With reference to the Supreme Court's February 2025 ruling on the taxation of lotteries, consider the following statements:
1. The Court ruled that the relationship between a State government and a sole lottery distributor is that of a principal and an agent.
2. The power to levy taxes on betting and gambling, including lotteries, falls exclusively under the State List.
Which of the statements given above is/are correct?

Question

Accepted Answer

B. 2 only — Statement 1 is incorrect because the Supreme Court explicitly held that the relationship is 'principal-to-principal', not principal-agent, meaning no service is rendered. Statement 2 is correct, as taxation on betting and gambling is governed by Entry 62 of the State List (List II) of the Seventh Schedule.

SC Quashes Service Tax on Lottery Distributors

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