2018 (10) TMI 941 - HC - GST

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

HC held that lotteries constitute actionable claims and are taxable under CGST Act 2017 and West Bengal GST Act 2017. Court determined lottery tickets ... Definition of goods including actionable claim - actionable claim as movable property - scope of supply under GST and Schedule III Entry 6 - competence of Legislature to tax under Article 246A - GST Council rate recommendations and justiciability - differential levy of tax and classification for taxationDefinition of goods including actionable claim - actionable claim as movable property - Whether a lottery is 'goods' or an 'actionable claim'. - HELD THAT: - The court examined the competing Supreme Court decisions in H. Anraj and Sunrise Associates and the statutory and constitutional definitions. Relying on the reasoning in Sunrise Associates, the court held that on purchase of a lottery ticket the purchaser acquires a conditional interest in the prize money which falls within the definition of an 'actionable claim'; lotteries are therefore, generally speaking, movable property and fall within the concept of 'goods' as understood for constitutional and fiscal purposes. The court rejected the contention that a lottery ticket cannot be treated as goods because it only represents a chance; on the authoritative view in Sunrise Associates such contingent interests are actionable claims and thus included within 'goods'.A lottery is an 'actionable claim' and therefore constitutes goods/movable property for the purposes of the GST enactments.Scope of supply under GST and Schedule III Entry 6 - competence of Legislature to tax under Article 246A - Whether lottery can be taxed under the Central Goods and Services Tax Act, 2017 and the West Bengal Goods and Services Tax Act, 2017. - HELD THAT: - The court reviewed the constitutional scheme effected by the One Hundred and First Amendment, the statutory definitions in Section 2(52) of the CGST Act (which expressly includes 'actionable claim' within 'goods'), and Schedule III Entry 6 which excludes only certain actionable claims other than lottery, betting and gambling from being treated as neither supply. Given that lotteries are actionable claims and that the CGST/State GST definitions include actionable claims, the court held that lotteries fall within the legislative competence to be subjected to GST. The court further observed that there was no substantiated challenge to the competence of the Central or State legislatures to enact the GST laws or to include lotteries within their scope.Lottery is leviable to tax under the CGST Act, 2017 and the West Bengal GST Act, 2017.GST Council rate recommendations and justiciability - differential levy of tax and classification for taxation - Whether the differential levy of GST rates on State-run lotteries and State-authorised lotteries is permissible. - HELD THAT: - The court noted that the GST Council, constituted under Article 279A, deliberated and recommended differential rates (as recorded in the minutes of the 17th meeting) and that the affected States participated in that process. Absent a clear showing that the Council's recommendations or the resultant notifications violate any constitutional provision or fundamental right, a writ court should be slow to interfere with the policy and rate decisions of the Council. The court further observed that Article 279A provides mechanisms for the Council and for resolution of inter-State disputes and that the mere fact of differential rates does not, without more, establish unconstitutional discrimination. On the material before it, the court found the differential levy to be within permissible classification for taxation.Differential levy of GST on lotteries, as recommended by the GST Council, is permissible; no constitutional invalidation was made.Differential levy of tax and classification for taxation - GST Council rate recommendations and justiciability - Reliefs to be granted to the petitioners. - HELD THAT: - Having held that lotteries are actionable claims/goods and are taxable under the CGST and State GST enactments, and having found no constitutional defect in the differential rate scheme on the material before the court, the petitioners were not entitled to the declarations and reliefs sought. The court observed that affected States had participated in the GST Council meeting and that statutory mechanisms exist for resolving disputes regarding GST recommendations; no basis for judicial interference in the present petition was established.Writ petition dismissed; no relief granted to petitioners.Final Conclusion: The High Court held that lotteries are 'actionable claims' and therefore fall within the definition of 'goods' for GST purposes; lotteries are taxable under the CGST Act and the West Bengal GST Act; the differential GST rates recommended by the GST Council are permissible on the material before the court; accordingly the writ petition was dismissed and no relief awarded. 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.