Introduction:

In a significant judgment delivered on April 30, the Supreme Court of India dismissed appeals filed by the Life Insurance Corporation (LIC) against the demand for stamp duty by the State of Rajasthan. The Court upheld the state’s legislative competence to levy stamp duty on insurance policies executed within its jurisdiction, subject to rates determined by central legislation.

Arguments of Both Sides:

The LIC contended that only the Union Government has the power to levy and collect stamp duty on insurance policies, citing Entry 91 of List I. On the contrary, the State of Rajasthan argued that it possesses the legislative competence to impose stamp duty under Entry 44 of List III, subject to rates prescribed by the Parliament.

Court’s Judgment:

The Supreme Court ruled in favor of the State of Rajasthan, affirming its authority to levy and collect stamp duty on insurance policies issued within its territory. While Entry 91 of List I vests the Parliament with the exclusive power to prescribe stamp duty rates, Entry 44 of List III empowers the state government to enact laws for stamp duty imposition. The Court emphasized that the state law prevails over central legislation under Article 254(2) of the Constitution.