Levying Service Tax on Lotteries : An Enigma for Parliament?

While the power of the legislature to levy tax on a particular subject-matter is paramount, subject only to the constitutional limitations, there are a few subjects which by their intrinsic nature have eluded their eligibility to tax. Lotteries organised by the various States of India, have significant revenue garnering opportunity in as much as huge value-addition is involved at each level of intermediary in this industry. However, due to fallacy in statutory enactments pertaining to service tax on lotteries or otherwise, the Parliament has not been successful in bringing them within the ambit of service tax. This article traces the legal position on this aspect culminating with a recent decision of the Sikkim High Court. This article traces the past and the present of the issues relating to levy of service tax on lotteries, a subject which has perhaps been the subject-matter of more litigation than any other issue in service tax in the two decades since the levy has been in vogue. For the ease of expediency and to present a clear picture, this article is divided into seven parts. The first part serves as a backgrounder to relevant constitutional and statutory provisions relating to levy of service tax in India. The second part revisits the levy of sales tax on lotteries to underscore important nuances relating to jurisprudential foundations of lotteries per se and its reflections on fiscal legislations. The third, fourth, fifth and sixth part focus on the challenges to the levy of service tax on lotteries for the period 01.07.2003 to 15.05.2008, 16.05.2008 to 30.06.2010, 01.07.2010 to 30.06.2012 and 01.07.2012 onwards respectively. These parts highlight the highs and lows of the competing considerations during the respective regimes in the wake of relevant statutory provisions applicable during the respective periods. The seventh and last part concludes by drawing lessons from the tumultuous litigation relating to service tax on lotteries