Further to amend the Punjab Value Added Tax Act, 2005.
Promuglated by the Governor of Punjab in the Sixty-second Year of Republic of India.
Whereas the Legislative Assembly of the State of Punjab is not in session and the Governor is satisfied that circumstances exit, which render it necessary for him to take immediate action;
Now therefore, in exercise of the powers conferred by clause (1) of article 213 of the Constitution of India, the Governor of Punjab is pleased to promulgate the following Ordinance, namely:-
1. Short title and commencement. (1) – This Ordinance may be called the Punjab Value Added Tax (Third Amendment) Ordinance, 2011.
“(7) Notwithstanding anything contained in sub-section (1) to sub-section (6), the State Government shall charge the tax in advance on the import of goods to be notified in such manner, as may be prescribed, and at such rates, as may be notified, but not exceeding the rates applicable on such goods under the Act:
Provided that such goods are meant for sale or use in manufacturing or processing of any goods for sale:
Provided further that such tax collected in advance, shall be counted towards final liability of the taxable person at the end of each tax paid.
(8) The tax collected under the Punjab Tax on Entry of Goods into Local Areas Act, 2000, shall be deemed to have been collected under the Provisions of sub-section (7).”.
3. Amendment in section 13 of Punjab Act 8 of 2005 – In the principla Act, in section 13, after sub-section (1), the following sub-section shall be inserted, namely:-
Section 6 of PVAT Act is a charging section and deals with incidence of tax under the PVAT Act. By introduction of section 6(7) advance payment of VAT has been levied on the import of such goods in the State of Punjab at such rates as may be notified.
It should be noted hereby that the taxable event in section 6(7) is import of goods within the State of Punjab from outside the State. Now the question arises whether State Government is competent to collect VAT on the import of goods when no sale or purchase within the jurisdiction of the State has happened.
Entry 54 of State list of the Seventh Schedule to the Constitution of India gives power to the State Governments to levy tax on sale or purchase of goods within the State. Entry 54 runs as under:
54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.
At the time of import of goods there is no sale or purchase involved which happens within the State. Hence it raises a question mark as to the validity of such provisions of collection of advance tax on the import of goods.
Another point which arises in mind is that advance tax is usually the tax paid in advance based upon the estimated tax liability which is likely to arise at the end of the relevant period, however Advance tax u/s 6(7) will be collected irrespective of the ultimate VAT liability of the dealer.
For example if a dealer imports goods and pay advance tax on it and then uses such goods in production of tax free goods or dispose of such goods otherwise than as sale then he will not get the benefit of advance tax paid as the advance tax u/s 6(7) will be treated as ITC as per the newly added sub section (1-A) of section 13. It also raises a question mark on the validity of levy of advance tax u/s 6(7).
Proviso to section 6(7) provides that advance tax shall be levied only on those goods which are meant for sale or use in manufacturing or processing of any goods for sale. It means that goods meant for personal use or goods which are not to be traded or use for manufacturing of any goods to be sold are outside the purview of advance tax u/s 6(7).
Lastly coming to section 6(8) added by the above ordinance, the entry tax paid under the Entry Tax Act will be deemed as the advance payment of VAT u/s 6(7) of PVAT Act. Now it should be noted that entry tax as levied u/s 3-A of Punjab Entry of Goods into Local Areas Act, 2000 has already been stayed by P&H HC in Bhushan Steel case. Many dealers have claimed deferment from payment of entry tax as per the general circular issued by the Punjab Government as directed by the Punjab & Haryana High Court. Hence till the time one has got deferment to pay entry tax under Entry Tax Act he will not be covered under the provisions of section 6(8).