The Telangana High Court had quashed the Telangana Value Added Tax (Second Amendment) Act-2017.
A bench of Chief Justice Ujjal Bhyuan and Justice P. Madhavi Devi, pronouncing the verdict in a batch of writ petitions challenging the Act, declared that the Second Amendment Act was ‘unconstitutional being devoid of legislative competence’. With the striking down of the Act by the HC, all the notices issued to the petitioners and the orders passed by authorities under Section 32 (3) of the VAT Act were set aside and quashed.
The bench noted that the intention of Parliament in ushering in the Goods and Services Tax (GST) regime through the 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’, the bench said. The judgment said the Constitution Amendment Act had provisions stopping 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. The bench said Section 19 of the 101st Constitution Amendment Act can be construed as a sunset clause paving the way for a window of one year to remove the laws inconsistent with the Act.
But the Telangana VAT (Second Amendment) Act, instead of removing the inconsistencies, introduced certain provisions like extending limitation to enable initiation of fresh proceedings. These were completely in conflict with the Constitution Amendment Act, the bench said.
