Bird’s Eye View on Provisions of Entry Tax Act 1976
( M.P. Sthaniya kshetra me mal ke pravesh par kar Adhiniyam, 1976)
R. S. Goyal,
Tax Consultant
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1.1The Entry Tax was introduced in place of Octroi as from 1st Sep 1976.
1.2Before 01.04.1976 various Municipal Corporations used to recover the Octroi on entry of goods into that local area comprised within their limits.
1.3Entry Tax Act is an Act to levy tax on the entry of goods into a local area in MP for consumption, use or sale therein.This Act was legislated by the State Legislator under Entry 52 of List 2 of 7th Schedule to the Constitution of India, Which reads as under
“Taxes on entry of goods into a local area for consumption, use or sale therein.”
1.4Liability to pay Entry Tax arises only when the goods are entered into a local area for Consumption, use or for sale therein. Liability of entry tax is on the goods coming into a local area from outside that local area i.e. the goods may be brought either from any other local area of MP or from any place outside the state of MP or any place outside the India.It is not necessary that property in goods must pass to another person.
1.4.1It is the actual “entry of goods and not title of the goods”which attract entry tax. Satna Cement Works Vs. C S T ( 1985 ) 18 VKN 67.
1.4.2It is not necessary that the goods should be consumed as raw material, incidental goods or packing material for being liable for entry tax. Crude soya oil entered into a local area for refining, is liable for entry tax, even if refining of oil is not a manufacturing process. MP Glychem Industries ( Soya Unit) Vs CCT MP (2010) 16 STJ 218 ( MP Bd) Consumption is a wide term not limited to consumption as raw material or incidental goods or packing material.
1.4.3Single point tax – The goods can suffer tax only at Single point and not multi point. When entry tax is already paid on any goods, it cannot be subjected to entry tax again. M P traders & agents, Indore Vs CST MP (2005) 5 STJ 874 (MP)
1.4.4Job Work: Goods entering into a local area for consumption or use in a Job Work are also subject to entry tax. The question is as to who would be paying entering tax, the owner of the goods or the agency or dealer who is causing entry on behalf of the owner for performing the desired job. Normally it is the owner of the goods who is liable to pay entry tax because entry is caused by either him or caused for him.
1.4.5"Local Area" Means the area comprised within the limits of Local Authority. Thus an area comprised within the limits of a corporation, municipality, village panchayat or nagar panchayat but the area comprised within zila panchayat or janpad panchayat is not a local area. ( please refer enclosed Chart-A )
1.5Local Authority means authority constituted under a law relating to local authority, but shall not include a Janapada Panchayat, Zila Panchayat, a Mandal Panchayat or such local authority as the state govt. may by notification , specify
1.6Local goodsmean goods of local origin as distinct from goods which enter into that local area. (please refer enclosed Chart--A )
1.7Raw Material: An article used as ingredient in any manufactured goods and includes fuel and lubricants.
1.8Taxable Market value mean market value excluding Entry Tax Paid Goods, goods sold in ISS, SOS and Export after its entry. Schedule-III goods which disposed is in any other manner and Exempted goods.
1.8.1The entry tax is payable on value of goods at the time of entry into a local area.It is payable on cost price plus transportation expanses and not on the price the goods would fetch in market. CCT MP Vs Gujarat Steel Tube Indore (2004) 4 STJ 278 MP.
1.8.2The entry tax is payable on Sale value of goods minus expenses referable to sale, where the cost price or transfer price is not ascertainable.
1.9Taxable purchase value excluding Entry Tax Paid Goods, goods sold in ISS, SOS and Export after its entry. Schedule-III goods which disposed is in any other manner and Exempted goods.
1.10Taxable Quantum mean aggregate of taxable purchase value and taxable market value.
1.11Value of Goods mean purchase price as per section 2(s) of M.P. Vat Act and include excise duty, Additional Excise Duty, Custom Duty or the market value of such goods if they have been acquired or obtained otherwise than by way of purchases.
1.11.1Deduction of discount after sales of goods is not allowable.Primo pick N Pack Pvt Ltd Jabalpur Vs CCT (2010) 17 STJ 550
1.11.2Value of goods at time of entry into local area is relevant and any subsequent increase of decrease in the value of goods in not relevant. Anant Spinning Mills Ltd Mandideep Vs CCT MP (2008) 12 STJ 481 (MP Bd)
1.11.3Excise modvat is not to be reduced from the purchase price for arriving at the value of goods for the purpose of entry tax. Shri Synthetics Ltd Ujjain Vs CCT MP. (2005) 6 STJ 473 (MP Bd)
2Incidence of taxation: Who will be paying tax?
2.1On a dealer, who is liable to pay tax under the Vat Act
2.1.1To decide whether a dealer is liable to pay tax under Sales Tax / Vat Tax act, his turnover has to be taken into consideration irrespective of whether liable to tax or not. The expression ‘liable to pay tax under the Vat Act is used to identify the person liable to pay entry tax. Lilasons Breweries Ltd, Vs State of MP (2011) 18 STJ 125.
