Skill Lotto Solutions (P.) Ltd. v. Union of India
Supreme Court of India
Writ Petition (Civil) No. 961 of 2018
Category: Classification, Taxability and Constitutionality of GST on Lottery
Date of Judgment: 03 December 2020
Relevant Sections: Section 2(52), Section 15 of CGST Act; Rule 31A of CGST Rules; Articles 14, 246A, 366(12), 366(29A), 301, 304 of Constitution
Facts of the Case (¶2–¶5)
The petitioner, a licensed lottery distributor for the State of Punjab, challenged the constitutional validity of GST levied on lotteries by impugning the definition of “goods” under Section 2(52) of the CGST Act, 2017. The petitioner argued that the inclusion of actionable claims (like lottery tickets) as “goods” was ultra vires and discriminatory. He contended that taxing only lotteries (excluding other actionable claims) violated Articles 14, 19(1)(g), 301, and 304 of the Constitution. Prior jurisprudence including Sunrise Associates (2006) and Gannon Dunkerley (1959) were relied upon to argue that lottery is not “goods” in a legal sense (¶2–¶5).
Questions in Consideration (¶12)
- Whether the writ petition is maintainable under Article 32 of the Constitution?
- Whether including actionable claims in the definition of “goods” under Section 2(52) of CGST Act is unconstitutional?
- Whether the Constitution Bench ruling in Sunrise Associates declaring lottery as an actionable claim is ratio decidendi or obiter?
- Whether taxing only lotteries, betting and gambling (and excluding other actionable claims) violates Article 14?
- Whether GST should be levied on the face value of lottery tickets excluding the prize money?
Observations of the Court
- Maintainability under Article 32
The petition alleged violation of Article 14. Hence, the Court held that writ petition under Article 32 is maintainable despite lottery being res extra commercium (¶16–¶17). - Definition of “Goods” and Constitutionality
The Court upheld the inclusion of actionable claims in Section 2(52) of CGST Act as valid and constitutional. The expansive power conferred by Article 246A allows Parliament to define “goods” inclusively. The Court referred to the inclusive nature of Article 366(12) and upheld the legislative competence (¶49–¶50). - Sunrise Associates Interpretation
The Court held that Sunrise Associates categorically ruled that lottery is an actionable claim. These observations formed part of the ratio decidendi, not mere obiter dicta (¶62). - Article 14 Violation Allegation
The Court rejected the claim of hostile discrimination. It held that there is a rational basis for taxing only lotteries, betting, and gambling, considering their historically regulated nature and social implications. Other actionable claims being exempted was found justifiable (¶71). - Valuation and Inclusion of Prize Money
The Court held that prize money is not to be excluded from the face value for computing GST. Rule 31A(2) deems the value of supply to be 100/128 of the face value, and the statute provides for no abatement of prize money (¶80).
Judgement of the Court
- The writ petition was dismissed.
- The inclusion of actionable claims in the definition of “goods” under Section 2(52) was upheld as constitutional.
- The ruling in Sunrise Associates was declared as the binding ratio decidendi.
- Taxation of only lottery, betting, and gambling did not violate Article 14.
- GST can be levied on the full face value including prize money.
- However, liberty was granted to challenge subsequent notifications dated 21-2-2020/02-3-2020 separately (¶82–¶83).
Between Fine Lines
- GST can be constitutionally levied on lotteries as “goods” since lottery is treated as an actionable claim.
- Sunrise Associates remains a binding precedent declaring lottery as actionable claim, not goods.
- Only three actionable claims—lottery, betting, gambling—are taxable under GST; this is not discriminatory.
- Prize money is not to be abated from ticket face value for GST.
- Tax policy differences from international practices do not make Indian GST provisions unconstitutional.
Summary of Referred Cases
| Case Name | Citation | Summary | Verdict / Holding |
| Sunrise Associates v. Govt. of NCT of Delhi | (2006) 4 STT 105 (SC) | Lottery tickets are actionable claims, not goods, and not subject to sales tax. | Held that sale of lottery tickets is a transfer of actionable claim; forms the basis for GST classification. |
| Gannon Dunkerley & Co. v. State of Madras | [1959] SCR 379 | Defined “sale of goods” in its legal sense; legislature cannot artificially expand definition for taxation. | Used to interpret “goods” narrowly under the Constitution; distinguished in this case as not applicable to GST regime post Article 246A. |
| Bhopal Sugar Industries Ltd. v. D.P. Dube | [1964] 1 SCR 481 | Legislature cannot extend definition of sale to cover consumption by owner. | Distinguished as not relevant; dealt with sale concept, not goods definition. |
| Navinchandra Mafatlal Bombay v. CIT | AIR 1955 SC 58 | Constitution words must be interpreted broadly, not pedantically. | Used to justify liberal construction of Article 366 and legislative flexibility. |
| R.M.D. Chamarbaugwala v. State of Bombay | AIR 1957 SC 699 | Gambling is res extra commercium and not entitled to fundamental rights. | Justified exclusion of gambling, betting, and lottery from general trade rights under Articles 19 and 301. |
| Martin Lottery Agencies Ltd. v. UOI | [2009] 12 STT 203 | Lottery is gambling and not regular commerce. | Reaffirmed gambling’s classification as res extra commercium; supports legitimacy of taxing such activities differently. |
| Krishna Das v. Town Area Committee | [1990] 3 SCC 645 | Courts cannot interfere with legislative tax policy unless irrational. | Reiterated limited judicial role in tax policy; supported the GST Council’s recommendation on valuation methods. |
