Skill Loto Solutions v. Union of India: Ingredients of a Perfectly Legislative Cake

[By Tanya Rathod]

The author is a student at the National Law University, Odisha.

Layers after layers of retrospection, judicial pronouncements, and amendments are the key to make any legislative policy a successful one. GST (Goods and Service Tax) regime is always on a path to unravel, widening the scope of jurisprudential interpretation. One such attempt was made by the Hon’ble Supreme Court of India recently, in the case of Skill Lotto Solutions v. Union of India[1]. The three-judge bench held that the levy of GST on Lottery, betting, and gambling is not in violation of any fundamental right. In doing so the court also said that such activities are res extra commercium; rendering such levy of GST on lottery, betting, and gambling lawful. The author in this article analyzes the skill lotto judgment to comprehend the sovereignty of the legislature in making the laws pertaining to taxation when the goods in question are not objects of private rights.


The Apex Court was approached by Skill Lotto Solutions Pvt. Ltd. who was an authorized agent of sale and distribution of lottery in Punjab. The writ petition was filed impugning the definition of goods under §2(52) of Central Goods and Services Tax Act, 2017 (CGST) and notifications to the extent they levy  tax on lotteries. The writ challenged the practice of levying GST on lottery, betting and gambling on the ground that it is not only discriminatory but also violative of the Articles 14, 19(1)(g), 301, and 304 of the Constitution of India.

Prior to the introduction of GST, through the One hundred and first Amendment in the Indian constitution, Article 246A was inserted which gave the Central Government or respective states the power to levy GST, in furtherance of which central and state legislations transpired. §2(52) of the Central Goods and Services Tax Act, 2017  defines ‘goods’ as, every kind of movable property other than money and securities but includes actionable claim.  However, it must be noted that the Entry III Schedule 6 of the 2017 CGST Act exempts levy of tax on all actionable claims meanwhile creating an exception for lottery, betting, and gambling. This exception with respect to lottery, betting, and gambling was challenged to be inconsistent with the jurisprudential rule of intelligible differentia under Article 14 of the Indian Constitution. The petitioner primarily contended that the definition of ‘Goods’ under §2(52) of the (CGST) Act is not inclusive of the lottery. Adjudicating upon the above contention as laid down in the petition, the Apex Court ruled the following.

A. Conflict of Definition: The Crust of the Cake

The petitioner challenged that the definition of ‘goods’ in the CGST Act 2017 stands in conflict with the definition given in the Constitution of India as under Article 366 (12) to include all materials, commodities and articles. The article thus fails to contain the term actionable claim rendering the levy of GST on actionable claims such as lottery, betting, and gambling unconstitutional.

Reaching for the crumb of the cake, the court held that the power of the legislature to make laws under article 246A of the Constitution is plenary and the definition of goods so made under Section 2(52) of the CGST Act 2017 is ‘inclusive’ rather than restrictive in nature, making way for the legality of inclusion of lottery in the definition of actionable claims. The court relied on the case of Sri Krishna Das v. Town Area Committee, Chirgaon, which stated that- the legislature or the taxing authority determines the question of need, the policies and selects the goods or services for taxation and Courts do not have the power to review those decisions

B. Reasonable Classification: The Frosting

The petitioner called into question the discriminatory proviso under Item no. 6, Schedule III which creates an exception for the activities or transactions which are treated neither as the supply of goods nor supply of services to include all actionable claims; and on the contrary leaving out lottery, betting and gambling as taxable. It was contended that there was no intelligible differentia in including actionable claims like lottery, betting, and gambling for tax purposes when all other actionable claims are free from levy of GST.

The Supreme Court in this regard stated that firstly, the activities of the lottery, betting, and gambling are res extra commercium i.e. things outside of commercial intercourse or the things which are not available for ownership, trade, or commerce. In the State of Bombay Vs. R.M.D. Chamarbaugwala and Anr the court said that; “activities of trade, commerce or intercourse doesn’t include activities which inherently promote the susceptibility of man towards earning money by chance and steer him towards losing hard-earned income which further gives rise to a state of indebtedness to be made the subject-matter of a fundamental right guaranteed by Article 19(1)(g).”

Relying on the said judgment the bench in Skill Lotto case held that there is sufficient nexus for the legislature to levy GST on those who carry the activities which are inherently res extra commercium and such regulations with regard to levy of tax on gambling activities are primed keeping in mind the welfare of society as a whole. The idea of the makers of the constitution was in no way to promote gambling activities and in doing so, the levy of tax on such activities is clearly not in contravention to the doctrine of equality as laid down in Article 14 of the Constitution.

In the case of State of West Bengal v. Anwar Ali Sarkar case, the court held that the differentia or classification must have a rational nexus with the object sought to be achieved by the statute in question. The reasonable classification of goods on the basis of what falls within the category of trade and commerce; and activities that do not trade and rather pernicious is justifiable. Consequently, it cannot be said that the exemption made for actionable claims from the tax net apart from three actionable claims; lottery, betting, and gambling is discriminatory in nature.

C. Value of Taxable Supply: The Icing.

Section 15 of the GST Act read with Rule 31A provides that while computing the value of supply, prize money is also included. This section was challenged under the plea stating that only the price of the lottery must be considered while doing so and not the prize money involved.

On this subject the final blow was given by the Apex court by holding that while determining the taxable value of supply the prize money is not to be excluded for the purpose of levy of GST. The court said that determining the value of taxable supply is subject to the statutory provision which evidently controls which provision has to be given its full effect. It stated that something which is not required to be excluded in the value of taxable supply cannot be added by judicial interpretation.

The value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme.


The judgment passed by the Hon’ble Supreme Court appears to be a layered assertion that central as well as state Governments have supreme powers in the process of annunciating any regulation with regard to levy of taxation; and the jurisdiction of the Court in this regard is stringently limited. The court in this case has heavily relied on customs as a rule which is reflected when the Court said that several rules concerning levy of tax on lottery, betting, and gambling have always been at hand even before the commencement of the GST regime. The major conundrum that still stands unsettled is whether the parliament enjoys unqualified power under Article 246A in deciding what falls within the category of goods that are taxable and if so, is it in alignment with the purpose of the act which was to prevent tax evasion, to begin with. The eighty-seven pages judgment has persistently underlined the power of the legislature to make laws on GST however; it fails to stipulate any periphery on such powers, only making the legislature seem like the lottery winner.


[1] Writ petition (civil) no.961 of 2018 decided on 03.12.2020


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