The Punjab Government has introduced a new entry tax law by the name The Punjab Development of Trade, Commerce and Industries Ordinance, 2015. This ordinance is promuglated w.e.f 05.05.2015.
Vide this ordinance the Punjab Government has got power to levy entry tax on any items with a new beginning as earlier entry tax Act i.e. The Punjab Tax on Entry of goods into Local Areas Act, 2000 is already under challenge before the Hon’ble Punjab and Haryana High Court and the recovery under the said Act has been stayed by the Court.
The interesting thing is under the earlier entry tax act, the input tax credit of entry tax was available under Punjab VAT Act, 2005. However, under this new ordinance no such ITC will be available against the entry tax paid.
It is worth mentioning here that every entry tax levied by the State Government has to be compensatory in nature so as to be Constitutionally valid. In other words for entry tax to be constitutionally valid, it must be expended for the direct benefit of those on whom it is levied.
Although the ordinance contains such provisions which prescribe the manner of utilization of the tax, but the big question is whether this entry tax would survive the compensatory test, if challenged before the Constitutional Court.
(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: firstname.lastname@example.org , M +919815243335)