Case Comment - Skill Lotto Solutions (P.) Ltd. V. Union Of India

Author: LawSphereX

Category: General Law

Published: 2026-08-23T18:42:31.187Z

Updated: 2026-08-30T07:06:46.363Z

CASE COMMENT: SKILL LOTTO SOLUTIONS (P.) LTD. V.

UNION OF INDIA

Sanskruti Soumya Seth, KIIT School of Law, Odisha

INTRODUCTION

The Goods and Services Tax (GST), introduced in 2017, redefined the scope of ‘goods’ and ‘services’ in India’s taxation regime, giving rise to several interpretative challenges. A major controversy arose when lotteries were classified as ‘goods’ under section 2(52) of Central Goods and Services Tax Act. This led to the landmark case of Skill Lotto Solutions (P. ) Ltd. v. Union of India1, where the Supreme Court upheld the validity of imposing GST on lottery, betting, and gambling. The Court observed that these activities fall within the category of ‘res extra commercium’, meaning they lie outside the sphere of lawful commerce, and therefore taxing them does not infringe upon any fundamental rights. The decision reflects how the GST framework continues to evolve through the interaction of legislative policy and judicial interpretation. BENCH Justice Ashok Bhushan, Justice R.

Subhash Reddy and Justice M. R. Shah. FACTS OF THE CASE The writ petitioner was an authorized agent for the sale and distribution of lotteries organized by the State of Punjab. The petitioner submitted that lottery is not a good as per the definition of ‘Goods’ under Section 2 (52) and levying tax on lottery is discriminatory and violative of articles 14, 19(1)(g), 301, 304 of the Constitution. The petitioner further argued that the GST rate should be uniform across States and that the tax base should exclude the portion representing prize money, as it never formed part of the distributor’s income. LEGAL ISSUES (I) Whether the writ petition relating to lottery was maintainable under article 32 of the Constitution of India since the writ petition related to lottery, which is res extra

1 Writ Petition (Civil) No. 961 of 2018

commercium and the petitioner could not claim protection under article 19(1)(g)? (II) Whether the inclusion of actionable claim in the definition of goods as given in section 2(52) of Central Goods and services Tax Act, 2017 is contrary to the legal meaning of goods and unconstitutional? (III) Whether the Constitution Bench judgment of this Court in Sunrise Associates v. Govt. of NCT of Delhi [2006] 4 STT 105 had laid down as the proposition of law that lottery is an actionable claim or the observations made in the judgment were only an obiter dicta and not a declaration of law? (IV) Where exclusion of lottery, betting and gambling from Item No. 6 Schedule III of the Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of the Constitution of India?

(V) Whether while determining the face value of the lottery tickets for levy of GST prize money is to be excluded for purpose of levy of GST? ARGUMENTS BY THE PETITIONER

The petitioner has challenged the provisions of Central Goods and Services Tax to the extent it imposes tax on lottery on the ground of violation of Article 14 of the Constitution. It was argued that this writ petition regarding the violation of Article 14 can be entertained under Article 32 which empowers the Supreme Court to enforce fundamental rights. The Supreme Court also entertained a similar case, H. Anraj v. State of Maharashtra2 where the petitioner moved writ petition challenging the imposition of tax on sale of lottery tickets. • Article 366 (12) defines goods to include all materials, commodities and articles, and it doesn’t include actionable claim, whereas goods as defined in Section 2 (52) of Central Goods and Services Tax Act, 2017 include actionable claim. It was argued that the judgment in Sunrise Associates v. Govt.

of NCT of Delhi3 where the Supreme Court held that lotteries are actionable claims is only obiter dicta and not the ratio of the judgment. At the same time, actionable claims are defined as only claims and not goods

2 H. Anraj v. State of Maharashtra [1984] 2 SCC 292

3 Sunrise Associates v. Govt. of NCT of Delhi [2006] 4 STT 105

as per section 3 of the Transfer of Property Act. Additionally, in State of Madras v. Gannon Dunkerley & Co. , (Madras) Ltd. 4, the Supreme Court held that the definition of goods in Sale of Goods Act, 1930, clearly excludes actionable claim. It was argued that actionable claims were purposefully included with goods to make lottery taxable to GST. The definitions in conflict as Article 366(12) and section 3 of the Transfer of Property Act are in conflict with section 2(52). Thus, the definition in Section 2 (52) is unconstitutional as lottery is not a good, so GST being levied on lottery is ultra vires to the constitution. • According to Schedule III of the Act, 2017, actionable claims other than lottery, betting and gambling have been treated neither as supply of goods nor supply of services. The Parliament doesn’t have power to make something taxable that is non-taxable otherwise.

