Entry Tax

Entry tax is a fee levied by the state governments on the transfer of goods from one state to another. The state to which the goods are being moved levies entry tax to protect its tax base. The entry tax was implemented in September 2000.

Note: Entry Tax has been replaced by the Goods and Services Tax(GST) starting 1 July, 2017.

Overview of entry tax

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, many 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 kilometers, the government has ensured that people are connected, offering a smooth system for the flow of goods and products from one place to another.

What is entry tax?

Entry Tax is a type of indirect tax levied on the shipment of goods from one state to another. It is applicable only when goods are brought into the state for use. The State Entry tax Act maintains rates for the goods of each state. The person who owns or purchases the goods at the time of entry into the state is responsible to pay the entry tax.

Entry tax rates

The tax rates vary for each state, due to many different product categories on which the tax is imposed at different rates. For instance,

States Goods Rates
Madhya Pradesh Agricultural implements 5%
Bihar Crude oil 2%
Goa Air-conditioners 12.5%

Entry Tax Liability in different States

One can say that the resources in India are unevenly distributed, leading to the 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 that 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 that are expected to pay entry tax when they cross state boundaries.

For example, Mr. Sanjay is a trader dealing in cement, with a base in Maharashtra. Due to a shortage of cement in Karnataka, a construction firm contracts Mr. Sanjay to supply cement to their construction site. Mr. Sanjay 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. Sanjay 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).

Below is a table with the state-wise entry tax in India:

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 period.

Products which attract Entry Tax

The products which attract entry tax in a state depend on many factors, with resource availability being one of them. 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 concern.

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).

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