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Calcutta HC Turns Down Plea to Exempt Lotteries From GST

Calcutta High Court
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  • PG News October 22, 2018
  • 4 Minutes Read

Hardly a month has gone by since four Indian lottery firms were slapped with tax evasion charges for a reported ‘lesser’ payment of their Goods and Services Tax (GST) in Punjab, that the Calcutta High Court has rejected the plea by a lottery operator to keep lotteries out of the ambit of the GST.

According to a recent report by Live Law, a single judge bench of the Calcutta HC, comprising of Justice Debangsu Basak rejected the writ petition filed by lottery operator M/s Teesta Distributors seeking that lotteries should be exempted from paying GST on grounds that lottery tickets were an actionable claims and thus outside the definition of ‘goods.’

The High Court also rejected Teesta Distributors’ claim that the dual taxation structure of 12% GST on lotteries sold by state governments within the particular state and 28% GST on lotteries sold by private distributors outside the organizing state is discriminatory and should be struck down.

Justice Basak ruled that while lotteries fall within the ambit of actionable claim as per a Supreme Court decision in the case by Sunrise Associates versus Delhi government, the definition of ‘goods’ under Article 366 (12) of the constitution is broad enough to allow legislatures to classify lotteries as goods, and therefore they can charge tax on lotteries.

“Schedule III under Section 7 of the CGST Act, 2017 deals with activities or transactions which shall be treated neither as a supply of goods nor as a supply of services. Entry 6 of Schedule III of CGST Act, 2017 takes out ‘actionable claims’ other than lottery, betting and gambling from the scope of such Act,” Justice Basak’sjudgement read.

Consequently, such lotteries are generally speaking ‘goods’ and come within the definition of ‘actionable claims’ which do not attract the CGST Act, 2017. On the parity of the same reasoning, lottery is chargeable to tax under WB GST Act, 2017 also.”

On the issue of dual taxation, the bench said, “The Goods and Services Tax Council established under Article 279A of the Constitution of India at its 17th meeting deliberated extensively with regard to the rate of tax to be imposed on lotteries. Differential rate of tax was introduced in the 17th Goods and Services Tax Council Meeting held on June 18, 2017. The States before the Court were present in such meeting. It was after extensive deliberations that, the GST Council had approved the rates as presently obtaining in respect of lottery. It is within the domain of such Council to decide the rate of tax.”

The court has further clarified that the decisions or the resolutions of the GST Council were not immune from judicial review and were justiciable. In case a resolution adopted in the GST Council meeting is substantiated to be breaching any fundamental right or any provision of the Constitution of India, the same can be adjudicated upon by a Writ Court, the bench ruled.

Notably, in September end, Punjab-based branches of four Indian lottery distributors- Essel Group, Sugal & Damani Group, Martin Group and M/S PAN India Network Ltd had to face some heat by the anti-evasion wing of the Ludhiana branch of CGST Commissionerate that registered four separate cases against the local branches or group firms of these companies. Overall, the four firms were found to have evaded GST to the tune of ₹13 Crores.

While private lottery firms have sought legal relief from high rates of taxation levied by the dual taxation system by the GST Council, as of now there is status quo as far as the union government and the GST Council’s response to the same is concerned.

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