The petitioner argued that there’s a hostile discrimination as only lottery, betting and gambling are taxed while other actionable claims are left out. • GST should not be levied on the lottery ticket's face value as it includes the prize money. The prize money should be excluded from the face value. GST is levied by excluding the prize money on the lottery held all over the world. ARGUMENTS BY THE RESPONDENTS

The laws relating to economic activity need to be analyzed in a broader view than that of civil rights. The transaction of lottery tickets can’t be considered similar to the status of trade, commerce or intercourse. Lottery is ‘res extra commercium’ so no right can be claimed under Article 19(1)(g) and Article 301. Thus, the writ petition is not maintainable under Article 32 of the Constitution. • The definition of goods under Article 366 (12) is inclusive in nature. Article 366(12A) aims to clarify that GST is applicable to supply of all goods or services or both, except supply of alcoholic liquor for human consumption. It is incorrect to state that the definition of goods in section 2(52) is contrary to the judgment in Sunrise Association because it was held that an actionable claim is movable property and goods in a wider sense.

• Article 246A empowers the Parliament to levy GST on lotteries as well as the GST Council has approved levying GST on lottery tickets under Article 279A. The inclusion of actionable claims in the definition of goods under Section 2(52) complies with

4 State of Madras v. Gannon Dunkerley & Co., (Madras) Ltd.[1959] SCR 379

legislative and taxing policy. The case of Gannon Dunkerley is not applicable in the present case as it dealt with the definition of ‘sale’ and not ‘goods’. • Not levying tax on actionable claims other than lottery, betting and gambling can't be considered discriminatory. • Section 15(1), 15(5) of the Central Goods and Services Tax Act, 2017, along with Rule 31A authorizes the levy of 28% tax on face value. So, it is neither discriminatory nor beyond the taxing policy or powers of the State. • During the pendency of the writ petition, Rule 31A was amended merging the two different rates which was previously levied on lotteries so the argument based on discrimination in different tax rates is no longer available to the petitioner. COURT’S OBSERVATION

Article 32 ensures the enforcement of fundamental rights and observes the rule of law. The grounds of challenge in this petition include violation of Article 14 and the discriminatory nature of taxes levied on lottery, betting and gambling. The Hon’ble Supreme Court has entertained similar cases like H. Anraj v. State of Maharashtra and such. The present writ petition is maintainable under Article 32 of the Constitution. • Issue I and II are interrelated. The petitioner heavily relied on the Gannon Dunkerley & Co. Ltd case to define ‘sale of goods’. However, the arguments based on this case is no longer applicable as the 46th Amendment to the Constitution (1982) inserted Article 366(29A), making tax on sale or purchase of goods on transfer of property according to a contract, inclusive in nature which meant work contracts were made taxable.

• Article 246A of the Constitution empowers the Parliament and the Legislature to make laws related to goods and services tax imposed by the Union or the State, notwithstanding anything contained in Article 246 and Article 254 which widens the power of the Parliament and the legislature to make laws. The definition of goods under Section 2(52) does not violate any constitutional provision or in conflict with Article 366(12) as Article 366(12) is an inclusive definition. • The Court in the H. Anraj case decided that lottery is ‘goods’ to the extent it comprises the right to participate and not actionable claims. This judgment was reconsidered in the case of Sunrise Association that a lottery ticket represents the right to claim prize, it is not a good but an actionable claim. The right to participate is inseparable from the chance to win.

