The Supreme Court on Thursday upheld levying of Goods & Services Tax (GST) on lottery. However, it said the petitioner can appeal against the notification that prescribes rate of 28 per cent.

The petitioner, Skill Lotto Solutions, approached the apex court and sought declarations that the levy of tax on lottery is discriminatory and against the Constitutional provisions. It also submitted that prize money to be excluded from the taxable value.

GST Council had decided that there will be a uniform duty of 28 per cent as against demand of dual rate (12 per cent for state-run and 28 per cent on those from private players authorised by the State Government).

After hearing arguments and counter arguments, the bench of justices Ashok Bhushan, R Subhash Reddy and M R Shah took note of a judgement by the Constitution Bench in the matter of Sunrise Associates where it has been said that lottery is an actionable claim as proposition of law. The observation cannot be said to be obiter dicta .

Further it said that lottery, betting and gambling are well known concepts and have been in practice in this country 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 the last several decades.

“When the parliament has included above three for the 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,” the bench said.

On the issue of prize money should be abated from the face value of the lottery ticket for levy of GST, the bench said: “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.”

According to Smita Singh, Partner, Singh & Associates, the Court has settled the brewing issue of GST liability on sale of lotteries. The definition of goods in the CGST Act is an inclusive definition which includes actionable claims and thus, the scope of terms and phases therein has been enlarged. The Court has rightly held that the lottery does qualify as goods under the Act. Although the issue on taxability and valuation has been settled, this judgement has left the question on GST rate on lotteries open. “Hence the lottery industry which has been grieving financial loss to their business due to the huge rate of GST will have to challenge the issue of rate of Tax via a separate petition,” she said.