In Brief
The Supreme Court upheld the constitutional validity of the Goods and Services Tax (Compensation to States) Act, 2017 and related cess rules. The Court rejected the petitioner's challenges that the legislation lacked legislative competence, violated the 101st Constitutional Amendment, or constituted double taxation. The Court held that Parliament has residuary power under Article 248 and Entry 97 of List I to enact the cess legislation. The Compensation Cess, though levied on the same taxable event as GST, is a separate impost for a distinct purpose (compensating States for revenue loss) with different distribution rules, and thus does not violate constitutional provisions against overlapping taxation. The petitioner was denied set-off of previously paid Clean Energy Cess against the new Compensation Cess, as these are entirely different levies serving different purposes and no legislative scheme provided for such credit.
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