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  • Entry Tax

    Overview:

    India, the 7th largest country by size in the world is home to over 1.2 billion people living in 29 states and Union Territories. Each Indian state is unique in itself, contributing some part towards completing India. Given the size and magnitude of our country, a number of goods move across its length and breadth, ensuring that essential commodities find their way to our homes. The central government, in a bid to streamline processes put forth the proposal of entry tax in states, thereby giving state governments control over the goods which enter their boundaries.

    With a road network of over 47 lakh kilometres, the government has ensured that people are connected to each other, offering a smooth system for flow of goods and products from one place to another.

    Entry Tax Liability in different States:

    One can say that the resources in India are unevenly distributed, leading to transfer of goods and products from one state to another. The system of entry tax ensures that these goods are accounted for, offering a certain source of income to state governments to improve conditions. While each state has different entry tax rules in place, one can broadly state that the person who brings goods from a particular place to the state concerned is the importer, who is liable to pay entry tax on the goods, depending on the policies in place. In simple words, every trader who brings goods which attract entry tax in a particular state is liable to pay the tax as per prevailing rates.

    At times it is not just goods, but also vehicles which are expected to pay entry tax when they cross state boundaries.

    For example, Mr. Ramesh is a trader dealing in cement, with a base in Maharashtra. Due to a shortage of cement in Karnataka, a construction firm contracts Mr. Ramesh to supply cement to their construction site. Mr. Ramesh is given a contract to supply 5 truckloads of cement, with each truck expected to cross over from the Maharashtra border into Karnataka. Now, on entering Karnataka, given the fact that cement attracts an entry tax, Mr. Ramesh is liable to pay a certain sum to the relevant authority. He can recover this amount by either increasing the final price of cement or ensure that the initial cost accounts for this tax. Since the vehicles which are entering Karnataka are registered in a different state, they could also attract an entry tax (varies according to laws in place in every state).

    Entry tax is imposed by state governments and is levied on the movement of goods from one state to another. To protect the tax base it is levied by the recipient state. This tax was introduced on September 1st, 2000. Below is a table with the state-wise entry tax:

    Entry Tax Enforcement:

    The enforcement of entry tax in a state falls on the Department of Commercial Taxes, with a dedicated team in place in most states. This department is in charge of levy and collection of the tax, with check posts established at almost all major boundary crossings. Individuals who have to pay entry tax can do so directly at these check posts or to the jurisdictional office of Commercial Taxes within a specified time period.

    Products which attract Entry Tax:

    The products which attract entry tax in a state depend on a number of factors, with resource availability being one of them. Typically, essential commodities like milk, sugar, rice, etc. do not attract any entry tax (depends on state policies in place), while those which aren’t considered essential for basic living can attract entry tax. Some of the general products on which an entry tax is levied are oil, LPG, electronic goods, furniture, paints, computers, etc. This list can be altered by a state government from time to time and individuals who deal with such products are expected to check their entry tax liability for the state concerned.

    Entry Tax Refund:

    In case of goods which have entered a state being returned (due to any reason), the person who brought them into the state can claim a refund on the entry tax paid. This refund can be claimed only within a specified time period (typically one month, which might vary from state to state).

    News About Entry Tax

    • Entry tax bill upheld by SC panel

      The Supreme Court upheld the proposed entry tax to be levied by state governments. A nine-judge panel headed by Chief Justice TS Thakur ruled with a majority of 7:2 stating that the freedom of trade under Article 301 of the Indian Constitution was not exempt of tax, and a non-discriminatory tax being levied was not in violation of Article 304(a) of the Constitution. The panel concluded that states have the right to levy non-discriminatory taxes. The endorsement of the entry tax by the Supreme Court means that companies will have to pay Rs.30,000 crores in arrears plus interest and future taxes till it is abolished under the Good and Services Tax (GST) scheme.

      22nd November 2016

    • States Go To SC Over Entry Tax Dues

      Even as Goods and Services Tax (GST) is being seriously debated in the country, many states have approached the Supreme Court over their authority to impose entry tax on goods being brought into a state for sale.

      States such as Madhya Pradesh, Chhattisgarh, Haryana, Punjab, Odisha, Uttar Pradesh and West Bengal have presented their case at the Apex court of entry tax dues of public and private corporations.

      Attorney General Mukul Rohatgi did not favour hearing of the case because once GST is imposed, entry tax would be abolished altogether. However, Chhattisgarh Advocate General JK Gilda said that whether the GST is imposed or not, the dues have to be recovered as it runs into thousands of crores, which would help boost the state treasuries.

      29th July 2016

    • Gujarat E-commerce Entry Tax not to generate revenue but level field

      The Gujarat Tax on Entry of Specified Goods into Local Areas Bill, 2016, introduced by Saurabh Patel, the Finance Minister of Gujarat, was done with a motive to level field of small retail as well as Mom and Pop stores. The bill proposes a 15% entry tax on online purchases. Some e-commerce companies and Flipkart have challenged this decision and approached the Gujarat High Court. NASSCOM (National Association of Software and Services Companies) has also expressed opposition to this move.

      The Finance Minister, however also expressed his support toward the Goods and Services Tax in Gujarat.

      9th May 2016

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