Tax levy under repealed VAT regime: Supreme Court issues Notice to Kerala Tax Authorities [Read Order]

The Supreme Court has sought for a response from commercial tax authorities in a case challenging the validity of certain provisions in the Kerala Goods and Services Tax (GST) law, which permit the assessment, imposition, and collection of tax under the repealed Value Added Tax (VAT) system.

The two-judge bench of Justices S. Ravindra Bhat and Dipankar Datta recently heard the arguments raised by S Mahesh Sahasranama for traders, including the petitioner, T S Belaraman.

Advocates Arjun Garg, Aakash Nandolia, and Sagun Srivastava also represented the petitioner.

The lead counsel argued that small traders and businesses have been greatly impacted by the pandemic and should be given the opportunity to recover rather than being burdened by oppressive tax laws. He stated that this case raises important constitutional issues and concerns the fundamental right to life and livelihood.

The levy of tax under the Value Added Tax (VAT) system was a consumption tax that was imposed on the value added to goods and services at each stage of production and distribution. It was earlier imposed on businesses that sell goods or services, and the tax is passed on to the consumer through the price of the goods or services.

VAT is calculated as a percentage of the value added to the product or service, and businesses are able to claim back the VAT they have paid on their own purchases as input tax credit. This system is used in many countries as an alternative to sales tax or excise tax.

The Special Leave Petition was submitted to the Supreme Court against a November 30, 2022 decision of the Kerala High Court in a group of petitions that challenged the constitutionality of the Kerala Goods and Services Tax Act, 2017.

The High Court had rejected the arguments made by the petitioners against the continued application of a 'saving' clause in the State GST Act to impose, collect, and assess tax under the repealed VAT law. The High Court had observed that the state has the sufficient legislative authority to incorporate the 'saving clause' into the Kerala GST Act. The Supreme Court bench, upon hearing the petitioner counsel, issued notice to the Commercial Tax Officers of Thiruvananthapuram and Thrissur, Kerala, along with other relevant authorities

To Read the full text of the Order CLICK HERE

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