Entry Tax in different states in India - Part 3 - Kerala
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;
b) the enactment violated article 301 providing for free trade and commerce throughout India; and
c) the state had failed to obtain the prior assent of the President under article 304(b)
But this decision has not resulted in free movement of goods from other states into Kerala. The Commissioner, Commercial Taxes has issued Circular 51/2006 dated 19 Dec 2006 and has made it mandatory for all goods brought in by persons who are not registered dealers to issue a Certificate of Ownership in Form No 16 of the KVAT Rules, 2005 and such Certificate should be countersigned by the Assessing Authority where the value of the goods exceeds Rs 5,000.00. This has the effect of preventing import of goods by unregistered persons from neighboring states as the assessing officers are reluctant to issue such certificates.
Further, it has been reported that the state government has prepared a new Entry Tax Bill and has sent it to the President for prior assent.
For the unregistered dealers Kerala entry tax still be chargeable?
There is no entry tax in Kerala now.
But the Commissioner has issued a Circular that all unregistered persons must issue a Certificate of Ownership in Form No 16 of the Kerala value Added Tax Rules and such form must be countersigned by the Assessing Officer of the area.
The assessing officers are reluctant to countersign such Forms of entities other than Government departments as they cannot ensure that the goods are for personal use. So effectively, for private enterprises, interstate purchase is barred.