Supreme Court Upholds States’ Power to Levy Additional Sales Tax, Says 1974 Verdict Still Holds

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).