2.2Who is causing entry of goods into a local area
2.2.1in case, if a dealer purchases goods of any other local area of MP and he sold the goods as such to any other dealer, without taking the delivery of the goods ( on spot delivery basis ) then in such a case the first dealer will not be liable for ET because he has not caused the entry of such goods. (please refer enclosed Chart—B )
2.3The goods are brought into the local area in the course of business of the dealer,
2.3.1in the course of business: Plant & Machinery entered into local area before commencement of production cannot be said to be in the course of business – not liable to entry tax – National Thermal Power Corporation Ltd, Sidhi V Addl Commissioner, Commercial Tax, Jabalpur (2004) 3 STJ 670 (MP)
2.4Entry of Schedule-II goods into each local area for consumption or use or sale therein.
2.5Entry of Schedule-III goods into each local area for consumption or use but not for sale therein.
2.6Entry tax not liable on following situations:
2.6.1Entry tax paid goods purchases of goods other than local goodsfrom a registered dealer, on which entry tax is payable or paid by that registered dealer. The fact that the goods in question is entry tax paid goods or goods of local areashould be mentioned on the invoice but if it is not mentioned on the invoice that the goods is entry tax paid or local goods for a particular local area than it will be presumed that the goods is entry tax paid. The purchasing dealer is not liable for entry tax if entry tax on such goods is payable or paid by the selling registered dealer – the purchasing dealer is entitled to take the advantage of absence of seal of local goods on the sale bill of such goods – to make the purchasing dealer liable for entry tax it is for the Revenue to prove that the taxable event has not occurred earlier and the goods have not been subjected to entry tax. Mohansingh & Sons V Commissioner of Sales Tax, M.P. (2004) 4 STJ 330 (MP)(FB)
In order to ensure that entry tax is not levied more than once, the concept of entry tax paid goods has been introduced. If any goods have already entered into a local area of MP the entry tax would become payable on such goods by such person who has already caused the entry therefore purchases made from a registered dealer who is liable to pay entry tax on causing entry of goods has been taken as tax paid goods and deduction thereof is allowed from the total value of goods.
There are goods which are produced in a local area and are sold to another dealer of the same local area in such a case there is no entry of goods and therefore no entry tax is payable by the purchasing dealer of that local area, but in case the goods are purchased by a dealer having his business place in some other local area then entry of goods would be caused by the purchasing dealer and entry tax would become payable. To ensure that such goods are taxed or necessarily taxed on their entry into a local area and no liability is saddled before entry into a local area, the concept of local goods has been introduced. Such goods are distinguished by affixing seal stating that the goods sold are local goods for a particular local area and while selling these goods, entry tax was not paid hence these goods cannot be treated as entry tax paid goods. On the basis of such statement the purchasing dealer is required to pay entry tax on such goods.
2.6.2Schedule-II goodssold in ISS, SOS and Export after its entry.This deduction is allowable only in case, where the goods were sold as such. In case of use of the goods in any processing, the deduction is not allowable. (please refer enclosed Chart—C, D, E & F)There is consumption / use of different variety of Tea to obtain tea of new Texture, Colour, Flavours and tastes – It is liable for Entry Tax even if after blending tea is sold in Interstate or Stock Transfer out of State or in the course of Export out of the territory of India. Ghanshyam & Co. Indore Vs CCT MP (2009) 14 STJ 394.
2.6.3Schedule-III goods which enter for consumption or use but disposed of in any other manner.
2.6.4Exempted goods.
2.6.5Entry of goods of sch. II & III by an Industrial unit from one Local area to other Local area:-
Within same industrial growth centre dev. By AKVN
Within the same industrial area (please refer enclosed Chart-G )
2.6.6Transfer of semi finished goods of sch. II & III by an Industrial unit from one Local area to other Local area for Intermediate processing or finishing & transfer back of such goods to original unit for manufacturing of final saleable product.(please refer enclosed Chart-H )
2.6.7Entry of goods of sch. II & III into local area by an Industrial unit being established in or spread over more than one local .(please refer enclosed Chart-I )
2.7Set off of deposit of Tax:- if dealer who deposited the tax on entry of any goods of Sch II & III, into the local area & sold such goods in ISS,SOS & EXPORT, he will be entitled for set off in respect such deposit of Tax by him.
2.8The Entry Tax is payable by a registered dealer who has purchased the goods from a URD who has effected the entry of such goods from any other local area.
2.9In case of purchases of sch III goods (other than LOCAL GOODS ) from the dealer of the same local area for consumption or use, the entry of such goods shall be deemed to have been effected by the purchasing dealer & he shall be liable to pay tax on con or use of such goods.
2.10Liability of Tax by the person other than a Reg. dealer Sec. 3(2) of ET Act. :- The entry under the section is payable in the following conditions.
2.10.1On Consumption, use or save of good Sch II or III ( other than motor vehicles) on which entry tax is not levible U/s 3 (1) of E. T. Act , such as ……
2.10.2By such person or class of person as notified by the state government.
