The Supreme Court held on November 4, 2026, that an additional tax levied
GS2Polity · Governance · IR· Constitution, amendments & basic structure· Prelims + Mains·
Why in news
The Supreme Court held that an additional tax (cess) levied by a State legislature on the sale or purchase of goods remains within the State's competence as an enhancement of the principal tax rate.
Background
A seven-judge Constitution Bench confirmed a 1975 ruling (S. Kodar vs State of Kerala) regarding the legislative competence of States. The court ruled that a cess computed as a percentage of sales tax is a tax on the sale or purchase of goods under Entry 54 of List II.
Facts for Prelims
- ConstitutionEntry 54 of List II of the Seventh Schedule covers taxes levied by States on the sale or purchase of goods other than newspapers.
- BodyThe Supreme Court's seven-judge Bench confirmed the 1975 S. Kodar vs State of Kerala ruling.
- FactThe judgment was delivered on November 4, 2026, based on petitions dating back to 1994.
For Mains
Q. Discuss the constitutional validity of 'tax on tax' structures and the extent of State legislative competence regarding fiscal levies under the Seventh Schedule.
Dimensions to cover in your answer
- Federal friction: Balancing State autonomy in fiscal policy against the constitutional definition of 'tax on goods' vs 'tax on income'.
- Judicial interpretation: The distinction between a surcharge as a rate enhancement versus a separate fiscal burden on turnover.
Keywords: Seventh Schedule · Legislative Competence · Fiscal Federalism · Cess · Sales Tax · Constitutional Bench
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