SC reserves order on GST on sale of lotteries
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Petitions filed by lottery sellers argued that Central GST Act of 2017 and notifications wrongly seen lotteries as “goods” whereas they had been solely ‘actionable claims’.
The Supreme Court has reserved its judgment on the constitutional validity of imposing Goods and Services Tax (GST) on sale of lotteries throughout the nation.
Petitions filed by lottery sellers, together with Skill Lotto Solutions Ltd., argued that the Central GST Act of 2017 and notifications wrongly seen lotteries as “goods” whereas they had been solely “actionable claims”.
Also Read | GST Council votes for 28% GST on all lotteries
They stated lottery tickets by themselves had been solely “valueless pieces of paper” and the GST Council was fallacious to suggest the imposition of tax on them.
A 3-judge Bench led by Justice Ashok Bhushan would primarily heard and pronounce the decision on prices of discrimination raised towards the legislation for imposing 12% GST on lotteries offered inside the similar State and 28% GST for sale of tickets from different States.
“Under the GST Act, there are two rates prescribed on the sale of lottery tickets. One is 12% if the lotteries are sold within the same State, and the other is 28% if a State sells the lottery tickets in other States. Arbitrary, discriminatory, unreasonable and clearly violative of Articles 14 of the Constitution,” advocate Arjun Garg, for Skill Lotto, had argued.
Several intervenors, represented by senior advocate Aryama Sundaram and advocate Rohini Musa, questioned the imposition of GST on the “face value” of lottery tickets. This “face value” consists of prize cash to be distributed to the winners of a lottery, margin of brokers, retailers and distributors, and so on.
“In the earlier tax regime, in which no VAT was levied on lotteries, but service tax was levied, the rate of tax was 1.28% or.82% on the face value of the lottery tickets depending on the prize money payout. Thus the Legislature never intended to tax the prize money component in the lottery trade, as it did not form part of the income of lottery traders, but payable to the winner of the ticket prize. However, the notifications levy GST on the face value of the tickets without adjusting or taking into account the prize money component,” Mr. Garg had argued.
The petitions problem Section 2(52) of the Central Goods and Services Tax Act, 2017 and notifications levying tax on lottery as being violative of the basic rights and opposite to a judgment of Supreme Court in Sunrise Associates Vs. Government of NCT of Delhi of 2006. The judgment had concluded that lotteries had been merely actionable claims and can’t be outlined as ‘goods’.
‘Actionable claim’
However, Section 2(52) of the Act defines ‘goods’ to incorporate ‘actionable claims’ like lotteries. An ‘actionable claim’ is a declare to debt by means aside from mortgage or hypothecation of property. Hence, lotteries, regardless of being actionable claims, will be taxed as ‘goods’ below the Act.
The petition stated that efforts had been from the Constitutional Amendment Act (a hundred and first) of 2017 to incorporate actionable claims inside the that means of ‘goods’ in order to make lottery fall inside the scope of the GST Act.
But Mr. Sundaram pointed the court docket’s consideration to Article 366(12), which was half of the Constitution even earlier than the 2017 Constitutional Amendment. The senior lawyer argued that Article 366 had outlined items solely to incorporate “materials, commodities and articles” and never actionable claims.
“In fact, actionable claims are inconspicuous by their absence from such definition,” Ms. Musa submitted. She stated the GST Act can’t develop the that means of ‘goods’ to incorporate one thing not envisaged in Article 366.
“Actionable claims can never be termed as goods and these are two separate concepts. However, the GST Act has blurred the distinction only with regard to lotteries, which is impermissible… It cannot be said that the sale of a lottery ticket involved a sale of goods. There was no sale of goods within the meaning of Sales Tax Acts of the different States but at the highest a transfer of an actionable claim,” Mr. Garg had argued.
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