottery ticket is not even an actionable claim but only a chance, but is treated as an actionable claim by ratio of Constitution Bench judgment in Sunrise Associates (supra), which will not be a good within the meaning of Article 366(12) of the Constitution’ submits the counsel.


The Learned Counsel for the Respondents contends that, the writ petition filed by the writ petitioner under Article 32 is not maintainable. It is submitted that lottery is “res extra commercium” and no right under Article 19(1)(g) and Article 301 can be claimed by the petitioner with regard to lottery. He stated that the transaction of lottery tickets cannot be raised to the status of trade, commerce or intercourse. And hence, there exists no right with the petitioner which can be enforced by writ petition filed under article 32 of the Constitution and the writ petition deserves to be dismissed.


He further stated that, the fact of not levying tax on other actionable claims apart from lottery, betting and gambling cannot be said to be discriminatory. The definition of goods given under Article 366(12) of the Constitution was said to be an inclusive definition. So, Lottery having been judicially held to be an actionable claim is said to be covered within the meaning of term goods under section 2(52). Article 279A the GST Council has also approved the levy of GST on lottery tickets, hence, the inclusion of actionable claims in the definition of goods under section 2(52) is kept within the legislative and taxing policy.


The Hon’ble Supreme Court observed that Article 366(12) contains an inclusive definition and the definition in Section 2(52) of Central Goods and Services Tax Act, 2017 is not in conflict with definition given in Article 366(12).


The Constitution framers were well aware of the definition of goods as occurring in the Sale of Goods Act, 1930 when the Constitution was enforced. By providing an inclusive definition of goods in Article 41 366(12), the Constitution framers never intended to give any restrictive meaning of goods. (Para. 34)


Thus it was held that the 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).The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to goods and services tax thus the expansive definition of goods in Section 2(52) cannot be said that it is not in accordance with the constitutional provisions.


It further held that,

The inclusion of actionable claim in definition “goods” as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is not contrary to the legal meaning of goods and is neither illegal nor unconstitutional. (Para.61)


It also noted that, even before enforcement of the Constitution of India, there were several legislations by different States regulating lottery, betting and gambling. In Union of India and Ors. Vs. Martin Lottery Agencies Limited, (2009) 12 SCC 209, this Court had considered levy of service tax on the lottery tickets.


On account of discrimination in taxing only lottery, betting and gambling whereas all other actionable claims have been left out, it was observed that:

Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. 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. Regulation including taxation in one or other form on the activities namely lottery, betting and gambling has been in existence since last several decades. When the parliament has included above three for purpose of imposing GST and not taxed other actionable claims, it cannot be said that there is no rationale or reason for taxing above three and leaving others. (Para.70)


Thus the contention of hostile discrimination in taxing the lottery, betting and gambling and not taxing other actionable claims was not accepted. And no violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017 was found.


The issue that whether the tax should be made on the price of the lottery or its prize value could be taken into account for the same was observed. And the Court held that, while determining the taxable value of supply, the prize money is not to be excluded for the purpose of levy of GST.


The petitioners were held not entitled to reliefs as claimed in the writ petition. The petitioner has further prayed for grant of liberty of challenging 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, which notification has not been challenged in the writ petition since the notifications were issued during the pendency of writ petition. For the above prayer, the Court ordered that the petitioner shall be at liberty to challenge the notifications dated 21.02.2020/02.03.2020 (challenging the rate of levy tax uniformally at 28%) separately in appropriate proceedings.

Subject to liberty mentioned above, the writ petition was dismissed.



M.Nandhitha

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