On Tuesday, the Supreme Court made an important ruling: only state governments can impose taxes on lottery sales, not the central government. Justices BV Nagarathna and Satish Chandra Sharma announced the decision, which confirmed that lotteries are part of “betting and gambling.” This means that only state legislatures have the right to manage and tax lotteries.
The court’s decision came after the central government tried to charge a service tax on companies that sell and promote lotteries, claiming these actions were taxable services under a law called the Finance Act. However, the Supreme Court disagreed, explaining that there is no actual “service” involved when states deal with lottery sellers. Instead, it stated that these businesses operate as equals to the states, not as agents serving them, so a service tax could not be applied.
In the past, the central government has tried several times to put lottery activities under the service tax category by changing the Finance Act in 1994, 2010, and 2015. Unfortunately for them, these changes were rejected by the Sikkim High Court from 2012 to 2015—a decision that the Supreme Court has now confirmed.
The case arose from appeals by the central government against companies like Future Gaming & Hotel Services and Summit Online Trade Solutions, which had previously won cases in the high court. The ruling also demonstrates that different states in India have various views on lotteries. Some states, such as Kerala and Sikkim, allow and regulate lotteries to earn money for the government, while other states, like Gujarat and Uttar Pradesh, have banned them due to worries about addiction and financial problems.
The choice to allow or disallow lotteries is completely up to state governments, according to the Constitution
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