Lottery distributors are not liable to pay service
tax to the Union government, the Supreme Court held on Tuesday while dismissing
an appeal of the Centre on the issue.
A bench comprising Justices BV Nagarathna and NK
Singh did not agree to the appeal of the Centre against the Sikkim High Court
judgement.
Since there is no agency in the relationship, the respondents
(lottery distributors) were not liable to pay service tax. However, the
respondents will continue to pay the gambling tax levied by the state under
Entry 62, List II of the Constitution, Justice Nagarathna said while
pronouncing the verdict.
"Service tax is not leviable on the
transactions between the purchaser of the lottery tickets and firmIn view of
the aforesaid discussions, we find no merit in the appeals filed by the Union
of India and others. Hence, these appeals are dismissed," the bench said.
Upholding the Sikkim High Court verdict, the top
court said it is only the state government that can impose taxes on lotteries
and not the Centre.
The Centre had contended that it was entitled to
impose service tax.
The top court said the high court was right in
holding that the lottery comes within the expression "betting and
gambling" which is part of Entry 62 of the state list of the Constitution
and only the state can impose the tax.
The Centre had moved the top court in 2013. The high
court judgement had come on a plea filed by lottery firm Future Gaming
Solutions Pvt Ltd.