Skill Lotto Solutions Pvt. Ltd. vs Union of India | Supreme Court on GST Lottery Validity (2020)”

GST Lottery Validity: The levy of GST on lotteries has been a contentious issue since the introduction of the Goods and Services Tax in India. Under the CGST Act, Section 2(52), the definition of “goods” was expanded to include “actionable claims”, with certain exclusions.

While most actionable claims were exempt, lotteries, betting, and gambling were specifically brought under the tax net. This prompted several challenges to the constitutional validity of GST on lotteries.

One such challenge reached the Supreme Court of India in the landmark case: Skill Lotto Solutions Pvt. Ltd. vs. Union of India (2020).

Facts of the GST Lottery Validity Case:

• Petitioner: Skill Lotto Solutions Pvt. Ltd., an authorized distributor of Punjab State Lotteries.
• Challenge: Writ petition questioning the levy of GST on lotteries.

Key Arguments by the Assessee (Petitioner)

• Lotteries are not “goods” under the Constitution (relying on Gannon Dunkerley & Sunrise Associates).
• Inclusion of actionable claims as goods under Section 2(52) is unconstitutional.
• Discriminatory taxation: While most actionable claims are excluded, lottery, betting, and gambling are taxed.
• Levy on face value of tickets is improper since it includes prize money.

Revenue’s Stand (Union of India)

• Parliament has plenary power under Article 246A to tax goods and services, including actionable claims.
• Lotteries are recognized as actionable claims and thus taxable.
• Levy on face value of tickets is valid under Section 15 & Rule 31A of CGST Rules.
• Classification is rational as lottery, betting, and gambling form a separate taxable class.

Supreme Court Judgment (2020)

The Supreme Court upheld the levy of GST on lotteries and dismissed the writ petition.

Key Findings:

1. Lotteries are actionable claims, and inclusion within “goods” under Section 2(52) is constitutionally valid.
2. Parliament has power under Article 246A to levy GST on actionable claims.
3. Differential treatment between actionable claims is not discriminatory; it is based on rational classification.
4. Levy on the face value of tickets (including prize money) is permissible under the GST framework.

The Court confirmed the constitutional validity of GST on lotteries.

Practical Impact on Businesses

• 28% GST is applicable on the face value of lottery tickets.
• Prize money not excluded – tax is levied on the gross ticket value.
• Lottery distributors/agents must ensure strict GST compliance.
• Confirms that lottery, betting, and gambling remain taxable despite being actionable claims.

Key Takeaways

• GST levy on lottery is valid and constitutional.
• Parliament has full authority to tax actionable claims such as lottery, betting, and gambling.
• Face value (including prize money) is the taxable base.
• Distributors and agents must factor GST impact on margins and pricing.

Why This Case Matters

The Skill Lotto case is a landmark judgment that clarified the scope of GST on actionable claims. It establishes that lottery, betting, and gambling are distinct taxable supplies under GST, even though other actionable claims remain exempt.

For lottery distributors and agents, this ruling provides clarity but also highlights the need to factor in the 28% GST levy while operating in the sector.