In a significant verdict, the Supreme Court Thursday held that the levy of Goods and Services Tax (GST) on lotteries, betting and gambling does not amount to hostile discrimination and is not violative of right to equality under the Constitution.
Upholding the validity of the provisions under the Central Goods and Services Tax Act, 2017 empowering authorities to tax lotteries, a bench headed by Justice Ashok Bhushan dismissed a plea of Skill Lotto Solutions Pvt Ltd, an authorized agent for sale and distribution of lotteries organized by Punjab government.
The firm had sought setting aside the definition of goods under Section 2(52) of the Central Goods and Services Tax Act, 2017 and consequential notifications to the extent it levies tax on lotteries and had sought a declaration that the taxing of lottery was “discriminatory and violative” right to equality and practice profession under the Constitution.
“We are of the view that definition of goods under Section 2(52) of the Act..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).
“…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,” said the bench which also comprised Justices R Subhash Reddy and MR Shah.
It dealt with five aspects related to the challenge to the GST law and said the power to make laws as conferred under Article 246A, “fully empowers” 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.
Justice Bhushan, in the 87-page judgement, first dealt with the objection of the Centre that a company cannot claim the protection under the writ jurisdiction as its plea pertained to lottery.
“The writ petition alleging the violation of Article 14 especially with respect to a parliamentary Act can very well be entertained under Article 32. We may also notice that with regard to the matter of lottery itself, this court had entertained a writ petition earlier under Article 32,” the judgment held.
The top court, however, did not agree to the contention of the lottery firm that the inclusion of “actionable claim” in the definition of goods in Section 2(52) of CGST Act was contrary to the legal meaning of goods and hence unconstitutional.
It also did not agree to the contention of the firm that the top court’s observation in an earlier judgement that the lottery is an “actionable claim” and hence taxable was not the declaration of law.
“The inclusion of actionable claim in definition ”goods” as given in CGST Act is not contrary to the legal meaning of goods and is neither illegal nor unconstitutional,” the top court held.
“The Constitution Bench judgment of this court in Sunrise Associates has laid down that lottery is an actionable claim as proposition of law. The observation cannot be said to be obiter dicta,” it said.
It said that lottery, betting and gambling have been in practice since before independence and have been regulated and taxed under 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,” it said.
Taxation in one or other form on the activities like lottery, betting and gambling has been in existence since last several decades, it said.
“When 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,” it said.
While dismissing the plea, the top court granted liberty to the firm to challenge notifications of February 21 and March 2 by which the rate of GST for lottery run by the state and lottery organized by the state have been made the same on the ground that they were not assailed in the present plea.