In an important verdict delivered on Wednesday, the Supreme Court upheld the power of States to levy additional sales tax or surcharge. In its judgment, the Court said that the Constitution Bench judgment of 1974, whereby the States have been empowered to levy additional sales tax or surcharge, continues to be operative.

The additional charge or surcharge is levied as a percentage of the existing sales tax. The seven-judge Constitution Bench, presided over by Chief Justice of India (CJI) Surya Kant, has held that the legal reference made more than 26 years ago is now irrelevant and purely theoretical in nature.

The Court has emphasized that the earlier judgment of the five-judge bench in S. Kodar v. State of Kerala (1974) still holds its ground. That earlier decision upheld the additional sales tax on the grounds that the surcharge, or additional tax, based on sales tax was essentially an increase in the sales tax rate and not a tax on dealers' income.

The Court also held that the legislative competence of states to impose such surcharges would be governed by the principles laid down in the S. Kodar case. The CJI stated that since the relevant statutory provisions had been amended and the Goods and Services Tax (GST) law had been implemented in the country, there was no need to reconsider the issue.

The seven-judge Constitution Bench comprised the CJI, Justice K.V. Vishwanathan, Justice S.V. Bhatti, Justice Joymalya Bagchi, Justice N.V. Anjaria, Justice Arun Palli, and Justice V. Mohana.

The dispute primarily involved a challenge to Section 5A of the Odisha Sales Tax Act, 1947. Under this, dealers with a certain turnover were charged an additional tax of 10% to 15%.

The petitioners had questioned whether the state legislature had the power to impose such a tax under Entry 54 of the Second List of the Seventh Schedule of the Constitution, or whether it was a 'tax on income' within the jurisdiction of Parliament.

However, during the hearing, Solicitor General Tushar Mehta also argued that after the implementation of the GST system in 2017, this dispute had largely remained theoretical (academic).

In an important verdict delivered on Wednesday, the Supreme Court upheld the power of States to levy additional sales tax or surcharge. In its judgment, the Court said that the Constitution Bench judgment of 1974, whereby the States have been empowered to levy additional sales tax or surcharge, continues to be operative.

The additional charge or surcharge is levied as a percentage of the existing sales tax. The seven-judge Constitution Bench, presided over by Chief Justice of India (CJI) Surya Kant, has held that the legal reference made more than 26 years ago is now irrelevant and purely theoretical in nature.

The Court has emphasized that the earlier judgment of the five-judge bench in S. Kodar v. State of Kerala (1974) still holds its ground. That earlier decision upheld the additional sales tax on the grounds that the surcharge, or additional tax, based on sales tax was essentially an increase in the sales tax rate and not a tax on dealers' income.

The Court also held that the legislative competence of states to impose such surcharges would be governed by the principles laid down in the S. Kodar case. The CJI stated that since the relevant statutory provisions had been amended and the Goods and Services Tax (GST) law had been implemented in the country, there was no need to reconsider the issue.

The seven-judge Constitution Bench comprised the CJI, Justice K.V. Vishwanathan, Justice S.V. Bhatti, Justice Joymalya Bagchi, Justice N.V. Anjaria, Justice Arun Palli, and Justice V. Mohana.

The dispute primarily involved a challenge to Section 5A of the Odisha Sales Tax Act, 1947. Under this, dealers with a certain turnover were charged an additional tax of 10% to 15%.

The petitioners had questioned whether the state legislature had the power to impose such a tax under Entry 54 of the Second List of the Seventh Schedule of the Constitution, or whether it was a 'tax on income' within the jurisdiction of Parliament.

However, during the hearing, Solicitor General Tushar Mehta also argued that after the implementation of the GST system in 2017, this dispute had largely remained theoretical (academic).