Supreme Court leaves 1974 additional sales tax ruling in force

The Supreme Court has left in force its 1974 ruling that states may impose an additional sales tax calculated as a percentage of sales tax payable, while holding that a long-running legal reference on the issue is now academic and does not require adjudication. A seven-judge Constitution Bench headed by Chief Justice of India Surya Kant said the reference had lost practical significance after changes to the laws under challenge and the introduction of the Goods and Services Tax (GST) in 2017. The court did not reconsider the broader question, but clarified that the principle established in S. Kodar v. State of Kerala continues to govern the issue. Under the 1974 ruling, an additional levy calculated as a percentage of sales tax payable is an enhancement of the sales-tax rate, not a tax on dealers’ income. The court said the levy falls within the state taxing power under Entry 54 of List II as it then stood. It also said state legislatures’ competence to impose such a surcharge remains governed by the principles in S. Kodar. The reference arose from a challenge to Section 5A of the Orissa Sales Tax Act, 1947. That provision set additional-tax rates of 10% for dealers with...