Kerala HC rules out service tax on lottery ticket sales

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In a recent development, the Kerala High Court has ruled that the sale of lottery tickets does not attract service tax under current legal provisions. The decision came in response to a writ petition filed by C.N. Mithran challenging the applicability of service tax on lottery ticket sales.

According to a report by Juris Hour, the court held that the sale of lottery tickets does not qualify as a taxable service. This conclusion was drawn based on the definitions provided in Section 65 of the Finance Act, 1994.

The petitioner sought a declaration that the transaction of selling lottery tickets is not covered under auxiliary or taxable services. He argued that such sales fall outside the scope of Section 65(105) of the Finance Act, 1994.

Justice Mohammed Nias C.P., who presided over the case, referred to a key Supreme Court ruling. The court relied on the precedent set in Union of India v. Future Gaming Solutions Pvt. Ltd.

In that case, the Supreme Court clarified that service tax is not applicable to transactions between lottery ticket purchasers and the Sikkim Government. The ruling stated that conducting a lottery is classified as a betting and gambling activity.

Both parties in the Kerala High Court case acknowledged that the matter had already been settled by the Supreme Court’s ruling. Based on this, the court agreed that service tax is not applicable to the sale of lottery tickets.

The judgment clarified that the sale of lottery tickets is not a service mentioned in the list of taxable services. The list is notified by the government and only those services are chargeable to service tax.

As a result, the court allowed the writ petition and ruled in favor of the petitioner. It found that the demand for service tax on lottery ticket sales is not valid under the Finance Act.

The case, titled C.N. Mithran v. Union of India, was registered under WP(C) No. 11406 of 2018. The judgment was delivered on April 10, 2025.

George Poonthottam appeared as the counsel for the petitioner, while Sreelal N. Warrier represented the respondent. The ruling reinforces that the conduct and sale of lottery schemes fall under gambling, not taxable services.

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