Seven-judge bench upholds a State's power to add a surcharge on sales tax and calls the old reference academic

4 November 2026

A seven-judge Constitution Bench of the Supreme Court led by Chief Justice Surya Kant has held that a State legislature may levy an additional tax, surcharge or cess calculated on an existing sales or purchase tax. The issue reached the Court through a challenge to Section 5A of the Orissa Sales Tax Act of 1947, under which dealers crossing stated turnover levels paid an extra tax. The appellants argued the levy strayed beyond Entry 54 of the State List, taxes on the sale or purchase of goods, and trespassed on Parliament's power over taxes on income in Entry 82 of the Union List. The Court approved S, kodar v. State of Kerala and said an additional tax computed as a percentage of sales tax payable is only an enhancement of the sales tax rate. The bench also recorded that India Cement v, state of Tamil Nadu is no longer good law after the nine-judge ruling in Mineral Area Development Authority. Because the statutes involved have since been replaced, the Court said the reference made in 1999 has become academic and disposed of it. Justice K.V, viswanathan wrote a concurring opinion.