Introduction: Entry Tax is a tax levied under the Punjab Tax on Entry of Goods into Local Areas Act, 2000. It is levied u/s 3-A of the said Act on a dealer who is bringing the goods into local areas of Punjab.Entry tax can be claimed as input tax credit by a person paying such entry tax against his output tax liability. However such claim of input tax credit of entry tax is available subject to the conditions mentioned u/s 13-A of the Punjab VAT Act, 2005. Section 13-A runs as under :-
“Subject to the provisions of this Act, a taxable person shall be entitled to input tax credit in respect of the tax, paid by him under the Punjab Tax on Entry of Goods into Local Areas Act, 2000, if such goods are for sale in the State or in the course of inter-state trade or commerce or in the course of export or for use in manufacture, processing or packing of taxable goods for sale within the State or in the course of inter-state trade or commerce or in the course of export.”
Thus claim of entry tax as input tax credit u/s 13-A is available only in the circumstances mentioned above in the section. As per the provisions of section 13-A if a person pays entry tax on raw material to be used in the manufacturing of tax free goods, his claim of entry tax as input tax credit will be restricted.
 However it is notable here that the provisions of section 13-A of the Punjab VAT Act, 2005 are not a complete code in it self as non-abstante clause is missing therein, in fact the provisions of section 13-A are subject to the other provisions of the Act.
Position after entry tax deemed as advance tax: A very important change has been brought about the status of entry tax under the Punjab VAT Act, 2005 after the introduction of the provisions contained in sub-section (7) and (8) of section 6 the said Act w.e.f 12-08-2011, which needs to be understood before giving the input tax credit of entry tax paid.
Provisions of section 6(7) and 6(8) runs as under:

(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 this 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(Punjab Act No. 9 of 2000), shall be deemed to have been collected under the provisions of sub-section (7).

A new incidence of taxation (that too with a non-abstante clause i.e irrespective of the taxable quantum of a person) has been created u/s 6(7) which is called as advance tax to be levied on the import of goods.

Whether such advance tax is within the purview of the Entry 54 of the State List or not wherein State Government can levy tax only on the sale and purchase of goods within the State, remains to be seen. However here in this article only status and claim of entry tax under the current provisions are discussed.

Such tax in advance is to be charged only on the goods which are meant for sale or use in manufacturing or processing of any goods for sale. Second proviso to section 6(7) further provides that such tax collected in advance shall be counted towards final liability of the taxable person.

No goods have been notified as yet u/s 6(7) on which tax in advance is to be charged, however section 6(8) creates a deeming legal fiction by which entry tax has been considered as tax in advance u/s 6(7).

Entry tax deemed as advance tax to be counted toward final liability: After the introduction of provisions of section 6(7) and 6(8) the status of entry tax is of a tax in advance under the provisions of Punjab VAT Act, 2005. Therefore its adjustment and claim towards the output liability should be allowed as advance tax and not as entry tax, as per the second proviso to sub-section 7 of section 6.

Meaning thereby if a person pays entry tax (now advance tax) on certain goods and uses them in manufacturing of tax free goods then claim of such entry tax(deemed as advance tax) should be allowed as per the 2nd proviso to section 6(7).

Thus a person manufacturing tax free goods having nil final liability is liable to get the refund of entry tax paid by him as such entry tax paid(deemed advance tax) has to be counted towards final liability of the taxable person.

The question may be raised that provisions of section 13-A will restrict input tax credit of entry tax paid in the above mentioned case, but it should be noted that provisions of section 13-A starts with words “Subject to other provisions of this Act”, therefore section 13-A is bound by the provisions of section 6(7) and 6(8) of Punjab VAT Act, 2005.Hence credit of entry tax deemed as advance tax is no more conditional one as per the provisions of section 13-A.

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Read Other Articles from Advocate Amit Bajaj

(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: [email protected], M +919815243335)

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