Court Nullifies Delta’s 5% Consumption Tax on VAT-Covered Transactions

• Sets aside disputed provisions of state law, bars enforcement

Wale Igbintade

The Federal High Court in Abuja has nullified provisions of the Delta State Hotel Occupancy, Restaurants and Departmental Stores Consumption Tax Law, 2017, which imposed a five per cent consumption tax on transactions already covered by the federal Value Added Tax (VAT) regime.

Justice Peter O. Lifu, in a judgment delivered on October 9, 2026, declared the challenged provisions invalid and set aside Sections 3 and 4 of the Delta State law, as well as Section 7(b), Item 13 of the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order No. 77 of 2015.

The court also issued a perpetual injunction restraining the Delta State Attorney-General and Commissioner for Justice, the Delta State Board of Internal Revenue, and their agents or representatives from implementing or enforcing the affected provisions.

The suit was instituted by the Nigeria Employers’ Consultative Association (NECA) and Retail Supermarkets Nigeria Limited, which operates Shoprite stores, against the Attorney-General of the Federation, the Delta State Attorney-General and Commissioner for Justice, and the Delta State Board of Internal Revenue.

The plaintiffs commenced the action through an Originating Summons filed by their counsel, Dr Joseph Nwobike, SAN, of Osborne Law Practice, who led their legal team, with G.D. Nwani also appearing for them.

J.O. Obaje represented the Attorney-General of the Federation, while Isaiah Bozimo, SAN, appeared for the Delta State defendants.

In the suit, NECA and Shoprite challenged the constitutionality and validity of the disputed provisions, arguing that the additional consumption tax created an overlapping tax burden on goods and services already subject to VAT.

They contended that the state could not lawfully impose a separate consumption tax that substantially overlapped with the federal VAT regime, as this would increase the tax burden on businesses and consumers.

The plaintiffs specifically sought declarations that Sections 3 and 4 of the Delta State law, which provide for the imposition and collection of the consumption tax, were inconsistent with the federal VAT framework and exceeded the state’s legislative competence to the extent of the alleged overlap.

They also challenged Section 7(b), Item 13 of the Schedule to the 2015 amendment order, arguing that it could not validly authorise the imposition of a separate consumption tax on transactions already covered by VAT.

The plaintiffs maintained that the disputed levy imposed an additional five per cent charge on specified goods and services supplied by restaurants, supermarkets and departmental stores, potentially exposing businesses to overlapping tax obligations.

In determining the dispute, Justice Lifu examined whether Delta State could lawfully impose a separate consumption tax on transactions already covered by the federal VAT regime.

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 VAT and state consumption taxes.

The defendants had argued that the two taxes operated differently.

According to them, VAT was collected at multiple stages of a transaction, while the state consumption tax applied at a single stage.

They further contended that Section 4 of the Delta State law excluded VAT from the computation of the consumption tax, thereby preventing 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 court examined the legality of imposing a separate tax on transactions already covered by the federal VAT framework and consequently invalidated the challenged provisions.

Justice Lifu also considered the constitutional provisions governing legislative powers, particularly Section 4(5) of the 1999 Constitution, which provides that where a state law is inconsistent with a valid law enacted by the National Assembly, the federal law prevails 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 suit.

Justice Lifu held that the plaintiffs’ challenge to the validity of the federal amendment order brought the dispute within the Federal High Court’s constitutional jurisdiction under Section 251 of the Constitution.

NECA, which represents more than 480 corporate members, and Shoprite had argued that the disputed provisions imposed an additional tax burden on businesses operating in Delta State.

Shoprite, which operates retail outlets in Delta State and other parts of Nigeria, maintained that the levy adversely affected its business by imposing an additional charge on transactions already subject to VAT.

The plaintiffs had asked the court to declare the challenged provisions null and void to the extent of their alleged inconsistency with the federal VAT regime, set them aside and restrain the relevant Delta State authorities from enforcing them.

The court granted relief against the challenged provisions and issued a perpetual injunction barring their enforcement.