Constitutionality of KVAT Act was in question in the case. The writ petition filed by State of Sikkim was dismissed by the High Court, and validity of the Act was upheld.

Lotteries organized by Government of India or Government of State is within the ambit of legislative competence of the Parliament, and so State has no legislative competence to levy tax on paper lotteries.

State of Kerala lacked legislative competence to impose tax under the impugned Act on State-organized lotteries. It derived its source of power from Entry 62 of List II of the Constitution of India. Also, KVAT Act intended to introduce indirect taxation on the sale of lottery tickets within the State.

Kerala Tax on Paper Lotteries Act 2005 was unconstitutional. State of Sikkim was directed to be entitled for refund of the tax paid from the State Government, on their producing proper accounts and proof as to who had ultimately borne the burden.