Supreme Court Upholds Telangana VAT (Second Amendment) Act Unconstitutional

Supreme Court Law Insider

LI Network

Published on: October 20, 2023 at 16:53 IST

In a significant legal decision, the Supreme Court of India has upheld a verdict by the Telangana High Court, declaring the Telangana Value Added Tax (Second Amendment) Act of 2017 as unconstitutional.

The Supreme Court bench, consisting of Justices S Ravindra Bhat and Aravind Kumar, ruled in favor of the Telangana High Court’s judgment, affirming that the amendments made to the VAT Act in Telangana lacked legislative competence.

The legal proceedings included appeals against the judgments of both the Telangana High Court and the Bombay High Court. The Telangana High Court had previously determined, in July 2022, that the Telangana Value Added Tax (Second Amendment) Act of 2017 was unconstitutional.

The judgment, issued by the bench of then Chief Justice Ujjal Bhuyan and Justice P Madhavi Devi, had set aside the Second Amendment Act and the notices issued under it.

The Telangana High Court’s decision was based on the principle that Parliament’s intention in introducing the Goods and Services Tax (GST) regime was to eliminate the multiplicity of taxes by consolidating various indirect taxes into a single tax.

The Telangana High Court further concluded that with the enactment of the 101st Constitution Amendment Act in 2016, the State legislature’s legislative competence was restricted. Consequently, the legislature did not have the authority to enact the Second Amendment Act, especially since the VAT Act had been repealed in most cases, making any amendment unnecessary.

The Telangana High Court emphasized that Section 19 of the Constitution Amendment Act did not grant the State legislature the power to pass the Second Amendment Act, as it was a transitional provision and not a source of legislative authority.

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