Power of States to Tax Lotteries

On 23rd March 2022, the Supreme Court announced that states are eligible to tax lottery schemes that are operating within the territories of the state as it falls under the activity of betting and gambling which comes under taxation covered under the State List.


  • This judgment was received under separate appeals that were filed by the states of Kerala and Karnataka.
  • After losing before their respective high courts the two states appealed to the Supreme Court to determine whether the states had legislative competence to frame lotteries tax law.
  • The Supreme Court bench said that the states legislatures of Kerala and Karnataka were fully competent to enact a law for taxing lotteries and receive taxes under the activity of ‘betting and gambling’ which are being organized in the respective States. This also includes the lotteries conducted by state or central governments.

Which are the two laws that are being talked about?

The two laws were the Kerala Tax on Paper Lotteries, Act, 2005, and the Karnataka Tax on Lotteries Act, 2004.

Judgement of the respective High Courts of the states

In 2010 and 2011 the Karnataka HC passed orders stating that the legislature of Karnataka had no such competence to pass the lottery related law and directed the state to refund the amounts that were deposited by the states (Arunachal Pradesh, Nagaland, Sikkim, and Meghalaya) which had organized various lottery schemes.

In 2020 and 2021, the High Court of Kerala had passed orders stating that the 2005 Act on tax was invalid and unconstitutional.



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