Surcharge and turnover tax form part of the interstate rate of tax under CST law for local sales parity.

Surcharge under the Surcharge on Taxes Act and turnover tax under section 5(2C) of the Kerala General Sales Tax Act, 1963 were treated as part of the "rate of tax" for section 8(2)(b) of the Central Sales Tax Act, 1956 on inter-State sales not covered by C forms. The reasoning was that section 8(2)(b) ties the inter-State levy to the tax rate applicable to local sales, and that surcharge and turnover tax are forms of sales tax included within the full State tax burden on the commodity. Their limited application to oil companies and turnover-based slabs did not exclude them from the statutory expression.

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Issues: Whether surcharge payable under the Surcharge on Taxes Act and turnover tax payable under section 5(2C) of the Kerala General Sales Tax Act, 1963 form part of the "rate of tax" for the purpose of section 8(2)(b) of the Central Sales Tax Act, 1956 on inter-State sales not covered by C forms.

Analysis: Section 8(2)(b) fixes the inter-State tax by reference to the rate applicable to the sale or purchase of the goods inside the appropriate State. The reasoning proceeded on the basis that surcharge and turnover tax are themselves forms of sales tax, and that the Supreme Court decisions relied on required a liberal construction of section 8(2)(b) so as to include the full sales tax burden attaching to the commodity under the State law. Although turnover tax under section 5(2C) applied only to oil companies and surcharge varied with turnover slabs, the Court held that these features did not take the levies outside the expression "rate of tax" in section 8(2)(b).

Conclusion: Both surcharge and turnover tax were held to form part of the rate of tax under section 8(2)(b) of the Central Sales Tax Act, 1956, and the revision failed.

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