Supreme Court On Taxing of Lotteries.

 ~Preet.


States Can Levy Tax On Lotteries Run By Other States : Supreme Court Allows Appeals Of Kerala & Karnataka

In a recent decision, the Supreme Court ruled that a state legislature has the authority to levy taxes on lotteries run by other states within its jurisdiction. Previously, the Karnataka High Court ruled that substantial provisions of the Karnataka Police (Amendment) Act, 2021, which prohibited internet gambling and skill-based gaming platforms, were unconstitutional. The Supreme Court ruled in 2020 that lottery, gaming, and betting are taxed under the 2017 Goods and Services Tax (GST) Act.

The decision was made in response to appeals filed by the governments of Karnataka and Kerala against decisions of their respective High Courts to overturn laws enacted by their legislatures to tax lotteries organised and promoted by the states of Nagaland, Arunachal Pradesh, Sikkim, Manipur in Kerala, and Karnataka. The High Courts ruled that the two states' tax rules were unlawful and unconstitutional, and ordered Kerala and Karnataka to repay the money received as tax from lotteries to the north-eastern states.

The court stated that "lotteries" are a "kind of gambling activity." 'Betting and gambling' is a State List item in the Constitution's Seventh Schedule. The authority to tax extends to any activities that fall under the category of "betting and gambling," including lotteries. Betting and gambling is a genus that comprises a variety of activities such as horse racing, wheeling, and various local variations/forms of 'betting and gambling'. Since there is no dispute that lotteries, whether conducted or organised by the Government of India or the Government of State, or whether authorised by the State or conducted by an agency or instrumentality of the State government or the Central government or any private player, are 'betting and gambling,' the court held that state legislatures have the authority to tax lotteries under Entry 62 of the State List.  This is due to the fact that the taxes envisioned by the aforementioned Entry is on 'betting and gaming' activities, which include lotteries, regardless of the company performing the same.

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