In Brief
The Supreme Court held that State Legislatures of Karnataka and Kerala have constitutional competence to levy taxes on lotteries conducted by any entity—including the Central Government or other States—within their territories. Although Entry 40 of List I reserves regulation of government-organized lotteries to Parliament, taxation of lotteries is a distinct field covered by Entry 62 of List II, which applies to 'betting and gambling' activities. Since lotteries are a species of gambling regardless of who organizes them, and taxation is a separate power from regulation, States can tax lottery activities within their jurisdictions. The Court rejected the argument that State-organized lotteries are excluded from the State's taxation power, affirming that the impugned Acts were valid exercises of State legislative competence. The High Court judgments declaring the Acts unconstitutional were set aside."
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