The Federal High Court in Abuja has restrained the Delta State Government from enforcing a five per cent consumption tax on transactions already covered by the federal Value Added Tax regime.
Justice Peter O. Lifu, in a judgment delivered on October 9, nullified key provisions of the Delta State Hotel Occupancy, Restaurants and Departmental Stores Consumption Tax Law, 2017, relating to the disputed levy.
The court also set aside Section 7(b), Item 13 of the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order No. 77 of 2015, and issued a perpetual injunction barring the state’s Attorney-General, the Delta State Board of Internal Revenue and their agents from enforcing the affected provisions.
The suit was brought by the Nigeria Employers’ Consultative Association and Retail Supermarkets Nigeria Limited, which operates Shoprite stores, over concerns that the levy created an additional tax burden on businesses and consumers.
The claimants argued that the state could not impose a separate consumption tax on transactions already subject to VAT, contending that the arrangement resulted in overlapping tax obligations.
They said the disputed provisions exposed restaurants, supermarkets and departmental stores to an additional five per cent charge on specified goods and services, despite the existing federal tax regime.
The Delta State defendants had argued that VAT and the state consumption tax operated differently, maintaining that VAT was collected at multiple stages while the state levy applied at a single stage. They also contended that the state law excluded VAT from the computation of the consumption tax to prevent double taxation.
However, Justice Lifu rejected the argument that differences in the methods of assessment and collection were sufficient to justify the additional levy.
The judge considered the Supreme Court’s decision in Attorney-General of Lagos State v. Eko Hotels Limited (2018) 7 NWLR (Pt. 1619) 518, which addressed the relationship between federal VAT and state consumption taxes.
He also examined Section 4(5) of the 1999 Constitution, which provides that federal legislation prevails over an inconsistent state law to the extent of the inconsistency.
The judgment followed the dismissal of preliminary objections by the Attorney-General of the Federation and the Delta State defendants, who had challenged the court’s jurisdiction to hear the case.
Justice Lifu held that the challenge to the validity of the federal amendment order brought the matter within the Federal High Court’s jurisdiction under Section 251 of the Constitution.
NECA, which represents more than 480 corporate members, and Shoprite maintained that the disputed levy increased the tax burden on businesses operating in Delta State.
The court granted relief against the challenged provisions and barred the relevant state authorities from implementing or enforcing them.
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