Supreme Court deems states' sales-tax surcharge reference academic after GST

The case concerns a reference to a Seven-Judge Bench regarding whether State Legislatures have the constitutional competence to levy a surcharge calculated as a percentage of sales tax payable, rather than directly on turnover, under Entry 54 of List II of the Constitution.

Who it concerns: Petitioners: Arjun Flour Mills and others; Respondents: The State of Odisha Finance Department and others; Bench: Seven-Judge Bench headed by CJI Surya Kant.

What the court decided

• The Court examined whether the reference remains live or has become academic due to subsequent legal developments.
• The Court noted that the sales tax regime under which the impugned levies were imposed has been replaced by Value Added Tax enactments and subsequently the Goods and Services Tax Act, 2017.
• The Court analyzed the distinction between the subject matter of a tax and the measure by which it is quantified.
• The Court observed that the device of computing a levy as a percentage of another tax is consistent with constitutional provisions allowing surcharges on Union duties.

Also in the document

• The judgment notes that the legal landscape has undergone a fundamental transformation during the pendency of the reference, specifically the replacement of the sales tax regime by GST.
• The Court references prior decisions by a Two Judge Bench, a Constitution Bench, and a Nine Judge Bench that have addressed related issues.
• The document states that the reference was made nearly three decades ago.