Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan*, R. Subhash Reddy and MR Shah, JJ has held that while determining the taxable value of lottery the prize money is not to be excluded for the purpose of levy of GST.

The Court explained that for determining the value of the lottery, there is statutory provision contained in Section 15 read with Rule 31A. Section 15 of the Central Goods and Services Tax Act, 2017 by sub-section (2) provides what shall be included in the value of supply. What can be included in the value is enumerated in sub-clause (a) to (e) of sub-section (2) of Section 15. Further, subsection (3) of Section 15 provides that what shall not be included in the value of the supply.

“What is the value of taxable supply is subject to the statutory provision which clearly regulates, which provision has to be given its full effect and something which is not required to be excluded in the value of taxable supply cannot be added by judicial interpretation.”

Further, Rule 31A as noted above, sub-rule (2) as amended clearly provides that value of supply shall be deemed to be 100/128 of the face value of ticket or of the prize as notified in the Official Gazette by the Organising State, whichever is higher.

The Court said that the value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme. It was hence, held that

“When prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, we are not persuaded to accept the submission of the petitioner that prize money should be excluded for computing the taxable value of supply.”

[Skill Lotto Solutions v. Union of India, 2020 SCC OnLine SC 990, decided on 03.12.2020]


*Justice Ashok Bhushan has penned this judgment

For petitioner: Senior Advocate Ravindra Shrivastava,

For Union of India: Additional Solicitor General Vikramjit Banerjee

For Intervenor: Senior Advocate C.A. Sundaram

Also read: Supreme Court upholds constitutionality of imposition of GST on lotteries, betting and gambling 

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah, JJ has upheld the constitutionality of imposition of GST on lotteries, betting and gambling.

Here are the key takeaways from the judgment: 

Whether the inclusion of actionable claim in the definition of goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is contrary to the legal meaning of goods and unconstitutional?

The inclusion of actionable claim in definition “goods” as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is not contrary to the legal meaning of goods nor it is in conflict with the definition of goods given under Article 366(12).

“The Constitution framers were well aware of the definition of goods as occurring in the Sale of Goods Act, 1930 when the Constitution was enforced. By providing an inclusive definition of goods in Article 366(12), the Constitution framers never intended to give any restrictive meaning of goods.”

Parliament by the  Constitution (One Hundred and First Amendment) Act, 2016 inserted Article 246A, a special provision with respect to goods and services tax in which special power has to be liberally construed empowering the Parliament to make laws with respect to goods and services tax. Article 246A begins with non obstante clause that is “Notwithstanding anything contained in Articles 246 and 254”, which confers very wide power to make laws. When the Parliament has been conferred power to make law with respect to goods and services, the legislative power of the Parliament is plenary.

“The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions.”

Whether the Constitution Bench’s observation ‘lottery is an actionable claim’ in Sunrise Associates v. Govt. of NCT of Delhi, (2006) 5 SCC 603 a law or obiter dicta?

The definition of goods in Section 2(j) as noticed by the Constitution Bench states that ‘goods’ means all kinds of movable property (other than newspaper, actionable claims, stocks, shares and securities). The exclusion of the actionable claims from the goods as enumerated in the definition is also a part of the definition.

“If a particular item is covered by exclusion it is obvious that it does not fall in the definition of the goods. When the Constitution Bench came to the conclusion that the lottery is an actionable claim it was considering the definition of 2(j) itself and what has been held by the Constitution Bench cannot be held to be obiter dicta.”

The Constitution Bench in Sunrise Associates has categorically held that lottery is actionable claim after due consideration which is ratio of the judgment. The expansion of definition of goods under Section 2(52) of Act, 2017 by including actionable claim is in the line with the Constitution Bench pronouncement in Sunrise Associates and no exception can be taken to the definition of the goods as occurring in Section 2(52).

Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of the Constitution of India?

The Constitution Bench in State of Bombay Vs. R.M.D. Chamarbaugwala, AIR 1957 SC 699 has clearly stated that Constitution makers who set up an ideal welfare State have never intended to elevate betting and gambling on the level of country’s trade or business or commerce.

Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. When Act, 2017 defined the goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes.

“It is a duty of the State to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life.”

Hence, there is no violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017.

Whether while determining the face value of the lottery tickets for levy of GST, prize money is to be excluded? 

Read here 

[Skill Lotto Solutions v. Union of India, 2020 SCC OnLine SC 990, decided on 03.12.2020]


*Justice Ashok Bhushan has penned this judgment

For petitioner: Senior Advocate Ravindra Shrivastava,

For Union of India: Additional Solicitor General Vikramjit Banerjee

For Intervenor: Senior Advocate C.A. Sundaram

 

Also read: GST on lotteries| Prize money not to be excluded for computing the taxable value of supply, holds SC

Case BriefsSupreme Court

Supreme Court: Showing concern over the presence of liquor vends on national and state highways across the country, the 3-judge bench of J.S. Khehar, CJ and Dr. D.Y. Chandrachud and L. NAgeswara Rao, JJ said that where a balance has to be drawn between protection of public health and safety and the need to protect road users from the menace of drunken driving and the trade in liquor, the interests of the latter must be subordinate to the former as drunken driving is a potent source of fatalities and injuries in road accidents.

Stating that a distance of 100 metres with reference to the highway is not adequate to ensure that users of the highway do not seek access to the sale of liquor in close proximity to the highway, the Court had, on 15.12.2016, directed that the liquor vends are not visible or directly accessible from the highway within the stipulated distance of 500 metres from the outer edge of the highway or the service lane. However, the Court laid down additional directions in respect of the following different areas where the blanket rule of ‘500 metres distance’ was not possible to be made applicable:

  • Local bodies with a population of less than 20,000 people: Considering the fact the requirement of maintaining a distance of 500 metres from the outer edge of the highway or service lane may result in a situation where the entire local area may fall within the prohibited distance as a state highway is the main thoroughfare of such area, the bench said that the , the prohibited distance in such areas should in our view be restricted to 220 metres from the outer edge of the national or state highway or of a service lane along the highway. However, no licence for the sale of liquor should be issued along either a national or state highway or a service lane along the highway and the sale of liquor should be from a point which is neither visible from a national or state highway or which is directly accessible from a national or state highway.
  • Continuation of existing licences: Based on the end of financial year, the Court had, on 15.12.2016, directed that the existing licences which have been renewed prior to the date of the order shall continue only until the term of the licence expires but not later than 1 April 2017. However, It was brought to the notice of the Court that different states have different periods of operation for their excise years. Hence, the order stands modified as “no licence shall either be granted or renewed or shall remain in operation in violation of the direction of this Court beyond 30 September 2017”.
  • States with hilly Terrain: The Court said that insofar as the States of Meghalaya and Sikkim are concerned, it would suffice if the two states are exempted only from the application of the 500 metre distance requirement. However, insofar as the State of Himachal Pradesh is concerned, the exemption which has been granted earlier in respect of areas falling under local bodies with a population of 20,000 will sufficiently protect the interests of the State.

[State of Tamil Nadu v. K. Balu, 2017 SCC OnLine SC 302, decided on 31.03.2017]