Tax On Lottery: The Supreme Court upheld the decision of the Sikkim High Court and said that only the state government can impose tax on lottery, not the central government.
Tax On Lottery: The Supreme Court has said in its order that the Central Government and its Revenue Department do not have the right to impose service tax on the advertisement, promotion, or sale of lottery tickets and the Supreme Court has dismissed the petitions filed by the Center and its Revenue Department. A bench of Justice BV Nagarathna and Justice NK Singh said, “The appeal filed by the Union of India and others has no merit. Therefore, these appeals are dismissed.
Delivering a 120-page judgement upholding the Sikkim High Court verdict, Justice Nagarathna discussed the Finance Act, its amendments and the history of the case. “We have found that the amendments made in the Finance Act, 1994 to levy service tax on the sole distributor/purchaser of lottery tickets (respondent-taxpayer) have failed at every stage,” the judge said.
Justice Nagarathna held that since no service has been provided by the respondent-taxpayer to the Sikkim government as any agency or agent, service tax cannot be levied on the transaction between the buyer of lottery tickets (respondent-taxpayer) and the Sikkim government.
While pronouncing the verdict, Justice Nagarathna said, “Since there is no agency in this regard, the respondents (lottery distributors) are not liable to pay service tax. However, the respondent lottery distributors will have to pay the gambling tax imposed by the state government under Entry 62 of List 2 of the Constitution. The bench said, “Service tax is not levied on the transaction between the buyer of lottery ticket and the firm… In view of the above discussions, we do not see any merit in the appeal filed by the Union of India and others. Therefore, these appeals are dismissed.
The Supreme Court upheld the decision of the Sikkim High Court, saying that only the state government can impose tax on lottery, not the central government. The court said, the High Court was right in saying that lottery falls under the category of “betting and gambling”, which is part of Entry 62 of the State List of the Constitution and only the state government can impose tax on it.
The Centre had moved the Supreme Court against the High Court’s decision in 2013. The High Court had given this verdict on a petition filed by lottery firm ‘Future Gaming Solutions Pvt Ltd’.
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