Seven-Judge Bench: Sales-Tax Surcharge Reference Academic After GST - S. Kodar Holds the Field

On 4 November 2026, a seven-judge Constitution Bench of the Supreme Court, headed by Chief Justice Surya Kant, answered a 27-year-old tax reference as "rendered infructuous", holding that a 1975 Constitution Bench ruling - S. Kodar v. State of Kerala - continues to settle the question. The reference asked whether States could levy a sales-tax surcharge computed as a percentage of the sales tax payable by a dealer, or whether such a "tax on tax" fell outside their legislative competence.

What the seven-judge Bench held

The reference arose from a perceived conflict between Hoechst Pharmaceuticals (1983) and India Cement (1990), and was enlarged in 1999 to reconsider S. Kodar (1975). It travelled from a two-judge Bench to a Constitution Bench and finally to this seven-judge Bench.
The Court held that S. Kodar "squarely holds" that an additional tax or surcharge computed as a percentage of the sales tax payable is simply an enhancement of the rate of sales tax, and is a tax on the sale or purchase of goods within Entry 54 of List II of the Seventh Schedule, as it then stood. That decision "continues to hold the field".
The premise of India Cement - that royalty is a tax - was overruled by the nine-judge Bench in Mineral Area Development Authority (MADA) in 2024. With that shadow lifted, no subsisting decision conflicts with S. Kodar, so the reference did not survive for adjudication.
The Court also noted that the sales tax regime under which the levies were imposed has been replaced, first by Value Added Tax and then by the Goods and Services Tax Act, 2017, making the referred question one of "no prospective significance".

What was left open

The validity of Section 30-AA of the Punjab General Sales Tax Act, 1948, which required otherwise-exempted industrial units to pay the surcharge.
Whether proceeds of the cess under the Punjab Social Security Act, 2000 could be credited directly to the Punjab Social Security Fund without first forming part of the Consolidated Fund of the State under Article 266.
All individual assessments, periods of levy and consequential reliefs - the appeals return to regular Benches for decision on their own merits.

Separate concurring judgment

Justice K.V. Viswanathan, in a separate opinion, agreed that S. Kodar "has been correctly decided, continues to be a good law and needs no reconsideration", adding that there is no real conflict between S. Kodar and Hoechst, and that India Cement belonged to a different genre of dispute. He recorded the Union's statement that a curative petition against MADA is pending, and that Parliament in 2026 inserted Section 9-D in the MMDR Act subjecting States' power to tax mineral rights to conditions prescribed by the Centre.

Why this matters for aspirants

Polity: Seventh Schedule entries (Entry 54, List II), Article 246, Article 266 and the Consolidated Fund, and how Constitution Benches resolve inter-Bench conflicts.
Economy: the transition from sales tax to VAT to GST (101st Constitutional Amendment), and the continuing litigation over legacy levies.
Current linkage: pairs with the 2024 nine-judge MADA ruling on States' power to tax mineral rights - a frequent prelims and mains theme.