The Supreme Court on 23rd March, 2022 has held that a State legislature is fully competent to enact the Acts and levy taxes on lotteries conducted by other States within its jurisdiction.
The judgment by a Bench of Justices M.R. Shah and B.V. Nagarathna came on appeals filed by the Karnataka and Kerala governments against the decisions of their respective High Courts to quash laws enacted by their legislatures to tax lotteries organised and promoted by the States of Nagaland, Arunachal Pradesh, Sikkim, Manipur in Kerala and Karnataka.
The High Courts had found the tax laws enacted by the two States invalid and unconstitutional and had even directed Kerala and Karnataka to refund the money collected as tax from lotteries to the north-eastern States.
However, Justice Nagarathna noted, “We find that Division Benches of the High Courts of Kerala and Karnataka were not right in holding that the respective State legislatures had no legislative competence to impose tax on the lotteries conducted by other States in their State.”
Further, “Betting and gambling is a genus. It includes several types or species of activities such as horse racing, wheeling and other local variations/forms of ‘betting and gambling’ activity… From the judgments of this court, it is clear that ‘lotteries’ is a species of gambling activity. Hence, lotteries are within the ambit of ‘betting and gambling’ as appearing in Entry 34 List II, the States of Karnataka and Kerala were fully competent to enact the Acts and levy taxes on the activity of ‘betting and gambling,” the judgment said.
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