Supreme Court Upholds State's Right to Tax Lotteries, Rejects Centre's Appeal

The Supreme Court ruled that only state governments can impose taxes on lotteries, dismissing the central government's appeal for service tax imposition on lottery distributors. This decision upholds the Sikkim High Court's judgment, confirming that lotteries fall under state jurisdiction as 'betting and gambling'.

The Supreme Court on Tuesday delivered a significant verdict, declaring that lottery distributors are not liable to pay service tax to the central government. A bench comprising Justices BV Nagarathna and N Kotiswar Singh dismissed the Centre's appeal, clarifying that taxing lotteries falls solely within the jurisdiction of state governments.

The apex court's ruling came in response to the central government's challenge against a Sikkim High Court judgment. The court meticulously examined the provisions of the Finance Act, 1994, along with its subsequent amendments, and found no justification to diverge from the High Court's stance. The amendments from 2012, 2015, and 2016 aimed at imposing service tax on lottery distributors were deemed ineffective.

The judgment emphasized that attempts to redefine relationships between the state government and lottery ticket distributors, as principal to principal rather than principal-agent, failed. As the central government's appeal was without merit, the top court upheld the High Court's ruling that state governments have exclusive authority to impose taxes on activities classified under 'betting and gambling'. These activities, including lotteries, are covered under Entry 62 of the State List in the Constitution. (ANI)