Levy of Entry Tax on certain Iron & steel goods in Maharashtra

Introduction

While  great activity being done by Central &  Maharashtra State Government for the success of Make in India & Ease of doing business  Initiatives, an unintended hardship seems to have been placed on manufacturers in Maharashtra through a Budget 2015-16 provision for levy of entry tax on iron and steel goods purchased from outside the State of Maharashtra.

As per Budget amendment, basic forms of iron and steel have been included in the list of entries liable for payment of Entry tax in the State of Maharashtra.

W.e.f. from 01.04.2015, Entry tax @ 5% will be payable on following goods which are added vide sr. no. 17 of the Schedule appended to the Maharashtra Tax on the Entry of Goods into Local areas Act, 2002:-

1) Steel bars  (rounds, rods, square flats, octagons and hexagons, plain & ribbed or twisted in coil form as well as straight lengths)

2) Steel structural (angles, joints, channels, tees, sheet piling sections, Z sections or any other rolled sections)

3)The Steel bars and structures made up of stainless steel.

Applicability of Entry Tax :-

Entry tax is applicable if above items of iron and steels are brought into the State of Maharashtra from outside States or are imported from abroad. All manufacturers of engineering goods will be hit by this compliance procedure.

Exemption from this tax is however available for traders who  import such goods in the State of Maharashtra for resale or for export out of India. Entry Tax is not leviable if the importer of goods is registered under the    MVAT Act and if such goods have been brought into the State for the  Purpose of:

a. Resale in state, or

b. Sales in the course of inter-State trade or commerce, or

c. Export out of the territory of India.

 If the goods are utilized for purposes, other than those mentioned above,  then Entry Tax is required to be paid.

Relevant Legal Provisions

An “importer” has been defined   in section 2(1)(g) of the Entry Tax Act as follows:

(i) A person who imports any goods whether on his own account or on account of a principle or any other person, into a local area for consumption, use or sale therein;

(ii) Any owner of the goods at the time of import of such goods into local area.

iii. The term, “import” has been defined in section 2(1)(f) of the Entry Tax Act as follows:

“import” with all it’s grammatical variation & cognate expression means bringing or causing to be bought or receiving any goods into a local area from a place outside the state.”

Compliances

An importer is liable for registration under the Entry Tax Act, if the value  Of specified goods imported by him at any time exceeds rupees ten Thousand in a financial year within 30 days from the date on which the value of such goods exceeds rupees 10,000.

Entry tax @ 5% will be payable on import of these  goods on periodical basis.

Irritants for Industry in Maharashtra

Basic forms of iron and steel is major input for most of the manufacturing industries and this new entry tax on these goods will cause hardships on such manufacturers to the extent they source their procurements of these inputs from outside Maharashtra.

Though this entry tax is eligible for set off this will put lot of compliance burden on manufacturers in terms of filing of returns and providing information to Assessing Officers. Besides this may cause cash flow issues to some dealers who already have excess set off and  claims for refunds pending with the Department.

Suggestions for Amendment

It is felt that this provision for entry tax is not made with manufacturers as target tax payers and hence following amendment in the definition of importer will relieve all manufacturers from this new in mind

Existing Definition

Sec 2(1)(g) of the Entry Tax Act

(i)  A person who imports any goods whether on his own account or on account of a principle or any other person, into a local area for consumption, use or sale therein;

Suggested Amended Definition

Sec 2(1)(g) of the Entry Tax Act

(i)  A person who imports any goods whether on his own account or on account of a principle or any other person, into a local area for consumption (otherwise than for manufacture of goods) , use or sale therein;

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