(c) Assumption that all online games are games of chance? In any case, it is now firmly settled that a new substantive tax liability is prospective in absence of specific retrospective legislation.33 Thus, the platform is left with INR 10, which represents its consideration for facilitating the online game. Thus, the gaming platform is in receipt of INR 200.
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- The ruling effectively nullifies multiple attempts by the Centre to impose a service tax on lottery distribution, reinforcing the constitutional separation of powers.
- Section 115BB of the Income Tax Act details the tax implications on income earned from online betting.
- It not only clarifies that states alone have the power to tax lotteries but also restricts the Centre from categorising them as taxable services.
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This ruling aligns with earlier decisions by the Sikkim High Court, which had struck down multiple service tax levies on lottery-related activities between 2012 and 2017. Since the lottery business operates on a principal-to-principal basis rather than a principal-agent relationship, it does not constitute a service, making it ineligible for service tax. The central government has long sought to bring lottery-related activities under the service tax net. The ruling effectively nullifies multiple attempts by the Centre to impose a service tax on lottery distribution, reinforcing the constitutional kabook777 separation of powers. While lottery tickets are categorised as actionable claims, the Supreme Court held that operating a lottery scheme qualifies as betting and gambling. The court ruled that lotteries fall under “betting and gambling” as per Entry 62 of the State List in the Seventh Schedule of the Constitution, placing them under the exclusive domain of state legislatures.
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