LEVY OF GST ON LOTTERY
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 22-10-2018
Goods
Section 2(52) of the Central Goods and Services Tax Act, 2017 ('Act' for short) defines the term 'goods' as every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
Actionable claim
Section 2(1) of the Act defines the expression 'actionable claim' as that shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882
Section 3 of the Transfer of Property Act, 1882, defines the expression 'actionable claim' as a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in possession either actual or constructive, of th
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pply of lottery tickets would need to be taxed as supply of goods.
GST rate on lottery
In respect of the Agenda Item on Lottery (17th GST Council Meeting) , the Council approved the following –
* The supply of lottery shall attract GST rates as under –
* Lottery run by State Governments – 12% of face value of lottery ticket (Face value to be inclusive of GST)
* Lottery authorized by State Governments – 28% of face value of lottery ticket (Face Value to be inclusive of GST )
* Tax can be levied by the State Governments on the first point of sale by the State Government to the lottery distributor or the sole selling agent appointed by the State Government on reverse charge basis and to exempt agents/stockists below the distributor.
Challenge before High Court on levy of GST on lotteries
In 'Teesta Distributors and others v. Union of India and others' – 2018 (10) TMI 941 – Calcutta High Court, the petitioners have sought a declaration that, lotteries are exempt from tax under
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ct, 2017 or any of the SGST Acts.
* Since lottery is neither 'goods' nor 'service', no levy under the Integrated Goods and Services Tax Act, 2017 can be made.
* When CGST, 2017 and IGST, 2017 propose to tax a lottery, it goes beyond the constitutional definition of 'goods'.
* 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.
* Treating lottery to be a 'goods' would do violence to the provisions of the Lotteries (Regulation) Act, 1998.
* Sale of lottery ticket is a trade under Article 301 to 304 of the Constitution.
* Differential rates of tax cannot be fixed for lottery tickets imported from other States and lottery tickets produced in the States.
* The discrimination in rates varies between 12 and 28 per cent. It is per se unsustainable and is required to be stuck down. All lottery tickets organized by the States have to be treated at par.
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ts, Central and State Legislations.
* Article 366(12) of the Constitution defines 'goods' to include all material commodities and articles. Accordingly the lotteries are 'goods'.
* The term 'goods' used in Article 366(12) of the Constitution of India is very wide and includes all types of movable properties whether those properties are tangible or intangible and is an inclusive one.
* Lotteries are 'actionable claim' and are included in the definition of 'goods'.
* Lottery is not a commodity in the market which can be bought against consideration and on payment of consideration the property passes to the purchaser
* The Union Parliament and the State Legislature have the competence to levy tax on any item including lottery.
* The State is allowed to pick and choose districts, objects, persons, methods and rates of taxation, if the State, does so reasonably.
* The Legislature enjoys very wide latitude in classification for taxation.
* A statute cannot be declared uncons
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uthorized by the State Government in another State attracts in aggregate 28 per cent, with 14 per cent each under the CGST and SGST.
* The notifications have been issued pursuant to the recommendations made by the GST Council in its 17th meeting. The rates are not discriminatory and are intended to preserve economic uniformity and the interest of the constituent States. According to him, the tax component is included in the price of the ticket. The end customer who purchased the ticket is not saddled with any additional tax burden.
Union of India submitted the following before the High Court-
* 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 that, sale of lottery ticket will attract GST. The rates were also agreed upon. Therefore, the States should not be permitted to contend contrary to
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vices Tax Act, 2017?
* If so, is differential levy of tax permissible?
* To what reliefs, if any, are the parties entitled to?
First issue – Lottery – an actionable claim?
The High Court analyzed the various provisions of the Act for the term 'goods'. It also analyzed the various judgments of Supreme Court. In 'H Anraj v. State of Tamil Nadu' – 1985 (10) TMI 258 – Supreme Court, it was held that lottery tickets to the extent that they comprise the entitlement to participate in the draw are 'goods' falling within the definition of 'goods' as given in Tamilnadu General Sales Tax Act, 1954 and Bengal Finance (Sales Tax) Act, 1941. Independent of the two state Acts under consideration therein, it has held that, a trade of a lottery ticket confers on the purchaser two rights.
The High Court observed that a sale of a lottery ticket confers on the purchaser thereof two rights-
* a right to participate in the draw; and
* a right to claim a prize contingent upon his being successfu
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cond issue – levy of GST on lotteries
In tune with the constitutional amendments incorporated, 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. The High Court analyzed the provisions of CGST Act regarding 'goods' , 'actionable claims', 'reverse charge', 'scope of supply', 'levy and collection' which have also been found the State Goods and Services Tax Act. It regulates the levy and collection of tax on intra-State supply of goods or services or both in the State of West Bengal. Legislature enjoys very wide latitude in classification for taxation.
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 I
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teries 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.
The High Court therefore held that lottery can be taxed under the CGST Act, 2017 and WB GST Act, 2017.
Third issue – levy of different taxes on lottery
The rationale for imposing differential rates appears from the minutes of the 17th meeting of the GST Council. The rationale for the differential rate or the rates by themselves has not been substantiated to be breach of any provision of the Constitution. The State Government cannot challenge its own notification as unconstitutional as, it has the wherewithal to set the wrong, right. In the present case, the States of Sikkim, Mizoram, Nagaland and Arunachal Pradesh have supported the writ petitioner on the score that the rates of taxes are discriminatory. Such States were prese
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