Lottery distributors not liable to pay service tax to Centre, only state gambling tax applies: SC
Upholding the Sikkim High Court verdict, the top court said it is only the state government that can impose taxes on lotteries and not the Centre.
Upholding the Sikkim High Court verdict, the top court said it is only the state government that can impose taxes on lotteries and not the Centre.
Upholding the Sikkim High Court verdict, the top court said it is only the state government that can impose taxes on lotteries and not the Centre.
New Delhi: The Supreme Court on Tuesday ruled that lottery distributors are not liable to pay service tax to the Union government, dismissing an appeal by the Centre.
A bench comprising Justices BV Nagarathna and NK Singh upheld the Sikkim High Court’s verdict, rejecting the Centre’s argument.
“Since there is no agency in the relationship, the respondents (lottery distributors) are not liable to pay service tax. However, they will continue to pay the gambling tax levied by the state under Entry 62, List II of the Constitution,” Justice Nagarathna said while delivering the judgment.
The court clarified that service tax cannot be imposed on transactions between lottery ticket purchasers and firms. “We find no merit in the appeals filed by the Union of India and others. Hence, these appeals are dismissed,” the bench stated.
Reaffirming the Sikkim High Court's ruling, the Supreme Court held that only state governments have the authority to impose taxes on lotteries, as they fall under "betting and gambling" in Entry 62 of the State List in the Constitution.
The Centre had argued that it had the right to impose service tax but the top court disagreed. The case stemmed from a plea filed by lottery firm Future Gaming Solutions Pvt Ltd, with the Centre moving the Supreme Court in 2013 following the Sikkim High Court’s decision.