Recently, a few pivotal judicial decisions have captured the attention of the nation. The Supreme Court of India made a landmark judgement stating that a state legislature holds the authority to tax lotteries carried out by other states within its jurisdiction. This ruling comes in the wake of similar judgements and cases related to online gaming and gambling laws, casting significant impact on the legal framework in India.
The Karnataka Police (Amendment) Act, 2021
This Act, which sought to ban online gambling and skill-based gaming platforms, faced judicial scrutiny when substantial sections of it were nullified by the Karnataka High Court. This Act was premised on curbing gambling practices and ensuring public order and ethics are maintained within the digital space.
Taxable Element of Gambling, Betting, and Lottery
In the year 2020, the Supreme Court made it clear that all lottery, gambling, and betting activities will fall under the umbrella of chargeable services under the Goods and Services Tax (GST) Act, 2017. Consequently, the revenue generated from such activities is taxable, further cementing the legislative right to impose taxes on these activities.
Origins of the Decision
The judgment came to light as an appeal filed by the governments of Karnataka and Kerala against their respective High Courts decree to abrogate laws formulated by them to tax lotteries administered by the States of Nagaland, Arunachal Pradesh, Sikkim, and Manipur within their jurisdictions. The High Courts deemed such tax laws unconstitutional, leading to a directive for Kerala and Karnataka to refund the taxed amounts to the North-Eastern States.
Supreme Court’s Viewpoint
According to the court, ‘lotteries’ is a “species of gambling activity”. The term ‘Betting and Gambling’ is enlisted in the State List under the Seventh Schedule of the Constitution, enabling state legislatures to tax all activities classified as ‘betting and gambling.’ This includes lotteries, horse racing, wheeling, and other local forms of ‘betting and gambling’ activities.
Central Laws Related to Lottery, Gambling, and Betting
India is governed by a few central laws related to these activities. The Lotteries Regulation Act, 1998 makes it legal for state governments to organize lotteries, provided that draws take place within the respective state. The Indian Penal Code, 1860 and Information Technology Rules, 2011 has provisions against obscene content used in advertising betting and gambling. Under the Foreign Exchange Management Act, 1999, income from lottery winnings and races are non-remittable. The Income Tax Act, 1961 covers all types of gambling industries in India, both directly and indirectly, contributing to the country’s Gross Domestic Product (GDP).
UPSC Civil Services Examination, Previous Year Questions (PYQs)
One of the questions from 2016’s examination asked, “The Parliament of India acquires the power to legislate on any item in the State List in the national interest if a resolution to that effect is passed by the…?”. The answer, shedding light on the robust democratic system of India, was the Rajya Sabha by a majority of not less than two thirds of its members present and voting.
