SUPREME COURT UPHOLDS VALIDITY OF LEVY GST ON LOTTERIES: SKILL LOTTO SOLUTIONS PVT LTD vs UNION OF INDIA
REPORTABLE
Skill Lotto Solutions Pvt Ltd
Versus
Union of India & Others
Writ Petition (Civil) No. 961 of 2018
Date of Judgment-03.12.2020
BRIEF FACTS-
The petitioner, an authorized agent, for sale and distribution of lotteries organized by State of Punjab has filed this writ petition impugning the definition of goods under Section 2(52) of Central Goods and Services Tax Act, 2017 and consequential notifications to the extent it levies tax on lotteries. The petitioner seeks declaration that the levy of tax on lottery is discriminatory and violative of Articles 14, 19(1)(g), 301 and 304 of the Constitution of India.
ISSUES FOR CONSIDERATION-
- Whether the writ petition is not maintainable under Article 32 of the Constitution of India since the writ petition relates to lottery ,which is res extra commercium and the petitioner cannot claim protection under Article 19(1)(g)?
- Whether the inclusion of actionable claim in the definition of goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is contrary to the legal meaning of goods and unconstitutional?
- Whether the Constitution Bench judgment of this Court in Sunrise Associates (supra) in paragraphs 33, 40, 43 and 48 of the judgment has laid down as the proposition of law that lottery is an actionable claim or the observations made in the judgment were only an obiter dicta and not declaration of law?
- Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of the Constitution of India?
- Whether while determining the face value of the lottery tickets for levy of GST, prize money is to be excluded for purposes of levy of GST?
QUESTION NO.1
PARA 16. The writ petition alleging the violation of Article 14 specially 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. Reference is made to judgment of this Court in H. Anraj and Ors. Vs. State of Maharashtra, (1984) 2 SCC 292 where the writ petitioner, who were agents for the sale of tickets for the lottery filed a writ petition questioning the ban imposed on the sale of lottery tickets within the State of Maharashtra. Even judgment of this Court in H. Anraj Vs. Government of Tamil Nadu, (1986) 1 SCC 414 was also a writ petition, which was heard along with a civil appeal questioning the leviability of the sales tax by the State Legislature on the sale of lottery tickets.
QUESTION NO. 2
PARA 49. 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 59. Thus, in view of what has been said above by the Constitution Bench, the submission of the petitioner that actionable claims have been artificially included in the definition of goods cannot be accepted. The Constitution Bench has clearly laid down that actionable claims are goods. We, thus, do not agree with the submission of Shri Shrivastava that Parliament has exceeded its jurisdiction in including actionable claims in the definition of “goods” under Section 2(52).
Answer No.II
61. 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.
Answer NO.III
62. 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.
Question No. IV
PARA 70. 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 71. It is a duty of the State to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life. The Constitution Bench in State of Bombay Vs. R.M.D. Chamarbaugwala and Anr. (supra) has clearly stated
that Constitution makers who set up an ideal welfare State have never intended to elevate betting and gambling on the level of country’s trade or business or commerce. In this country, the aforesaid were never accorded recognition of trade, business or commerce and were always regulated and taxing the lottery, gambling and betting was with the objective as noted by the Constitution Bench in the case of State of Bombay Vs. R.M.D. Chamarbaugwala and Anr. (supra), we, thus, do not accept the submission of the petitioner that there is any 75 hostile discrimination in taxing the lottery, betting and gambling and not taxing other actionable claims. The rationale to tax the aforesaid is easily comprehensible as noted above. Hence, we do not find any violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017
Question No.5
PARA 78. For determining the value of the lottery, now, there is statutory provision contained in Section 15 read with Rule 31A as noted above. Section 15 of the Act, 2017 by sub-section (2) it is provided what shall be included in the value of supply. What can be included in the value is enumerated in sub-clause (a) to (e) of sub-section (2) of Section 15. Further, sub section (3) of Section 15 provides that what shall not be included in the value of the supply. When there are specific statutory provisions enumerating what should be included in the value of the supply and what shall not be included in the value of the supply we cannot accept the submission of the petitioner that prize money is to be abated for determining the value of taxable supply. What is the value of taxable supply is subject to the statutory provision which clearly regulates, which provision has to be given its full effect and something which is not required to be excluded in the value of taxable supply cannot be added by judicial interpretation.
PARA 80. The value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme. When prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, we are not persuaded to accept the submission of the petitioner that prize money should be excluded for computing the taxable value of supply the prize money should be excluded. We, thus, conclude that while determining the taxable value of supply the prize money is not to be excluded for the purpose of levy of GST.
PARA 80. In the foregoing discussion we are of the view that the petitioner is not entitled to reliefs as claimed in the writ petition.
