Supply of Lottery attract GST Liability.

Teesta Distributors v. Union of India

Calcutta High Court

W.P. No. 18424 (W) of 2017

Category: Classification | GST Applicability on Lotteries

Date of Judgement: October 10, 2018

Relevant Sections: Article 366(12), Article 279A, Article 301–304 of Constitution; Sections 2(52), 7, 9, and Schedule III of CGST Act, 2017; Rule 31A of CGST Rules, 2017

Facts of the Case [¶1–5, 28–29]:

1. The petitioner, Teesta Distributors, sought a declaration that lotteries are not taxable under the GST regime, arguing that lotteries are not ‘goods’ under CGST Act and thus not liable to tax under either CGST or SGST Acts [¶1–3, ¶28(i)-(ii)].
2. The petitioner relied on Sunrise Associates to argue that lotteries are ‘actionable claims’ and not goods, and hence exempt under Entry 6 of Schedule III read with Section 7 of CGST Act [¶2–4, 27].
3. The challenge was also against the differential GST rates (12% on state-run lotteries and 28% on lotteries authorised by states), arguing violation of Articles 14 and 301–304 due to discrimination [¶5, 20, 27].
4. Petitioners were selling paper lotteries of northeastern states in West Bengal. These states challenged the discriminatory rate structure adopted by the GST Council in its 17th meeting held on June 18, 2017 [¶29].

Questions in Consideration [¶28]:

1. Whether lottery is a ‘goods’ or an ‘actionable claim’?
2. Can lottery be taxed under the CGST Act and the West Bengal GST Act?
3. If so, is differential levy of tax permissible?
4. What reliefs are the parties entitled to?

Observations of the Court:

1. On Classification as Goods:
   Relying on Sunrise Associates, the court held that a lottery is an actionable claim and qualifies as goods under Article 366(12) and Section 2(52) of the CGST Act which expressly includes ‘actionable claims’ except for money and securities [¶32–34].
2. On Taxability:
   Since lotteries are excluded from the exemption under Entry 6 of Schedule III (which excludes all actionable claims other than lotteries), they are specifically taxable under CGST and SGST Acts [¶44–46].
3. On Differential Rates:
   The court upheld the GST Council’s decision to impose 12% GST on lotteries run by states and 28% on state-authorised lotteries. It emphasized the wide legislative discretion in taxation policy and noted that the rates were the result of extensive deliberations at the 17th GST Council Meeting [¶47–48].
4. On Legislative Competence and Discrimination:
   The Court reiterated from Binoy Viswam and Federation of Hotel Associations that taxation classifications are valid as long as they are reasonable. It found no violation of Articles 14 or 301–304 as the petitioners failed to show that the classifications or tax regime were unreasonable or unconstitutional [¶41–42].

Judgement of the Court:

• The Court dismissed the writ petition, upholding:
  • That lotteries are actionable claims and goods under the CGST Act [¶34];
  • That they are taxable under CGST and SGST [¶46];
  • That the differential rate of taxation (12% vs. 28%) is permissible and not arbitrary [¶48];
  • That no relief is warranted to the petitioners in the facts of the case [¶49–50].

Between Fine Lines (Summary in 5 Lines):

The Calcutta High Court ruled that lotteries, being actionable claims, fall under the definition of goods as per the CGST Act. Consequently, GST is applicable to them. The Court upheld differential GST rates (12% for state-run vs. 28% for authorised lotteries) as constitutionally valid. It emphasized that legislative and GST Council decisions carry strong presumption of validity unless shown to be arbitrary. The petition was dismissed with no relief to the petitioner.

Summary of Referred Cases

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