Supreme Court of India upholds General Services Tax on lottery

Published:10 December 2020

Supreme Court

The Supreme Court of India has dealt a blow to the lottery industry in the country, upholding the constitutional validity of imposing a General Services Tax (GST) on lottery ticket sales and winnings.

Skill Lotto Solutions, a dealer in the state of Punjab, brought the petition to the court to rule on whether lottery should be excluded from the GST.

The company claimed that lottery tickets are not actually goods, but "actionable claims," and thus fall beyond the scope of taxation.

According to the law, actionable claims are excluded from taxation, but not when it comes to lottery, gambling and betting. This provision was challenged by the petitioner as discriminatory to the industry.

The Supreme Court, however, dismissed the notion that "lottery, gambling and betting" were always regulated in India in the interest of social welfare, and thus the state had a rationale for treating the "lottery, gambling and betting" business differently from other "actionable claims."

The court offered the company relief, on a bright note, to challenge the GST rate imposed.

For many years, India's lottery industry has been calling for system reform, saying the tax system is undermining the industry and encouraging illegal lotteries. They pushed for changes to a system that imposed a tax rate of 12% on state-owned lottery and 28% on authorized lottery that sell across state boundaries.

The GST Council decided to abolish the dual tax rate, but unfortunately opted for the higher levy that came into force in March of this year.