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Issues: Whether the State Government could validly enhance the rate of compounded tax under the composition scheme framed under Section 6 of the U.P. Value Added Tax Act, 2008, and whether the enhanced rate could apply prospectively to applications filed before the amendment.
Analysis: The composition scheme was held to be a statutory arrangement under Section 6 of the U.P. Value Added Tax Act, 2008, by which tax liability is accepted on an agreed basis for a financial year. The second proviso to Section 6(1) was construed as operating independently and as not limiting the State Government's power to alter the rate of compounding under the scheme. The scheme was also read as requiring a yearly option for compounding, so the rate applicable is the rate in force for the relevant period of the agreement. The amendment enhancing the compounded rate from 2% to 4% was treated as prospective, and the petitioners were found not to have any enforceable claim against the revised rate for periods after the amendment. The Court also rejected the contention that the amendment was arbitrary, discriminatory, or hit by promissory estoppel.
Conclusion: The enhancement of the compounded tax rate under the scheme was upheld, and the challenge to the amendment failed.
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