Federal High Court Bars Delta From Enforcing Overlapping Consumption Tax

By AMANDA EZE

Court Declares Tax Provisions Invalid

THE Federal High Court in Abuja has nullified provisions of Delta State’s 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 delivered the judgment on 9 October 2026. In the ruling, he set aside Sections 3 and 4 of the state law, 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.

Furthermore, the court 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 enforcing the affected provisions.

NECA, Shoprite Challenged the Levy

The suit was instituted by the Nigeria Employers’ Consultative Association (NECA) and Retail Supermarkets Nigeria Limited, which operates Shoprite stores. They challenged the constitutionality and validity of the disputed provisions, arguing that the additional levy created overlapping tax obligations on transactions already subject to VAT.

According to the claimants, the state could not lawfully impose a separate consumption tax to the extent that it duplicated the federal tax regime. They maintained that the additional five per cent charge increased the financial burden on businesses and, potentially, consumers.

Consequently, they asked the court to declare the relevant provisions invalid insofar as they conflicted with the federal VAT framework or exceeded the state’s legislative powers.

Dr. Joseph Nwobike (SAN) of Osborne Law Practice led the claimants’ legal team, which included G.D. Nwani. Meanwhile, J.O. Obaje represented the Attorney-General of the Federation, while Isaiah Bozimo (SAN) appeared for the Delta State defendants.

Judge Rejects Defendants’ Arguments

During the proceedings, the defendants argued that VAT and the state consumption tax operated differently. They maintained that VAT applied at multiple stages of a transaction, whereas the consumption tax applied at a single stage.

They also contended that Section 4 of the Delta State law excluded VAT from the calculation of the consumption tax, thereby preventing double taxation.

However, Justice Lifu rejected the argument that differences in assessment and collection methods were sufficient to justify the additional levy on transactions already covered by the federal VAT regime.

In reaching his decision, the judge considered the Supreme Court’s ruling 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 court subsequently invalidated the challenged provisions and restrained the relevant Delta State authorities from enforcing them.

Constitutional Powers at the Centre of the Dispute

Justice Lifu also examined Section 4(5) of the 1999 Constitution, which provides that a valid federal law prevails over an inconsistent state law to the extent of the inconsistency.

The constitutional question formed a central part of the dispute because the claimants challenged provisions of both the Delta State law and the federal amendment order governing the collection of taxes and levies.

Earlier, the Attorney-General of the Federation and the Delta State defendants had raised preliminary objections challenging the court’s jurisdiction. Nevertheless, Justice Lifu dismissed those objections.

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

Implications for Businesses & Tax Administration

NECA, which represents more than 480 corporate members, argued that the disputed provisions placed an additional tax burden on businesses operating in Delta State. Shoprite, which runs retail outlets in the state and other parts of Nigeria, similarly maintained that the levy adversely affected its operations by adding a charge to transactions already subject to VAT.

The judgment therefore provides relief to the claimants by preventing the enforcement of the specific provisions challenged in the suit.

However, the ruling should be understood within the scope of the court’s decision: it invalidated the identified provisions concerning the disputed overlap with VAT and restrained the named state authorities from enforcing them. The supplied account does not establish that the court abolished every consumption tax in Delta State or invalidated all state taxation powers.