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Supreme Court on Lottery Taxation Issue

Supreme Court on Lottery

Supreme Court ruled that a state’s government has the authority to place taxes on lotteries organized by other states within its own borders. Previously, the Karnataka High Court made a significant ruling against the Karnataka Police (Amendment) Act, 2021, which had prohibited online gambling and skill-based gaming platforms. Back in 2020, the Supreme Court also determined that lotteries, gambling, and betting could be subject to taxes under the Goods and Services Tax (GST) Act of 2017.


  • The Supreme Court recently made a significant decision concerning the taxation of lotteries.
  • This case involved appeals from the Karnataka and Kerala governments.
  • Both states were challenging their High Courts’ rulings that had struck down their laws imposing taxes on lotteries run by other states, such as Nagaland, Arunachal Pradesh, Sikkim, and Manipur, within their territories.
  • The High Courts had declared the tax laws of Karnataka and Kerala as invalid and unconstitutional.
  • Furthermore, the High Courts ordered these two states to refund the taxes they had collected from lotteries to the northeastern states mentioned earlier.

What was the Supreme Court’s Ruling?

  • The court stated that lotteries are a form of gambling.
  • Betting and gambling fall under the jurisdiction of the state government as per the Constitution’s Seventh Schedule.
  • The state has the authority to impose taxes on activities related to betting and gambling, which includes lotteries.
  • Betting and gambling cover various activities like horse racing, wheeling, and other local forms of gambling.

Lottery Rules in India: Lotteries are legal in India, but they should be organized by the state government, and the draw must take place within that state.

Indian Penal Code: The Indian Penal Code has rules against engaging in obscene activities in public places. These rules could apply if explicit content is used for promoting betting and gambling.

Foreign Exchange Management Act: This act prohibits sending money earned from lottery winnings, racing, or gambling outside of India.

Information Technology Rules: According to these rules, internet and network service providers, as well as search engines, are not allowed to host content that supports gambling directly or indirectly.

Income Tax Act: India’s income tax policies cover all aspects of the gambling industry, both directly and indirectly, making it a part of the country’s Gross Domestic Product (GDP).

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