States to decide tax on lottery, not Centre: Supreme Court

NEW DELHI: Dismissing an appeal of the Centre against a Sikkim high court decision, the Supreme Court of India on Tuesday said that lottery distributors are not liable to pay service tax to the Union government.

"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 firm…In 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 comprising Justices BV Nagarathna and NK Singh said.

The apex court affirmed the Sikkim High Court's decision, saying that taxation on lotteries falls exclusively under state jurisdiction, not central authority. The Centre's assertion of its right to impose service tax was rejected.

The court confirmed that the high court correctly classified lottery under "betting and gambling" in Entry 62 of the state list of the Constitution, establishing the state's exclusive right to levy taxes.

The case originated from the Centre's 2013 appeal against the high court's verdict, which was delivered in response to a petition by Future Gaming Solutions Pvt Ltd.