Court upholds GST on lotteries, rejects challenge based on actionable claims. No hostile discrimination found. Petitioner can challenge notifications.

The court dismissed the writ petition challenging the levy of GST on lotteries under the Central Goods and Services Tax Act, 2017. It upheld the constitutionality of the provisions including actionable claims in the definition of goods, citing the Constitution Bench judgment in Sunrise Associates. The court found no hostile discrimination in taxing only lottery, betting, and gambling. Additionally, the argument to exclude prize money from the face value of lottery tickets for GST levy was rejected. The petitioner was granted liberty to challenge notifications issued during the petition in separate proceedings.

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Issues: (i) Whether a writ petition under Article 32 was not maintainable because lottery is res extra commercium and no protection under Article 19(1)(g) was available; (ii) Whether inclusion of actionable claim in the definition of goods under Section 2(52) of the Central Goods and Services Tax Act, 2017 was contrary to the legal meaning of goods and unconstitutional; (iii) Whether the Constitution Bench decision in Sunrise Associates laid down as a proposition of law that lottery is an actionable claim; (iv) Whether exclusion of lottery, betting and gambling from Item No. 6 of Schedule III was hostile discrimination and violative of Article 14; (v) Whether prize money was to be excluded while determining the face value of lottery tickets for levy of GST.

Issue (i): Whether a writ petition under Article 32 was not maintainable because lottery is res extra commercium and no protection under Article 19(1)(g) was available.

Analysis: The challenge was framed substantially on Article 14 and on the legislative competence and validity of the GST levy. A petition raising constitutional infirmity of a parliamentary enactment on the ground of discrimination is maintainable under Article 32. The submission based on Article 19(1)(g) was not pressed by the petitioner, and the nature of lottery did not defeat maintainability of the constitutional challenge.

Conclusion: The writ petition was maintainable under Article 32 and the preliminary objection was rejected.

Issue (ii): Whether inclusion of actionable claim in the definition of goods under Section 2(52) of the Central Goods and Services Tax Act, 2017 was contrary to the legal meaning of goods and unconstitutional.

Analysis: Article 366(12) uses an inclusive definition of goods, and Article 246A confers plenary power on Parliament to legislate on GST. The Constitution Bench in Sunrise Associates held that an actionable claim is movable property and goods in the wider sense, and specifically treated a lottery ticket as an actionable claim. The statutory inclusion of actionable claims within goods was therefore not inconsistent with the constitutional scheme or beyond legislative competence.

Conclusion: The inclusion of actionable claim in Section 2(52) was held to be valid and constitutional.

Issue (iii): Whether the Constitution Bench decision in Sunrise Associates laid down as a proposition of law that lottery is an actionable claim.

Analysis: The discussion in Sunrise Associates was not incidental. The Court directly considered the nature of a lottery ticket, held that the right to participate in the draw is part of an actionable claim, and overruled the contrary view in H. Anraj. The holding formed the basis of the final conclusion and not mere obiter dicta.

Conclusion: Sunrise Associates was held to have laid down as law that lottery is an actionable claim.

Issue (iv): Whether exclusion of lottery, betting and gambling from Item No. 6 of Schedule III was hostile discrimination and violative of Article 14.

Analysis: The Court noted the long-standing regulatory and taxing treatment of lottery, betting and gambling, and their distinct character from ordinary actionable claims. Since these activities had historically been treated differently and were capable of rational classification for tax purposes, the selective treatment did not amount to hostile discrimination. The legislative choice in taxation was held to have a rational basis.

Conclusion: No violation of Article 14 was found in Item No. 6 of Schedule III.

Issue (v): Whether prize money was to be excluded while determining the face value of lottery tickets for levy of GST.

Analysis: The GST scheme under Section 15 and Rule 31A specifically governs valuation of lottery supplies. The earlier service-tax circular and the works-contract valuation principle were held inapplicable. The statutory formula under Rule 31A, as amended, determined the taxable value and did not permit judicial exclusion of prize money from the face value for GST computation.

Conclusion: Prize money was not required to be excluded while determining taxable value for GST.

Final Conclusion: The constitutional and statutory challenge to the GST levy on lotteries failed, while liberty was reserved to challenge the later notifications separately.

Ratio Decidendi: Where the Constitution provides an inclusive definition and confers plenary GST power on Parliament, actionable claims may validly be included in goods for GST purposes, and lottery being an actionable claim can be taxed and valued under the statutory GST framework without offending Article 14.

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