2018 (10) TMI 941 – CALCUTTA HIGH COURT – [2018] 59 G S.T.R. 35 (Cal), 2018 (19) G. S. T. L. 29 (Cal.) – Constitutional validity of levy of GST on Lottery – petitioners have sought a declaration that, lotteries are exempt from tax under Sl. No. 6 of Schedule III read with Section 72 of the Central Goods and Service Tax Act, 2017 and Sl. No. 6 of Schedule III read with Section 72 of the State Goods and Service Tax Act, 2017 – scope of the word 'goods' – petitioner has submitted that, when CGST, 2017 and IGST, 2017 propose to tax a lottery, it goes beyond the constitutional definition of ‘goods’ – actionable claim – Transfer of Property Act, 1882.
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Is lottery a ‘goods’ or an ‘actionable claim’? – Held that:- In the case of Sunrise Associates [2006 (4) TMI 118 – SUPREME COURT OF INDIA], it is held that a lottery is in essential a chance for a prize, the sale of a lottery ticket can only be a sale of that chance. It has held that, there was no distinction between the two rights. The
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urchaser would have a claim to a conditional interest in the prize money which is not in the purchaser’s possession. The right would fall squarely within the definition of ‘actionable claim’ and, would therefore be excluded from the definition of goods under the Sale of Goods Act and the sales tax statute. It has held that, lotteries being actionable claims are generally speaking “goods” or moveable property – the first issue has to be answered by holding that, a lottery is an ‘actionable claim’ and goods or moveable property.
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Can lottery be taxed under Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017? – Held that:- In the facts of the present case, it has not been substantiated that, the State Legislature promulgating the West Bengal Goods and Services Tax Act, 2017 did not have the competence to pass the law or that it violates any fundamental rights of the petitioner or any other right of the petitioner or any provision of the Constitut
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the scope of such Act. Consequently, since lotteries are generally speaking ‘goods’ and come within the definition of ‘actionable claims’, and since, lotteries are kept out of the purview of ‘actionable claims’ which do not attract the CGST Act, 2017, lottery can therefore be charged to tax under the CGST Act, 2017 – The second issue is answered by holding that, lottery can be taxed under the Central Goods and Services Tax Act as well as the West Bengal Goods and Services Tax Act, 2017.
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If so, is differential levy of tax permissible? – Held that:- 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 approv
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it Bhowmick, Advocate Mr. Angan Baruah, Advocate For the Respondent No. 6: Mr. Ayanabha Raha, Advocate The petitioners have sought a declaration that, lotteries are exempt from tax under Sl. No. 6 of Schedule III read with Section 72 of the Central Goods and Service Tax Act, 2017 and Sl. No. 6 of Schedule III read with Section 72 of the State Goods and Service Tax Act, 2017. Learned Senior Advocate appearing for the petitioner has submitted that, a lottery cannot come within the definition of goods . Referring to 1986 Volume 1 Supreme Court 63 (H. Anraj v. Government of Tamil Nadu) he has submitted that, the initial view of the Supreme Court was that, lottery tickets to the extent they comprise the entitlement to participate in the draw, are goods. Such view was reversed in 2005 Volume 5 Supreme Court Cases page 603 (Sunrise Associates v. Government of NCT of Delhi). Both, the Central Goods and Services Tax Act, 2017 (CGST) and the State Goods and Services Tax Act, 2017 (SGST) define g
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neficial interest therein. Referring to Lotteries (Regulation) Act, 1998, he has submitted that, lottery has been defined to mean a scheme, in whatever form and by whatever name called for distribution of prizes by lot or chance to those persons participating in the chances of a prize, by purchasing tickets. According to him, ticket holder has a right to participate in the chance of getting a prize. The ticket holder, has a contingent interest in the prize money, which he may or may not get in the future, but does not get to possess any benefit for such payment in return. The sale of lottery ticket is, therefore, a sale of chance. Consideration is paid for the chance to win. The sale of lottery ticket therefore does not entail transfer of any goods or even beneficial interest in a movable property. Therefore, the person who sells the lottery ticket is not selling any goods nor is the purchaser buying any goods . Viewed from such perspective, lottery cannot come within the definition of
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er of taxation controlled by Article 265 of the Constitution forbids levy or recovery or any tax except by authority of law. Since lottery is not goods within the meaning of the Constitution, neither Central nor the State Governments can enact any law for the purpose of levying sales tax on the lottery. A lottery is not a commodity in the market which can be bought against consideration, and on payment of the consideration, the property passes to the purchaser. Referring to the provisions of the Act of 1998, he has submitted that, such Act came into being in exercise of powers under List I Entry 40 of the Seventh Schedule of the Constitution. According to him, treating lottery to be a goods would do violence to the provisions of the Act of 1998. The State and the Central legislature therefore have exceeded the Constitutional mandate in bringing lottery within the scope and ambit of the SGST, CGST and IGST. Without prejudice to such contentions, learned Senior Advocate appearing for the