2.10.3No E.T. is payable again on Entry tax paid goods
2.11The entry tax payable on value of goods
2.12No entry tax is payable on good of Sch I of entry tax act
2.13Entry tax on motor vehicles The Entry tax is leaviable on entry of motor vehicle, liable for registration under M P motor vehicle Act, by such person who is not liable to pay tax U/s 3 (1) of entry tax Act into any local area or consumption, use or sale
2.13.1Entry tax is not liable under this section if the motor vehicle is purchased from a dealer registered under M P vat Act
2.13.2On vehicle which was registered under motor vehicle Act of any other state or union territory at least for 15 months, before its registration in M P
2.13.3Tax under this section is to be deposited within 15 days and return is to file in CT deptt. In case of non deposit of tax and non filing of returns, in interest @ 2% per month will be payable. The assessment and appeal provisions or also applicable under entry tax Act
2.13.4In case of non deposit of tax, the concerning RTO may impound the vehicle for recovery of tax and penalty. In case the tax and penalty is not deposited within one month the concerning RTO may sale the vehicle though public auction.
2.14Rate at which entry tax to be charged
2.14.1E T is payable by dealer on the taxable quantum of Sch II and III goods as per the rate mentioned in the schedule
2.14.2Entry tax on goods of sch II (other than coal and iron steel) used or consumed as raw material for the manufacturing of other goods or as incidental goods shall be 1% . in case the dealer contravenes the conditions he will be liable to pay differential amount of tax
2.14.3Set off if a registered dealer consumed or use, such goods of Sch II (other than coal and iron steel) which suffered entry tax at a rate exceeding 1%, is entitled to clam set off equal to the difference between the tax suffered on such goods and liability of tax @ 1 percent.
2.14.4 The state government may issue notification for recovery of tax on the basis other than on the value of goods.
3Provision of entry tax on enhanced rate section 4-A
3.1The government may notify the local area and the goods which are consumed or used in such local area for levy of tax at enhance rate
3.2In case such notified goods, within such local area, already suffered tax at schedule rate then such dealer shall be liable to pay tax at a differential rate
3.3 The entry tax shall not be chargeable on such goods, within such local area at any other rate, in any other provisions of E T Act, as mentioned in notification issued u/s 4-A of E T Act
4Principal governing levy of ET on dealer or person. The Entry Tax is levied on a dealer or a person accordance with the following principals
4.1ET shall not be payable If the Entry of Such goods is not effected by the dealer or person into a local area.
4.2 On consumption, use or sales of any goods, in any local area, by a dealer or a person, Until the contrary is proved, it will be presumed that such goods were entered by him into that local area for consumption use or sales therein. For example if a dealer purchases for resale but ultimately such goods are communed as raw material then it shall be presumed that such goods were purchased for consumption and not for resale.
4.3In Case of purchases of goods by a dealer from a person other than Registered dealer (Un registered dealer), it shall be presumed that the entry of goods had been effected by such Registered dealer from other local area.In case the registered dealer is in a position to establish that, before he purchased the goods from URD (Un registered dealer), that URD entered those goods into that local area.
4.4For the purposes of assessment, the same documents/records/books, as produced by the dealer for assessment under VAT Act will be relevant for the purpose of assessment under ET Act.
5Compulsion to affix seal
5.1Every registered dealer, who manufacture, produce or grow any goods of schedule II in a local area, should affix the seal on sales bill, mentioning that such goods is “LOCAL GOODS FOR …..LOCAL AREA, ENTRY TAX NOT PAID. “
5.2Any Trader who purchases such LOCAL GOODS and sale the same he should also affix the seal of local goods. In such a case he will not be liable to pay Entry Tax on such transaction, but if he entered the goods into any other local area then in such a case he will be liable to pay tax on it .
5.3Every registered dealer who deals in local goods should keep separate accounts for ET
5.4On failure to affix the seal, it will be presumed that he has facilitated the evasion of Tax & the penalty from 2 to 5 times of the tax shall be imposed on him.
6Composition Every registered dealer, who deals in the “goods of local area” may apply for composition
6.1The composition money will be equal to the amount of entry tax liable to be paid on entry of “local goods” into other local area
6.2The proportionate value of sales likely to have taken place in the local area “local goods” which into other local area, is to be calculated on the basis of on the proportion of population of that local area bears to the total population of M.P.
7On failure to fulfill responsibility or obligation undertaken Penalty equal to the 1.5 times of the tax payable on such goods is leviable. If penalty of such default can be imposed under any provisions of entry tax Act no penalty will be imposed U/s 8
8Burden of proof :- The burden of proving the following is on the dealer or person
8.1The entry of goods of Sch II has not been effected into a local area by a dealer or person
8.2The entry of goods of Sch III has not been effected into a local area by a dealer or person
8.3That the dealer or person is eligible for deduction of goods of local area.
8.4The unregistered dealer, from who the goods is purchased by the dealer, had not entered that goods into that local area before the purchases made by the dealer
8.5That the motor vehicle was not entered by a person into local area for consumption, use or sale therein
8.6Fore claiming deduction of local goods, the purchase bills is to be compulsorily produced before assessing authority
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