Vakil Help Desk News: a seven-judge Constitution Bench of the Supreme Court has held that a long-pending reference on a State's power to impose an additional levy on sales tax has become academic after GST, while observing that such a levy was a valid tax on the sale of goods.
Vakil Help Desk News, Tax & GST. A seven-judge Constitution Bench of the Supreme Court has disposed of a reference pending since 1999 on whether a State could impose an additional tax computed on sales tax.
The question
The case concerned an additional tax levied as a percentage of sales tax on dealers above certain turnover thresholds. The issue was whether a levy calculated on sales tax falls within a State's power to tax the sale of goods (Entry 54 of the State List), or trespasses on Parliament's power to tax income (Entry 82 of the Union List). Earlier decisions appeared to pull in different directions.
What the Court held
- An additional tax computed as a percentage of sales tax is simply a rate enhancement and remains a tax on the sale or purchase of goods — within the State's competence.
- However, because the constitutional entries and State laws in question have been replaced by GST, the question no longer has practical relevance. The reference was held to be rendered academic and disposed of.
- Some issues — including a surcharge question and a cess-and-Consolidated-Fund question — were left open, and the individual matters were sent to a regular bench.
What this means for you
The Court confirmed that an additional tax measured on sales tax was a valid tax on goods, but closed the reference as academic because GST has replaced that framework — a reminder of how much the tax map has changed. Pending assessment disputes from that era still need individual attention. We advise businesses on GST and legacy tax disputes.