The Supreme Court held on Wednesday (November 4, 2026) that an additional tax levied by a State legislature on the sale or purchase of goods will not fall outside the State’s competence.
Kodar versus State of Kerala ) that a cess levied as an increment to an existing sales tax has to be judged in the same way as the principal tax. A surcharge, the court explained, was only an enhancement of the principal levy, partaking of its character and drawing its validity from the same source. A seven-judge Bench confirmed a 1975 ruling ( S. Thus, the court reasoned that when a State Legislature, acting within its own taxing entry (Entry 54), chose to enhance the tax on the sale or purchase of goods for a class of dealers, the additional levy would take on the character and computation of the principal tax, and not change colour and transform into a tax on income.
“A surcharge on income tax, for instance, has always been computed as a percentage of the income tax payable,” the court differed with the assessees.
However, the lead opinion of the judgment authored by the CJI noted that the sales tax regime has undergone a change with the ensuing decades the case lay pending in the Supreme Court.
Newer legislation, first the Value Added Tax enactments and thereafter the Goods and Services Tax Act, 2017, have taken over, rendering the reference largely an “academic” exercise.
