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Informist, Wednesday, Aug. 12, 2026

 

NEW DELHI – A seven-judge Constitution bench of the Supreme Court will decide if states have the power to impose an additional levy on sales tax. The petition, pending for three decades, has been listed for hearing on Sept. 22. The bench, headed by Chief Justice of India Surya Kant, said it will begin the hearing at 1400 IST, allowing its constituent judges to hear regular matters in the morning session.

 

The case has its genesis from the Odisha government amending the Orissa Sales Tax Act, 1947, and inserting Section 5A in 1997. With this, the state government levied an additional tax of 10% on dealers with an annual turnover between INR 1 million and INR 10 million. It also imposed an additional tax of 15% if the turnover exceeded INR 10 million.

 

The petitioner, Arjun Flour Mills, argued that the state government's amendment encroached on Parliament's domain. The power to impose taxes based on annual turnover is part of the Union's domain under Entry 82 of the Union List, the petitioner said.

 

A provision of the Bihar Finance Act, 1981, similar to Section 5A of the Odisha law, was upheld by the apex court in 1983, saying the surcharge fell into the category of a sales tax, which fell squarely within the state's powers under Entry 54 of the State List. The apex court had held that the law-making powers of the state and the Union regarding taxation are distinct and clear, with no overlap. Another apex court verdict had upheld an additional sales tax imposed under the Tamil Nadu Additional Sales Tax Act, 1970.

 

However, in 1989, the top court had taken a different view regarding the provisions of the Madras Panchayats Act, 1958, wherein Section 115 of the Act had imposed a cess on land revenue while Section 116 had imposed a surcharge on the cess paid under Section 115 for excavation and mining. In that case, the court had said these provisions were ultra vires the Seventh Schedule of the Constitution. It had observed that the additional cess was not on the land but on the royalty payable for land excavation, which was not within the state's power to legislate.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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