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inless Ltd. (supra) in support of such contentions. Learned Additional Advocate General appearing for the State of West Bengal, the Respondent No. 3 herein, has submitted that, Goods and Service Tax Act, 2017 was enacted in order to simplify the regime of indirect taxation by bringing it under one umbrella. It has come into being by virtue of Constitutional Amendments, Central and State Legislations. He has drawn the attention of the Court to Articles 269A, 279A and 286 of the Constitution of India. He has also draws the attention of the Court to the deletion of entries in the Union and the State list and the incorporation of entries in the Union and the State list. He has submitted that, the Central Goods and Services Tax Act, 2017 came into effect on July 1, 2017. Section 2(52) of the CGST defines goods . Section 2(1) of the CGST defines actionable claim . He has referred to Section 3 of the Transfer of Property Act, 1882 which defines actionable claim . He has also referred to Artic
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t be subjected to Sales Tax. According to him, Sunrise Associates (supra) should be construed to mean that, lotteries are actionable claim and are included in the definition of goods . However, since the Sales Tax laws excluded actionable claim from its purview, lotteries were also held to be excluded. According to him, CGST and SGST, have included actionable claims within the definition of goods , having regard to the ratio laid down in Sunrise Associates (supra). The inclusion of actionable claim in the definition of goods is legislative recognition of judicial pronouncement. Therefore, it cannot be argued that, the Union Parliament or the State Legislature did not have competence to include actionable claim in the definition of goods . Learned Additional Advocate General appearing for the State of West Bengal has submitted that, the Union Parliament and the State Legislature have the competence to levy tax on any item including lottery. The State is not required to tax everything in
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al rights stipulated in Part III of the Constitution of India or any other right or provision of the Constitution of India. A statute cannot be declared unconstitutional solely on the ground that, it is unreasonable or arbitrary. He has pointed out that, the legislative competence to enact CGST Act and SGST Act and subjecting lottery to CGST and SGST have not been questioned. Learned Additional Advocate General appearing for the State of West Bengal has submitted that, the business of lottery partakes the character of betting and gambling. There exists no constitutional right to carry on the business of lottery. Therefore, there is no question of violation of fundamental rights. Since the business of lottery is not constitutionally protected activity, the reasonableness of physical restrictions cannot be subject matter of judicial review under Article 226 of the Constitution of India. Consequences and effects of legislations are not the same under legislative subject matter. Learned Ad
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he price of the ticket. The end customer which purchased the ticket is not saddled with any additional tax burden. Learned Additional Advocate General appearing for the State of West Bengal has submitted that, the State of Sikkim, Mizoram, Nagaland and Arunachal Pradesh, cannot be allowed to take a stand that, the rates introduced are discriminatory. He has relied upon AIR 1962 Calcutta 338 (The State v. Keshab Chandra) in support of his contentions. Learned Additional Solicitor General appearing for the Union of India has submitted that, the 101st Amendment to the Constitution introduced Article 279A to the Constitution. It deals with Goods and Services Tax Council. He has referred to Article 279A (4) of the Constitution. He has submitted that imposition of GST on lottery was discussed at length during the 17th GST Council meeting held on June 18, 2017. The States who are parties to the present writ petition were present in such Council meeting. The GST Council approved and resolved t
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value of ticket or of the price as notified in the Official Gazette by the organizing State, whichever is higher, for lottery run by State Governments and lottery authorised by State Governments respectively. According to him, the tax incidence is to be borne by recipient of goods and services. Tax of 12/28 per cent on a lottery ticket having a face value of ₹ 2 will translate into a tax component of 21 paisa/44 paisa which a consumer would pay for a chance to win at the bumper prize. According to him, this is a miniscule impact on the price of ticket. Learned Additional Solicitor General, has relied upon All India Reporter 1964 Supreme Court page 925 (Khyerbari Tea Co. Ltd. and Anr. v. State of Assam and Ors.) and submitted that, in tax matters, the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation, if it does so reasonably. He has submitted that, the categorization of sale of lotteries as lotteries organized by States and the l
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iews expressed by the north-east States and the other States in the 17th meeting, the formula of 12%/28% was promulgated. According to him, lottery is an actionable claim as held in Sunrise Associates (supra). Actionable claims are included in the definition of goods as defined in Section 2(52) of the CGST Act, 2017. Therefore, lottery is leviable to GST. He has submitted that, the respondent no. 1 adopts the contentions of the State of West Bengal with regard to the contentions relating to Articles 301 to 304 of the Constitution of India. Learned Senior Advocate appearing for the respondent no. 5, the State of Nagaland, has submitted that, the State of Nagaland in the 17th GST meeting held on June 18, 2017 objected against imposition of high rates of GST on lottery. Nagaland has very limited sources of revenue. It does not have a lottery market of its own. It is largely dependent on bigger markets in other States of West Bengal, Maharashtra, Punjab and others. The proposal of Governme
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cate appearing for the State of Nagaland has submitted that, Article 279A (6) mandates a uniform/harmonious tax structure. Lottery is defined in Section 2(b) of the Lotteries (Regulation) Act, 1998. The same does not permit any classification as sought to be made by the GST Council. H. Anraj (supra) has held that a discriminatory tax on lottery would be violative of Articles 301 and 304. To some extent, H. Anraj (supra) holds the field. He has pointed out that, out of 29 States and 7 Union Territories in India, only 10 States organize lotteries. Out of the States organizing lotteries, only Hill States of North-East are affected. Therefore, the Hill States were outnumbered and outvoted in the GST Council. The Hill States were therefore obliged to apply the rates as decided by the GST Council. Learned Advocate General of the State of Mizoram appearing for the respondent no. 2, has submitted that, the classification of 12/28 percent of tax for lotteries has no functional basis. He has ref
