Can’t weaponise taxation against goods from other states, says SC

NEW DELHI: The Supreme Court has reiterated that taxation cannot be weaponised to discriminate between locally manufactured goods and similar goods imported from other states, as it struck down a 2007 Rajasthan government notification granting value-added tax (VAT) exemption to certain local products.

- 

The March 9, 2007 notification had exempted VAT on asbestos cement sheets and bricks manufactured within Rajasthan if they contained at least 25 per cent fly ash. However, similar goods produced outside the state but sold in Rajasthan were taxed, giving local manufacturers a price advantage. Out-of-state producers challenged the move as discriminatory. A bench of Justices B V Nagarathna and K V Viswanathan held that the notification violated Article 304(a) of the Constitution. The provision allows states to tax goods imported from other states but bars discriminatory treatment visa-vis locally made products.