Supreme Court: ‘Lottery distributor not liable to pay service tax to the Centre’, Centre’s petition rejected in court

New Delhi| The Supreme Court rejected a petition by the Center related to collecting service tax from lottery distributors. The court said that lottery distributors are not liable to pay service tax to the central government. A bench of Justices BV Nagarathna and NK Singh did not agree with the Centre’s appeal against the Sikkim High Court verdict.

Justice Nagarathna, while delivering the judgment, said, “Since there is no agency in this regard, the defendants (lottery distributors) were not liable to pay service tax”. Defendants will, however, continue to pay the gambling tax levied on behalf of the State under Entry 62 of List II of the Constitution

Upholding the Sikkim High Court verdict, the top court said only the state government can tax lotteries, not the Centre. The Center had argued that it was entitled to levy service tax.

The top court said the high court was right in saying that lotteries fall under the category of “betting and gambling”, which is part of Entry 62 of the state list of the Constitution and only the state can tax it. The Center had moved the apex court in 2013. The High Court’s decision came on a petition filed by lottery firm Future Gaming Solutions Pvt Ltd.