2018 (7) TMI 1635 - HC - GST

State of Goa remains respondent in writ petitions challenging GST notifications on lotteries under GGST CGST IGST Acts 2017

The HC dismissed applications seeking deletion of State of Goa as respondent in writ petitions challenging GST notifications on lotteries. Petitioners ... GST on lotteries - Validity of Notifications issued by the State of Goa - seeking deletion of the State of Goa as a party Respondent - distinction between lotteries run by the State Government and the lotteries authorized by the State Government - Petitioners are aggrieved by not only impugned notification issued by State of Goa under the GGST Act, 2017 but also by the act of the Centre of issuing the impugned notifications under the CGST Act, 2017 as well as the IGST Act, 2017 which seeks to levy Goods and Services Tax on lotteries organized, promoted and conducted by the State of Sikkim. Held that:- It is not the actual incidence of GST under the GGST Act, 2017 which are impugned in the present Writ Petitions but the provisions of law made by the Parliament as well as the respective State Governments including the State of Goa by which it seeks to levy GST on lotteries. A part of the cause of action for the present Writ Petition having arisen within the jurisdiction of this Court coupled with the fact that the said Writ Petitions WP(C) No. 36/2017 and WP(C) No.38/2017 having been filed prior in time before this Court to the Writ Petition filed by Serenity Trades Private Limited in WP(C) No.759/2017 in the High Court of Bombay at Goa and WP(C) No.59/2017 is being heard together with the said two Writ Petitions this Court is of the view that the aforesaid applications filed in the aforesaid Writ Petitions for deletion of State of Goa from the array of Respondents in the said Writ Petitions are liable to be dismissed. Applications dismissed - The State of Goa may file the counter affidavit, if they desire to do so. Issues Involved:1. Jurisdiction of the High Court to entertain the writ petitions.2. Validity of the notifications issued under the Goods and Services Tax Act (GST) by the Central Government and various State Governments, including the State of Goa.3. Classification and differential tax rates on lotteries.4. The legality of taxing the prize money component of lottery tickets.5. Reverse charge mechanism for lottery distributors or selling agents.Issue-wise Detailed Analysis:1. Jurisdiction of the High Court:The primary issue was whether the Sikkim High Court had jurisdiction to entertain writ petitions challenging notifications issued by the State of Goa under the Goa Goods and Services Tax Act, 2017 (GGST Act). The applicant argued that the cause of action related to the GGST Act arose in Goa and should be challenged in the High Court of Bombay at Goa. However, the court noted that part of the cause of action had arisen within its jurisdiction, as the petitions also challenged notifications issued by the Central Government and other states under the Central Goods and Services Tax Act, 2017 (CGST Act) and Integrated Goods and Services Tax Act, 2017 (IGST Act). Therefore, the court held that it had jurisdiction to entertain the petitions.2. Validity of Notifications under GST:The petitions challenged the validity of notifications issued under the CGST Act, IGST Act, and respective State GST Acts, including the GGST Act, on the grounds that they imposed GST on lotteries organized by the State of Sikkim. The petitioners argued that the notifications were unconstitutional and illegal. The court noted that the petitions were not solely challenging the GGST Act notifications but also the central notifications, thereby justifying its jurisdiction.3. Classification and Differential Tax Rates on Lotteries:The petitioners contended that the classification of lotteries into 'lotteries run by State Governments' and 'lotteries authorized by State Governments' with differential tax rates of 12% and 28% respectively was discriminatory and violated Articles 14, 19(1)(g), 301, and 304 of the Constitution of India. They argued that such classification was arbitrary and would be misused by states to monopolize the lottery business. The court acknowledged this concern, noting that the petitions sought to quash the differential tax rates and the classification itself.4. Legality of Taxing the Prize Money Component:The petitions also challenged the legality of taxing the prize money component of lottery tickets, arguing that the prize money should not be included in the taxable value as it did not form part of the petitioners' income. They sought a declaration that GST should only be levied on the face value of the lottery ticket minus the prize money. The court recognized this issue as part of the broader challenge to the GST notifications.5. Reverse Charge Mechanism:The petitions sought to quash the notifications that imposed a reverse charge mechanism on lottery distributors or selling agents, making them liable to pay GST instead of the suppliers. The petitioners argued that this was unconstitutional and beyond the scope of the GST legislation. The court noted this issue as part of the comprehensive challenge to the GST framework for lotteries.Conclusion:The Sikkim High Court dismissed the applications filed by the State of Goa seeking deletion as a party respondent in the writ petitions, holding that part of the cause of action had arisen within its jurisdiction. The court allowed the petitions to proceed, recognizing the broader issues related to the validity of GST notifications, classification and differential tax rates on lotteries, the legality of taxing the prize money component, and the reverse charge mechanism. The State of Goa was granted the opportunity to file a counter affidavit if desired.