In a landmark ruling today (February 11), the Supreme Court dismissed the Union Government’s appeal, affirming that lottery distributors are not liable to pay service tax under the Finance Act, 1994. The Court upheld the Sikkim High Court’s decision that Clause (zzzzn) of Section 65(105) of the Finance Act, 2010, which sought to tax lottery-related activities, was unconstitutional.
A bench of Justice B.V. Nagarathna and Justice NK Singh held that the relationship between lottery distributors and the State of Sikkim is a principal-to-principal relationship, not an agency arrangement. Therefore, no service is rendered, and service tax is not applicable.
This ruling solidifies that lotteries fall under “betting and gambling”, which is exclusively taxable by State Governments under Entry 62, List II of the Constitution. However, distributors will remain liable to pay State-imposed gambling taxes.
Stay tuned for further updates once the full judgment is uploaded.
Case Details
Case Title: Union Of India Versus Future Gaming Solutions P.Ltd. And Anr.Etc
Case No.: C.A. No. 004289 – 004290 / 2013
Counsel For Petitioner: Gurmeet Singh
Counsel For Respondent: Arjun Garg
