A seven-judge Supreme Court bench held that states could levy additional sales tax or surcharge on sales tax payable under the pre-GST regime, reaffirming the 1974 Kodar ruling while calling the issue largely academic after GST.

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• On November 4, a seven-judge Constitution Bench of the Supreme Court held that states could impose an additional sales tax or surcharge calculated as a percentage of the sales tax payable.
• The court held that such a levy amounts to an increase in the sales tax rate and falls within the legislative powers of states.
• The bench reaffirmed the five-judge ruling in S. Kodar v. State of Kerala (1974), which upheld the Tamil Nadu Additional Sales Tax Act, 1970.
• Kodar had rejected the argument that the levy was a tax on the dealer's income, treating it as an enhancement of the sales tax rate.
• The Tamil Nadu law in Kodar applied the additional tax to dealers whose annual turnover exceeded ₹10 lakh.
• The question before the court was whether a levy calculated on a validly levied sales tax falls outside the state legislature's competence under Entry 54 of the State List.
• The reference arose from the Arjun Flour Mills order, which had flagged a conflict in how the court had judged the nature of additional levies, and it was 27 years old.
• The bench had reserved judgment on September 22 before pronouncing the verdict.
• The court said the introduction of GST in 2017 had made the reference largely academic.
• Tax experts said the ruling does not authorise states to impose new surcharges or additional levies outside existing GST laws.
• Any additional levy today must derive authority from the present legal framework rather than the erstwhile sales tax provisions.

Tags: SalesTax, Entry54, KodarVsStateOfKerala