2018 (10) TMI 941 - HC - GST

Lotteries ruled as actionable claims and taxable under CGST Act 2017 and West Bengal GST Act 2017

Teesta Distributors & Ors. Versus Union of India & Ors.

HC held that lotteries constitute actionable claims and are taxable under CGST Act 2017 and West Bengal GST Act 2017. Court determined lottery tickets ... Constitutional validity of levy of GST on Lottery - petitioners have sought a declaration that, lotteries are exempt from tax under Sl. No. 6 of Schedule III read with Section 72 of the Central Goods and Service Tax Act, 2017 and Sl. No. 6 of Schedule III read with Section 72 of the State Goods and Service Tax Act, 2017 - scope of the word 'goods' - petitioner has submitted that, when CGST, 2017 and IGST, 2017 propose to tax a lottery, it goes beyond the constitutional definition of ‘goods’ - actionable claim - Transfer of Property Act, 1882. Is lottery a ‘goods’ or an ‘actionable claim’? - Held that:- In the case of Sunrise Associates[2006 (4) TMI 118 - SUPREME COURT], it is held that a lottery is in essential a chance for a prize, the sale of a lottery ticket can only be a sale of that chance. It has held that, there was no distinction between the two rights. The right to participate being an inseparable part of the chance to win, is therefore part of an ‘actionable claim’. It goes on to hold that, the sale of a lottery ticket does not necessarily involve the sale of goods. It is nothing other than a contract of carriage. The actual ticket is merely evidence of the right to transfer. A contract is not a property but only a promise supported by consideration, upon breach of which either a claim for specific performance or damages would lie. Like railway tickets, a ticket to see a cinema or a pawnbroker’s ticket are memoranda or contracts between the vendors of the ticket and the purchasers. Tickets are themselves normally evidence of and in some cases the contract between the buyer of the ticket and its seller. A lottery ticket can be held to be goods if at all only because it evidences the transfer of a right. It has examined the question as to what right a lottery ticket represents. It has held that, on purchasing a lottery ticket, the purchaser would have a claim to a conditional interest in the prize money which is not in the purchaser’s possession. The right would fall squarely within the definition of ‘actionable claim’ and, would therefore be excluded from the definition of goods under the Sale of Goods Act and the sales tax statute. It has held that, lotteries being actionable claims are generally speaking “goods” or moveable property - the first issue has to be answered by holding that, a lottery is an ‘actionable claim’ and goods or moveable property. Can lottery be taxed under Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017? - Held that:- In the facts of the present case, it has not been substantiated that, the State Legislature promulgating the West Bengal Goods and Services Tax Act, 2017 did not have the competence to pass the law or that it violates any fundamental rights of the petitioner or any other right of the petitioner or any provision of the Constitution. The definition of ‘goods’ in Article 366(12) of the Constitution allows the Legislatures to classify lottery as ‘goods’ and charge tax thereon - The Integrated Goods and Services Tax Act, 2017 makes provisions for levy and collection of tax on inter-state Supply of Goods or Services or both by the Central Government. It defines Import of Goods in Section 2(10) and Import of Services in Section 2(11) of the Act of 2017. By Import of Goods, it means Import of Goods from a place outside India. By Import of Services, it means the supply of any service where the supplier of services located outside in India, the recipient of services located in India and the place of supply of service is in India. Schedule III under Section 7 of the CGST Act, 2017 deals with activities or transactions which shall be treated neither as a supply of goods nor as a supply of services. Entry 6 of Schedule III of CGST Act, 2017 takes out ‘actionable claims’ other than lottery, betting and gambling from the scope of such Act. Consequently, since lotteries are generally speaking ‘goods’ and come within the definition of ‘actionable claims’, and since, lotteries are kept out of the purview of ‘actionable claims’ which do not attract the CGST Act, 2017, lottery can therefore be charged to tax under the CGST Act, 2017 - The second issue is answered by holding that, lottery can be taxed under the Central Goods and Services Tax Act as well as the West Bengal Goods and Services Tax Act, 2017. If so, is differential levy of tax permissible? - Held that:- The Goods and Services Tax Council established under Article 279A of the Constitution of India at its 17th meeting deliberated extensively with regard to the rate of tax to be imposed on lotteries. Differential rate of tax was introduced in the 17th Goods and Services Tax Council Meeting held on June 18, 2017. The States before the Court were present in such meeting. It was after extensive deliberations that, the GST Council had approved the rates as presently obtaining in respect of lottery. It is within the domain of such Council to decide the rate of tax - differential levy of tax is permissible. To what reliefs, if any, are the parties entitled to? - Held that:- No relief can be granted to the petitioners, in the facts of the present case. Petition dismissed. Issues Involved:1. Is lottery a 'goods' or an 'actionable claim'Rs.2. Can lottery be taxed under the Central Goods and Services Tax Act, 2017 and the West Bengal Goods and Services Tax Act, 2017Rs.3. If so, is differential levy of tax permissibleRs.4. To what reliefs, if any, are the parties entitled toRs.Issue-wise Analysis:1. Is lottery a 'goods' or an 'actionable claim'Rs.The petitioners argued that a lottery cannot be classified as 'goods' under the CGST Act, 2017, and SGST Acts, citing the Supreme Court's decision in Sunrise Associates v. Government of NCT of Delhi, which held that a lottery is an 'actionable claim'. The definition of 'goods' in Article 366(12) of the Constitution includes all materials, commodities, and articles, which the petitioners argued should not encompass lotteries since they do not entail the transfer of any tangible property or beneficial interest. The court, referencing H. Anraj v. Government of Tamil Nadu and Sunrise Associates, concluded that a lottery is an 'actionable claim' and, generally speaking, 'goods' or movable property.2. Can lottery be taxed under Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017Rs.The petitioners contended that the CGST and SGST Acts exceed constitutional mandates by taxing lotteries, which are not 'goods' within the meaning of the Constitution. The court examined the constitutional amendments and provisions introduced by the 101st Amendment Act, 2016, including Articles 246A, 269A, and 279A, which empower the Parliament and State Legislatures to levy GST on goods and services. The court noted that the definition of 'goods' in Section 2(52) of the CGST Act includes actionable claims, thereby validating the inclusion of lotteries under the GST regime. The court found no constitutional violation in taxing lotteries under the CGST and WB GST Acts, thus affirming their taxability.3. If so, is differential levy of tax permissibleRs.The petitioners argued against the differential tax rates for lotteries run by the State and those authorized by the State, claiming it violated the constitutional mandate of uniform taxation. The court referred to the extensive deliberations of the GST Council, which justified differential rates to preserve economic uniformity and the interests of constituent States. The court emphasized that legislative bodies have wide latitude in taxation matters, including differential rates, provided they are reasonable. The court concluded that the differential levy of tax is permissible and not in breach of any constitutional provisions.4. To what reliefs, if any, are the parties entitled toRs.The petitioners sought relief from the differential tax rates and the classification of lotteries as 'goods'. However, the court found no merit in their arguments, upholding the constitutionality of the CGST and WB GST Acts and the differential tax rates. Consequently, no relief was granted to the petitioners, and the writ petition was dismissed with no order as to costs.Conclusion:The court concluded that a lottery is an 'actionable claim' and generally 'goods' under the GST regime. It upheld the taxability of lotteries under the CGST and WB GST Acts and validated the differential tax rates imposed by the GST Council. The petitioners were not entitled to any relief, and the writ petition was dismissed.