Goods And Service Tax India

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.

Further, the State had not obtained the assent of the President before introducing the bill in the assembly as required by article 304(b).