LI Network
Published on: October 26, 2023 at 15:38 IST
A Division Bench of the Supreme Court has ruled on the validity of Value Added Tax (VAT) Amendment Acts in various states, including Telangana, Gujarat, and Maharashtra, in the post-Goods and Services Tax (GST) era.
These amendments were challenged in multiple high courts, leading to a comprehensive judgment from the apex court.
At the heart of the matter was the legislative competence of states to enact amendments to their VAT laws after the introduction of the GST regime on July 1, 2017. Section 19 of the Constitution (101st Amendment) Act, 2016, established a one-year time limit to amend laws related to taxation of goods and services in accordance with the newly amended Constitution. The question was whether states could make amendments beyond this prescribed period.
The Supreme Court, comprising Justices S. Ravindra Bhat and Aravind Kumar, made the following determinations:
- The amendments to the Telangana VAT Act and Gujarat VAT Act, enacted after July 1, 2017, were deemed invalid due to a lack of legislative competence.
- The judgment of the Bombay High Court, which upheld an amendment to the Maharashtra VAT Act, was set aside, particularly regarding the pre-deposit requirement, which was held to be void.
In the case of Telangana and Gujarat, the concerned states appealed the decisions of their respective high courts, which had invalidated the amendments. However, in the case of Maharashtra, where the high court upheld the amendment, the appellants were the assesses.
The Supreme Court also provided crucial insights:
- Section 19 of the Constitution (101st Amendment) Act, 2016, and Article 246A, both enacted to facilitate the transition to the GST regime, allowed state legislatures and Parliament to amend or repeal existing laws, but this power was not subject to limitations under Section 19. The provision constituted the expression of sovereign legislative power.
- The Court distinguished between ordinary and constitutional laws, emphasizing that Section 19 was enacted as part of the constituent power, giving it the same force as the rest of the constitutional amendment. It was not comparable to a mere parliamentary enactment.
- The Court clarified that the power to amend or repeal was not subject to limitations under Section 19, as long as it was done within the stipulated time frame, allowing necessary changes to existing laws.
- The Court examined the cases of Telangana, Gujarat, and Maharashtra in detail. In Telangana, an ordinance introduced changes to the local VAT Act before the one-year deadline for amendments, but by the time it was enacted, the state legislature had lost its legislative competence. In Gujarat, an amendment with retrospective effect was deemed unconstitutional after the GST laws came into effect. In Maharashtra, the legislative competence ceased to exist when the GST regime began, rendering retrospective amendments void.
The Supreme Court’s conclusions reflect its interpretation of the constitutional amendments, highlighting the need for a seamless transition to the GST regime. This landmark judgment clarifies the boundaries of state legislative power in amending VAT laws post-GST and sets a precedent for similar cases.
Case Title: The State of Telangana & Ors. V. M/S Tirumala Constructions., Civil Appeal No(S). 1628 Of 2023