SC Quashes Service Tax on Lottery Distributors
In News
What Happened
Why It Matters
Background
History & Context
What Changed
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BEFORE: The Union government treated lottery distributors as "agents" who provided marketing and promotion services to the state government. NOW: The Supreme Court clarified the relationship is "principal-to-principal," meaning distributors purchase tickets outright and take on the financial risk themselves, rendering no taxable service.
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BEFORE: The Centre attempted to use its residuary power under Entry 97 of the Union List to impose a service tax on lottery operations. NOW: The Supreme Court reaffirmed that conducting a lottery falls under "betting and gambling" (Entry 62 of the State List), leaving the power to tax it exclusively with state legislatures.
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BEFORE: There was ambiguity over whether the sale of lottery tickets could be categorized as a taxable service under Central laws. NOW: The Court reiterated that a lottery ticket is an "actionable claim" and an activity of betting/gambling, squarely excluding it from the ambit of central service tax.
Prelims Angle
NCERT Connection
Practice Questions
Q1
Correct Statement(s)With reference to the Supreme Court's February 2025 ruling on the taxation of lotteries, consider the following statements: 1. The Court ruled that the relationship between a State government and a sole lottery distributor is that of a principal and an agent. 2. The power to levy taxes on betting and gambling, including lotteries, falls exclusively under the State List. Which of the statements given above is/are correct?