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o the purchaser. Referring to Suman Enterprises (supra) learned Advocate for the petitioner has contended that, although it has held that, there was no fundamental right to carry on trade of lottery tickets, it has also noticed the ingredients in the sale of lottery tickets. According to him, the activity of holding lottery by a State under the Lottery (Regulation) Act, 1998 would come under Article 298 of the Constitution. If a State exercises powers under Section 5 of the Act of 1998 then, such State must also stop its own business of lottery in order to stop other States from selling lotteries within its territorial jurisdiction. According to him, lottery cannot be goods but is to be treated as business of contract. He has contended that, even if it is assumed that, sale of lottery ticket does not come within the meaning of Article 301 to 304, the same makes no difference as it is an activity covered under Article 298 of the Constitution, and is uniformly applicable to all States. T
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n the seventh schedule, when the legislature has fixed the type of lottery to be one. Discrimination in the rates of levy between State organized lotteries merely because they are crossing the borders has no rational nexus and is highly discriminatory and violative of Article 14 of the Constitution of India as also Articles 301 to 304 of the Constitution. Consequently, he submits that, the reliefs as prayed for in the writ petition should be granted. The following issues have arisen for consideration:- i) Is lottery a goods or an actionable claim ? ii) Can lottery be taxed under Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017? iii) If so, is differential levy of tax permissible? iv) To what reliefs, if any, are the parties entitled to? The petitioners claim that, they sell paper lotteries of the respondent no. 2 and respondent no. 4 to 6 within the State of West Bengal. Apart from the respondent no. 2 and 4 to 6, there are other States which or
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ledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognised as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. The definition of goods in the Constitution is an inclusive definition. It has a very wide sweep. All materials, commodities and articles are included in the definition. The definition, to my reading, is not limited to tangible materials, commodities and articles. An intangible product such as a software would come within the definition of goods appearing in Article 366(12) of the Constitution of India. Whether lottery tickets can be goods was considered in H. Anraj (supra). Such issue was considered in the backdrop of the larger issue as to whether, Sales Tax can be levied by a State Legislature on the sale of lottery tickets in the concerned State. H. Anraj (supra) was rendered on Oc
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g a price therefor ( the face value of the ticket ) and such purchase entitles him not merely to receive or claim a prize in the draw, if successful but before that also to participate in such draw. In other words, a sale of a lottery ticket confers on the purchaser thereof two rights (a) a right to participate in the draw and (b) a right to claim a prize contingent upon his being successful in the draw. Both would be beneficial interests in movable property, the former in praesenti , the latter in futuro depending on a contingency. Lottery tickets, not as physical articles, but as slips of paper or memoranda evidence not one but both these beneficial interests in movable property which are obviously capable of being transferred, assigned or sold and on their transfer, assignment or sale both these beneficial interests are made over to the purchaser for a price. Counsel for the dealers sought to contend that the concept of a lottery cannot be sub-divided in two parts, namely, a right t
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v. Connare on which counsel for the dealers relied. It is thus clear that a transfer of the right to participate in the draw which takes place on the sale of a lottery ticket would be a transfer of beneficial interest in movable property to the purchaser and therefore, amounts to transfer of goods and to that extent it is no transfer of an actionable claim; to the extent that it involves a transfer of the right to claim a prize depending on a chance it will be an assignment of an actionable claim. H. Anraj (supra) has held that, lottery tickets are goods for the purpose of Article 366(29-A)(a) of the Constitution of India and the Tamilnadu General Sales Tax Act 1959 and Bengal Finance (Sales Tax) Act, 1941. It has held that, only the transfer of right to participate in the lottery draw, which took place on the sale of a lottery ticket amounted to a transfer of goods to the extent that the sale involved the transfer of the right to claim the prize, depending on chance, it was an assignm
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ght to transfer. A contract is not a property but only a promise supported by consideration, upon breach of which either a claim for specific performance or damages would lie. Like railway tickets, a ticket to see a cinema or a pawnbroker s ticket are memoranda or contracts between the vendors of the ticket and the purchasers. Tickets are themselves normally evidence of and in some cases the contract between the buyer of the ticket and its seller. Therefore, a lottery ticket can be held to be goods if at all only because it evidences the transfer of a right. It has examined the question as to what right a lottery ticket represents. It has held that, on purchasing a lottery ticket, the purchaser would have a claim to a conditional interest in the prize money which is not in the purchaser s possession. The right would fall squarely within the definition of actionable claim and, would therefore be excluded from the definition of goods under the Sale of Goods Act and the sales tax statute.
