The state can impose a tax on lotteries from other states under its jurisdiction: SC

Bench says “betting and gambling” is listed as a state in the Seventh Schedule to the Constitution

Bench says “betting and gambling” is listed as a state in the Seventh Schedule to the Constitution

The Supreme Court ruled Wednesday that a state legislature has the right to impose a tax on lotteries held by other states under its jurisdiction.

A panel of judges MR Shah and BV Nagarathna observed that ‘lotteries’ are a ‘species of gambling activity’. The court declared that “betting and gambling” was part of the state’s list of the Seventh Schedule to the Constitution.

“The power to tax applies to all activities which are of the nature of ‘betting and gambling’, including lotteries. Since then there is no doubt that lotteries, whether conducted or organized by the Government of India or the State Government or whether authorized by the State or conducted by any agency or instrument of the State or Central Government or any private actor, is ‘bet and gambling’, state legislatures have the power to tax lotteries under entry 62 of the state list,” said Judge Nagarathna, author of the 122-page judgment.

Appeal against HC verdicts

The judgment came on appeals filed by the governments of Karnataka and Kerala against decisions of their respective high courts to strike down laws enacted by their legislatures to tax lotteries run and promoted by the states of Nagaland, Arunachal Pradesh, Sikkim, Manipur to Kerala and Karnataka.

The High Courts have ruled the tax laws enacted by the two states invalid and unconstitutional and even ordered Kerala and Karnataka to reimburse the northeastern states for money collected as lottery tax.

“We find that the divisional benches of the high courts of Kerala and Karnataka were not correct in holding that the respective state legislatures had no legislative jurisdiction to impose a tax on lotteries run by other states in their State,” Judge Nagarathna noted.

“Betting and gambling are a genre. It includes several types or species of activities such as horse racing, wheeling and other local variants/forms of “betting and gambling” activities… According to the judgments of this court, it is clear that ‘lotteries’ is a species of gambling activity. Therefore, lotteries fall within the domain of ‘betting and gambling’ as stated in entry 34 of Schedule II… the States of Karnataka and Kerala were fully competent to enact laws and levy taxes on the activity of “betting and gambling”, the judgment said.

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