New Delhi: In a significant ruling, the Supreme Court on Tuesday held that lottery distributors are not liable to pay service tax to the central government. The verdict comes as a setback for the Centre, which had appealed against a Sikkim High Court judgment favoring lottery distributors.
A bench comprising Justices BV Nagarathna and NK Singh dismissed the Centre’s appeal, stating that since there is no agency relationship, the respondents (lottery distributors) are not liable to pay service tax.
“Service tax is not leviable on transactions between the purchaser of lottery tickets and firms. We find no merit in the appeals filed by the Union of India and others. Hence, these appeals are dismissed,” the bench stated.
The apex court clarified that lottery distributors will continue to pay the gambling tax imposed by the state under Entry 62, List II of the Constitution. The ruling reinforces that only state governments have the authority to levy taxes on lotteries, categorizing them under “betting and gambling.”
This verdict upholds the Sikkim High Court’s decision, emphasizing that the Centre does not have jurisdiction to impose service tax on lotteries, a move that could have significant financial implications for state-run lottery operations.
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