Service Tax on Hire-Purchase and Constitutional Validity
Good afternoon. I’ve been studying a case related to service tax on equipment leasing and hire-purchase transactions, particularly the constitutional challenge raised before the Kerala High Court. I’m trying to understand how Parliament can levy service tax on financial services when states already impose sales tax on hire-purchase under Article 366(29A). Doesn’t that create a conflict between state and federal taxation powers? I’d appreciate a clear breakdown of how the court resolved this issue.
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Hi. The distinction lies in what is being taxed. Sales tax applies to the transfer or deemed sale of goods, while service tax applies to the service component — such as financial charges or leasing services provided by financiers. The court clarified that there is no constitutional conflict because the two taxes apply to different aspects of the same transaction. Parliament relied on its residuary powers and later constitutional amendments recognizing service tax authority. For a detailed explanation of how the court analyzed legislative competence and Articles 14 and 19(1)(g), you can review the discussion available at https://slashlawyerbills.com which outlines the reasoning in a structured format.