Transit state vs. Free trade: The Allahabad HC draws the limits of GST power

| Last updated: 27 May 2026

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The Allahabad High Court, in a significant ruling, has clarified the limits of GST enforcement powers for states through which goods merely transit. The court held that while transit states can inspect goods and verify documents, they cannot impose penalties on inter-state transactions that have no tax nexus with their territory. This judgment reaffirms the constitutional guarantee of free inter-state trade under Article 301 and prevents excessive GST enforcement from hindering commerce.

When GST Enforcement Crossed Its Natural Boundaries In one of the most significant GST judgments delivered in recent times, the Allahabad High Court in M/s Maruti Enterprises v. State of U.P. and Another [2026-VIL-515-ALH dated 14.05.2026] delivered an extensive 34-page judgment examining the powers of GST authorities of a transit State during inter-State movement of goods. The controversy arose when consignments originating from States such as West Bengal, Assam, and Bihar, and destined for De

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About the Author

Raj Jaggi

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CA. Raj Jaggi is a Chartered Accountant based in New Delhi, primarily practising in the field of Goods and Services Tax (GST) consultancy, litigation support, and advisory services. After being associated with the leading indirect tax firm A.K. Batra and Associates for nearly 19 years, from June 2007 to March 2026, he ... Read more

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