Summary
The Court upheld inclusion of actionable claims within goods under the CGST Act and rejected the challenge to taxing lottery, betting and gambling while excluding other actionable claims. Lottery’s character as an actionable claim was binding precedent, and prize money could not be deducted contrary to the valuation scheme. The Article 32 petition was maintainable on its equality challenge but failed on the merits, with liberty to separately challenge the later uniform-rate notifications.
Issues
- Whether an Article 32 challenge based on equality was maintainable despite lottery’s res extra commercium character.
- Whether including actionable claims in goods exceeded Parliament’s GST power and whether lottery’s classification was binding precedent.
- Whether taxing lottery, betting and gambling while excluding other actionable claims was discriminatory.
- Whether prize money must be deducted in valuing lottery supply for GST.
Provisions considered
- Articles 14 and 32, Constitution of IndiaEntertained the constitutional equality challenge but found a rational basis for treating lottery, betting and gambling differently from other actionable claims. (¶¶ 14, 15, 16, 17, 63, 66, 68, 69, 70, 71)
- Articles 246A and 366(12), Constitution of IndiaRead the special GST power and inclusive constitutional definition of goods as permitting the statutory inclusion of actionable claims. (¶¶ 20, 33, 34, 36, 37, 49, 58, 59, 61)
- Sections 2(1) and 2(52), Central Goods and Services Tax Act, 2017Upheld the definition expressly including actionable claims and its incorporation of the property-law definition. (¶¶ 21, 22, 23, 24, 48, 49, 59, 61, 62)
- Schedule III, item 6, Central Goods and Services Tax Act, 2017Rejected the equality objection to exclusion of actionable claims other than lottery, betting and gambling under the provision examined. (¶¶ 63, 66, 68, 69, 70, 71)
- Section 15(1)–(4), Central Goods and Services Tax Act, 2017Applied the statutory valuation inclusions and exclusions rather than adding an exclusion for prize payouts by judicial interpretation. (¶¶ 73, 78, 80)
- Rule 31A(2), Central Goods and Services Tax Rules, 2017Applied the prescribed lottery valuation mechanism and rejected abatement of prize money, while preserving a separate challenge to the later uniform-rate notifications. (¶¶ 74, 75, 78, 79, 80, 83)
Held
- The petitioner did not press violation of Article 19(1)(g). Its challenge to a parliamentary enactment on Article 14 grounds could nonetheless be entertained under Article 32, so the preliminary maintainability objection failed. (¶¶ 13, 14, 15, 16, 17)
- The constitutional definition of goods is inclusive and does not exclude actionable claims. Parliament’s special power under Article 246A supported their inclusion in Section 2(52); authorities concerning the older sale-of-goods taxing field did not invalidate that definition. (¶¶ 24, 31, 33, 34, 36, 37, 49, 52, 58, 59, 61)
- Sunrise Associates decided that lottery is an actionable claim as part of its ratio, not merely obiter. The earlier sales-tax exclusion of actionable claims did not mean they were incapable of inclusion as goods in the wider sense. (¶¶ 41, 42, 43, 44, 45, 46, 48, 62)
- The established distinct regulatory and gambling character of lottery, betting and gambling supplied a rational basis for their different tax treatment. Leaving other actionable claims outside the tax net did not establish hostile discrimination under Article 14. (¶¶ 63, 66, 68, 69, 70, 71)
- The valuation scheme under Section 15 and Rule 31A did not permit deduction of prize money. The former service-tax circular, works-contract valuation decisions and foreign taxing schemes did not justify introducing such a deduction into the governing GST provisions. (¶¶ 73, 74, 75, 76, 77, 78, 79, 80, 81)
- The uniform-rate notifications issued during pendency had not been challenged in this petition. Liberty was granted to challenge them separately in appropriate proceedings. (¶ 83)
Result
Writ petition dismissed, subject to liberty to separately challenge the notifications dated 21 February 2020/2 March 2020 imposing a uniform 28% rate.