Supreme Court Rules Against Central Service Tax on Lottery Sales
In a landmark decision, the Supreme Court has declared that the central government lacks the authority to levy service tax on the sale of lottery tickets, affirming that this domain falls exclusively under state jurisdiction.
Lottery Sales Classified Under State Jurisdiction
The Supreme Court’s ruling emphasizes that all activities related to lotteries—from ticket publication to prize distribution—are encompassed within the term ‘betting and gambling,’ which is under the exclusive purview of state governments.
Principal-to-Principal Relationship
The Court further clarified that the relationship between state governments and lottery distributors or purchasers is of a principal-to-principal nature, not a principal-agent relationship. Consequently, there is no service rendered by the distributors to the state that would warrant the imposition of service tax.
Implications of the Ruling
This decision has significant implications for the taxation framework of lottery operations in India. By affirming that the central government cannot impose service tax on lottery sales, the ruling reinforces the autonomy of state governments in regulating and taxing betting and gambling activities within their territories.
In summary, the Supreme Court’s judgment delineates the boundaries of central and state taxation powers, particularly concerning the lottery business, and underscores the constitutional allocation of authority over betting and gambling to state governments.
