The Federal High Court in Abuja has invalidated provisions of Delta State’s consumption tax legislation that imposed an additional five per cent charge on specified transactions already covered by the federal Value Added Tax regime.
Justice Peter O. Lifu delivered the judgement on October 9, 2026, in a suit instituted by the Nigeria Employers’ Consultative Association (NECA) and Retail Supermarkets Nigeria Limited, operators of Shoprite stores.
The claimants challenged the validity of Sections 3 and 4 of the Delta State Hotel Occupancy, Restaurants and Departmental Stores Consumption Tax Law, 2017, alongside Section 7(b), Item 13 of the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order No. 77 of 2015.
They argued that the disputed provisions created overlapping tax obligations on transactions already subject to federal VAT, thereby imposing an additional financial burden on businesses and consumers.
COURT EXAMINES FEDERAL AND STATE TAX POWERS
In determining the dispute, Justice Lifu considered the relationship between the federal VAT framework and state consumption taxes.
The defendants had argued that VAT and the state consumption tax operated differently, maintaining that the state levy applied at a single stage while VAT was collected across multiple stages.
They also contended that the state legislation excluded VAT from the computation of the consumption tax, thereby preventing double taxation.
The court rejected the argument that differences in the methods of assessment and collection were sufficient to justify the additional levy on transactions already covered by the VAT framework.
Justice Lifu also considered Section 4(5) of the 1999 Constitution, which establishes the supremacy of valid federal legislation over inconsistent state legislation to the extent of the inconsistency.
NECA AND SHOPRITE SECURE INJUNCTION
The court declared the challenged provisions invalid and set aside the relevant sections of the state law and the specified provisions of the federal amendment order.
It further issued a perpetual injunction restraining the Delta State Attorney-General and Commissioner for Justice, the Delta State Board of Internal Revenue and their agents from implementing or enforcing the affected provisions.
The claimants were represented by Dr Joseph Nwobike, SAN, of Osborne Law Practice, while Isaiah Bozimo, SAN, appeared for the Delta State defendants.
IMPLICATIONS FOR BUSINESSES
The judgment highlights the importance of constitutional boundaries in taxation and the need for consistency between federal and state fiscal legislation.
For businesses operating in Nigeria, the decision raises important questions about overlapping levies, statutory authority and the legal remedies available when government-imposed charges are challenged as inconsistent with the applicable tax framework.
The ruling is particularly significant for businesses in the hospitality, restaurant and retail sectors.
The judgment provides a fresh reference point in the continuing legal debate over taxation powers and the limits of state revenue legislation.
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