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rated, Central Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Act, 2017 were enacted. Article 246A of the Constitution of India makes special provision with respect to Goods and Services Tax. It empowers the Parliament and the Legislature of every State subject to Article 246A(2) and notwithstanding anything contained in Articles 246 and 254, to make laws with respect to Goods and Services Tax imposed by the Union or the State. Article 246A(2) recognises the exclusive power of the Parliament to make laws with respect to Goods and Services Tax where the supply of goods, or of services, or both takes place in course of inter-state trade or commerce. Article 269A deals with levy and collection of Goods and Services Tax in course of inter-state trade or commerce. Essentially, Article 269A recognises the Government of India to collect Goods and Services Tax on supplies in the course of inter-state trade or commer
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, Commerce or Intercourse between States or within any part of the territory of India as may be required in public interest. Article 304 empowers the State Legislature to impose restrictions on Trade, Commerce and Intercourse among States on the parameters enumerated therein and subject to Article 303. Article 303 imposes restrictions on the Legislative power of the Union and the States with regard to Trade and Commerce. Therefore, Trade, Commerce and Intercourse throughout the territory of India are not absolutely free. They are subject to reasonable restrictions as may be imposed by a State Legislature or by the Parliament in public interest. Article 303(2) allows the Parliament to make non-discriminatory laws if it is necessary to deal with scarcity of goods in any part of India. Relevant provisions of the Central Goods and Services Tax Act, 2017 are as follows:- 2. Definitions In this Act, unless the context otherwise requires,- (1) actionable claim shall have the same meaning as a
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for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a
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asis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in
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le Processor (supra). The State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it is done reasonably is the view expressed in The Twyford Tea Company (supra). It has not been substantiated that, either the Central or the State Legislatures have exceeded their jurisdiction in promulgating any of the Acts governing goods and services. Binoy Viswam (supra) has held that, a legislation or a provision contained in a statute can be invalidated on two grounds, namely, it is not within the competence of the legislature which passed the law and/or it is in contravention of any of the fundamental rights stipulated in Part III of the Constitution or any other right/provision of the Constitution of India. It goes on to say that, a statute cannot be declared unconstitutional on the ground that, it is arbitrary or unreasonable. In the facts of the present case, it has not been substantiated that, the State Legislature promulgating the West Bengal Go
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ch 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. Consequently, since lotteries are generally speaking goods and come within the definition of actionable claims , and since, lotteries are kept out of the purview of actionable claims which do not attract the CGST Act, 2017, lottery can therefore be charged to tax under the CGST Act, 2017. On the parity of the same reasoning, lottery is chargeable to tax under WB GST Act, 2017 also. Jindal Stainless Ltd. (supra) has held that, the power of taxation is controlled under Article 265 of the Constitution and that, no tax can be levied, except by authority of law. CGST Act, 2017 and WB GST Act, 2017 cannot be held to be unconstitutional. Lotteries come within the scope and ambit of CGST Act, 2017 and WB GST Act, 2017. Therefore, lottery can be taxed under the CGST Act, 2017 and W
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ed by requisite majority. Article 279A contemplates establishment of a mechanism to adjudicate any dispute between one or more States or between the Government of India and any State or States on one side and one or more States on the other side or between two or more States. However it should not be construed that, the decisions or the resolutions of the Goods and Services Tax Council is immune from judicial review or that they are not justiciable. In a given case, where, a resolution adopted in the Goods and Services Tax 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 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 1
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