The Strange Saga of Compensatory Taxes: Charting a Way Out of India's Maze of Doctrinal Uncertainty
| Pages | 119-133 |
| Date | 01 October 2022 |
| Published date | 01 October 2022 |
| Author | Rishabh Jain |
The Strange Saga of Compensatory Taxes
119
Cambridge Law Review (2022) Vol VII, Issue 2, 119–133
The Strange Saga of Compensatory Taxes:
Charting a Way Out of India’s Maze of
Doctrinal Uncertainty
RISHABH JAIN*
ABSTRACT
The ‘doctrine of compensatory taxation’ (‘DCT’) – that is, the levy of supposedly
non-restrictive taxes by States on account of facilitation of trade, commerce, and
intercourse (‘TCI’) – has been central to India’s constitutional jurisprudence on
TCI. At t he same time, its actual development presents what Chandrachud J
rightly calls “a maze of doctrinal uncertainty”. This essay closely analyzes the rise
and fall of the DCT to reveal underlying conflicts between its two referents which
explain the ‘maze of doctrinal uncertainty’ around it. It then argues that the DCT
was rightly rejected, but that the conceptual confusions introduced by it have not
been fully extirpated and have even figured in some of the grounds used to reject
the DCT. In the process, several key mistakes in Indian constitutional
jurisprudence are revealed, including a conflation of two different and contrary
doctrines under the common label of DCT, the rejection of the older ‘direct and
immediate impact’ doctrine due to conflation with DCT, and the mislocation and
misapplication of the fee -tax distinction. More broadly, the strange saga of the
DCT serves as a warning against over-emphasis in TCI jurisprudence on textual
factors to the exclusion of conceptual (particularly economic and logistical) ones.
Keywords: Indian Constitution; taxation; t rade and commerce; federalism; compensatory
taxes
* BA LLB (Hons.) Candidate (National Law University, Delhi). I am grateful to my family and f riends for their
critical support, to my teachers for their patient instruction, and to the editors and reviewers for their skilful help
with this article. Any errors that remain are my own.
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