Goods And Service Tax India

The Assam Entry Tax Act, 2008 has received the assent of the Government of Assam on 13th April,2008. The Preamble to the Act reads, “Whereas it is expedient to provide for the imposition of a tax on the entry of goods into any local area in Assam for consumption, use or sale therein for the purpose of providing the infrastructure and amenities to facilitate trade and commerce within the state of Assam and for matters connected there with or incidental thereto;”. By adding the purpose for which the Entry Tax is proposed to be collected, the State Government has overcome the decision of the Assam High Court in ITC Ltd. vs State of Assam and others.

The Assam High Court, while delivering the judgement in ITC Ltd vs State of Assam & Others, held that the Assam Entry Tax (Amendment) Ordinance, 2005 is unconstitutional and invalid. The notifications dated 8th Jan 2002, 21st Aug 2003, 26th Aug 2006, 29th Sep 2004 and 28th Feb 2005 were also held to be ultra vires, unconstitutional, null and viod. [Date of decision: 17th November 2006]

It is to be noted that the Assam Entry Tax Act, 2001 is still valid. However, addition of new goods to the Schedule to the Act for imposing entry tax was held to be beyond the competence of the state legislature as the prior sanction of the resident was not obtained.

The Rajasthan High Court [Jodhpur Bench], while delivering the judgement in Dinesh Pouches Ltd vs State of Rajasthan & Others, held that the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 is unconstitutional and invalid.

The High Court held that the Act was not compensatory as no special services were provided to those from whom the tax was collected. The Act was held to impede interstate trade and commerce. The prior assent of the President was not obtained as required by Article 304(b) of the Constitution.

Date of decision: 21st August 2007

The Karnataka High Court, while delivering the judgement in Bharat Earth Movers Ltd vs State of Karnataka & Others [2007] 8 VST 69 (Karn), held that Karnataka Special Tax on Entry of Certain Goods Act, 2004 is unconstitutional and invalid.

The High Court held that the Act was not compensatory as no special services were provided to those from whom the tax was collected. The Act was held to impede interstate trade and commerce. The prior assent of the President was not obtained as required by Article 304(b) of the Constitution.

The Madras High Court in ITC Ltd vs State of Tamil Nadu and Another has struck down the Tamil Nadu Entry Tax Act. The Court refused to accept the government argument that it is compensatory in character. It also held that the entry tax is discriminatory and violative of article 304(a) of the Constitution.

The State’s plea that the entry tax is collected to reimburse the expenses for maintenance of roads and bridges was not accepted by the Court. The Court applied the test laid down by the Supreme Court in Jindal Stainless Ltd case and held that the expenses sought to be reimbursed have no connection with the collection of entry tax. The persons paying the entry tax do not get any special benefit as a class. Hence it is not compensatory.

The Kerala High Court has now declared that the Kerala Entry Tax Act violates Article 301 in Thressiamma Chirayil vs State of Kerala decided on 18 Dec 2006.

Earlier, in Rajan vs State of Kerala, the Kerala High Court had upheld the Act. Subsequently, in, Fr William Fernandez vs State of Kerala, the High Court had held that Entry Tax cannot be imposed on goods imported from outside the country.

But in the latest decision in Thressiamma’s case, the High Court held that

a) the enactment failed the test of “compensatory tax” as enunciated by the Supreme Court in Jindal Stainless Steel Ltd vs State of Haryana;

Having noted the position in Gujarat, where the Gujarat High Court upheld the constitutional validity of the Entry Tax Act in Eagle Corporation Pvt Ltd vs State of Gujarat and Others, I will examine the status of the Entry Tax Act in Jharkhand.

Tata Iron & Steel Co Ltd was aggrieved by a demand for entry tax on coal imported by them and challenged the levy. The Jharkhand High Court, in Tata Iron & Steel Co Ltd vs State of Jharkhand and Others, has held that:

a) The State government is not authorised to levy entry tax on imported goods as contended by TISCO.

The State Governments have introduced Entry Tax to be paid by actual users who bring goods from outside the state for use or consumption inside the State. The principal reason for this levy was that the States were losing revenue when goods were brought from other states.

However, in the recent past, these Acts have been challenged in various High Courts with varying results.