SC QUASHES LUXURY TAX ON GUTKA, CIGARETTES

The Supreme Court gave a major relief to the tobacco industry when it ruled that states have no power to impose luxury tax on goods like gutka and cigarettes. The judgement, instantly welcomed by Godfrey Phillips India Ltd, CST Industries Ltd, ITC Ltd and Purandas Ranchoddas and Sons, will hit states like UP, West Bengal, Haryana and Andhra Pradesh.

A five-judge constitution Bench comprising Chief Justice R C Lahoti, Justice Ruma Pal, Justice Arun Kumar, Justice G P Mathur and Justice C K Thakker passed the nanimous 80-page order o a bunch of petitions filed by tobacco manufacturing companies.

The petitioners had argued that their products were already taxed under the Central Excise laws. Centre shares the revenue collected with the states with a condition that states would not impose sales tax on these products. Some states were imposing luxury tax on these items, which was violative of the laid down laws, the petitioners had said. This was upheld by the Bench. The Court order said that the state governments have no legislative competence to enact a law to impose luxury tax under entry 62 of List II.

Justice Ruma accepted the petitioners' argument that luxury tax could be imposed on services like massage parlours, casinos and hotels, but the concept of the luxury tax could not be extended to goods.