The Tripura High Court has ruled that state tax authorities cannot bring back powers that belonged to the repealed VAT regime, nor can they retain deposits collected under old VAT rules, once the Goods and Services Tax (GST) system has come into force. The court said such actions have no legal backing and violate the principles of natural justice.
The judgment came after a taxpayer challenged show-cause notices issued under the Tripura Value Added Tax (TVAT) Act, which had ceased to operate following the rollout of GST in 2017. Despite the law being repealed, authorities initiated proceedings almost nine years later, leading the court to call the move “arbitrary and unsustainable.”
The bench noted that deposits taken at the time of registration under the VAT regime were meant for compliance under a law that no longer exists. Therefore, the State cannot hold them indefinitely. Once the VAT system was replaced by GST, those deposits rightly belong to the taxpayers, the court said, directing the authorities to return the money without delay.
The ruling reinforces earlier legal interpretations from the Supreme Court, which has repeatedly clarified that states cannot amend, revive, or use VAT powers after GST came into effect. Any tax action must derive authority from a valid, existing statute—not one that has been abolished.
Legal experts say the Tripura judgment strengthens taxpayer rights and prevents misuse of outdated laws for revenue recovery. It also provides relief to businesses that still had deposits stuck under the old VAT system.
With this order, taxpayers in Tripura can now seek a refund of their VAT-era deposits and challenge any delayed or revival-based notices issued without lawful authority.
