High Court quashes Telangana VAT amendment legislation

High Court quashes Telangana VAT amendment legislation

Subject :Economy

Context: The Telangana High Court has quashed the Telangana Value Added Tax (Second Amendment) Act-2017 as “unconstitutional and devoid of legislative competence”.

What is Value Added Tax?

• It is a type of indirect tax levied on goods and services for value added at every point of production or distribution cycle, starting from raw materials and going all the way to the final retail purchase.
• VAT was introduced on April 1, 2005.

Goods and Services Tax:

• The intention of the Parliament in ushering in the Goods and Services Tax regime through 101st Constitution Amendment Act along with simultaneous enactment of the Central GST (CGST) Act and various State GST (SGST) Acts was to avoid multiplicity of taxes.
• Provisions of the Telangana VAT (Second Amendment) Act-2017 were ‘wholly inconsistent with the scheme of the Constitution 101st Amendment read with the CGST Act and TGST Act
• 101st Constitution Amendment Act had provisions denuding the States from making any law except on the sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption.
• Thus the States did not have the competence to make law to levy VAT or such tax on any goods other than the above goods
• Section 19 of the 101st Constitution Amendment Act can be construed as a sunset clause paving way for a window of one year to remove the laws inconsistent with the Act.