The transfer of this right is of a beneficial interest in movable property,

not in possession, and thus an actionable claim. However, the Court held that there was no need to exclude them from the definition of goods. Thus, the definition of section 2(52) of the Act, 2017 was expanded to include actionable claims as well. • The observations of the Constitution Bench in Sunrise Associated are not merely obiter dicta but is binding. Therefore, the inclusion of actionable claim in the definition of goods under section 2(52) of Central Goods and Services Tax Act, 2017 is not in conflict with the legal meaning of goods and it is neither illegal nor unconstitutional. • As per the judgment in Ayurveda Pharmacy v. State of Tamil Nadu5, there must be a rational basis for discrimination between commodities of some class or category for the purpose of imposing tax. The Supreme Court examined the historical treatment of lottery, betting, gambling and such activities.

In in State of Bombay v. R. M. D. Chamarbaugwala6, the Court observed that lottery, betting, gambling and such activities have been discouraged since ancient times. These activities encourage reckless tendency of people to gain profits easily while disrupting the peace and happiness of the common man. It was highly doubtful that the makers of our Constitution intended to make such activities a part of this country’s trade, commerce or intercourse and to be made a subject matter of fundamental rights under Article 19(1)(g) or made free under Article 301. It’s certain that it was never intended to guarantee freedom of gambling and such activities. Thus, it can’t be claimed that there was no rationale for imposing tax on lottery, betting and gambling.

• The petitioner argued that since the prize money is paid by the distributor or agent to the winning ticket holders, it does not form part of the consideration received for supply of lottery tickets and should be deducted while computing the value for levy of GST. • The Court rejected the circular dated 14-2-2007 which provided that the value of taxable service shall be taken into account at the total face value of the ticket sold minus (a) the total cost of the ticket paid by the distributor to the State Government and (b) price money paid by the distributor. The value of taxable supply is a matter of statutory regulation, that is, its value has to be determined by examining Section 15 of Central Goods and Services Tax Act, 2017 read with Rule 31A. The prize money can’t be excluded while computing the taxable value of supply.

Such exclusion can’t be done with judicial interpretation; rather, it requires Parliamentary interference. The Court

5 Ayurveda Pharmacy v. State of Tamil Nadu [1989] 2 SCC 285

6 State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SC 699

was also of the view that the legislative schemes of other countries are not relevant while determining the taxable values in this country. DECISION

The Supreme Court was not in favor of the petitioner. • It held that the petitioner was not entitled to relief and dismissed the writ petition.

LEGAL PRINCIPLES LAID DOWN "The legislature possesses the competence to enact an inclusive definition of 'goods' for the purpose of a taxing statute in exercise of its power under Article 246A of the Constitution. Such a definition is constitutionally valid and the courts will not interfere with this legislative policy as long as there’s a rational basis for the classification." This judgment is a landmark precedent that affirms the broad legislative discretion of the Legislature in economic and fiscal matters, especially in creating a new tax regime like GST. It settles the legal position on the taxability of lotteries and similar activities under the GST regime. KEY TAKEAWAYS

This Judgment clarified that the definition of ‘goods’ under the Central Goods and Services Tax Act, 2017 and it also includes actionable claims. • Only lottery, betting, and gambling are taxable actionable claims under GST while other actionable claims are exempted as per Schedule III. • It interpreted Article 246A of the Constitution and clarified the legislative competence of Parliament and State Legislatures to enact laws related to GST • The Court held that Central Goods and Services Tax Act, 2017 and the Rules would prevail over any previous enactment, circulars or notifications regarding matter related to GST.

CONCLUSION

The Supreme Court’s judgment in Skill Lotto Solutions (P. ) Ltd. v. Union of India marks a crucial development in India’s tax regime, solidifying the constitutional basis of the GST system. The Court has firmly upheld Parliament's plenary authority under Article 246A to enact comprehensive fiscal legislation by confirming the taxability of lotteries. The ruling affirms the legislative prudence in adopting a broad and inclusive definition of ‘goods’ that reflects modern economic realities, moving beyond narrow traditional interpretations. The Court has set a clear precedent for identifying distinct taxable categories within the GST framework, recognizing the state’s legitimate role in regulating and taxing specific activities through rational classification.

However, it also highlights potential concern of the legislature’s wide discretion to define ‘goods’ which could theoretically extend taxation to new rights or claims beyond what was previously considered taxable. The judgment demonstrates how the GST regime continues to evolve through the combined force of legislative intent and judicial interpretation, reflecting the dynamic nature of India’s economic and constitutional landscape.