Entry Tax is levied on the goods which are brought into a local area from outside the Local Area. The basic question which arises is whether entry tax shall be levied on entry of goods into local area from a place outside the local area. In this regards, it is pertinent to note that the amount of capital expenditure involved during this period is huge and therefore answer to this question is of utmost importance.
Kindly note that in the state of Madhya Pradesh, Section 3 of the Entry Tax Act states that
“There shall be levied an entry tax, (a) on the entry in the course of business of a dealer of goods specified in Schedule-II, into each local area for consumption, use or sale therein; and(b) on the entry in the course of business of a dealer of goods specified in Schedule-III into each local area for consumption or use of such goods but not for sale therein; and such tax shall be paid by every dealer liable to tax under the Vat Act who has effected entry of such goods.”
It is pertinent to note that levy of entry tax shall be on the goods which are purchased during the “course of business”. This phrase “Course of Business” has been interpreted by Hon’ble MP High Court in a plethora of judgements, a few of which are mentioned here-in-below for ease-of-reference:
a) NTPC Limited v The State of Madhya Pradesh [WP No. 2024/2008]
b) Maihar Cement vs ACST 1985 60 STC 210 MP
c) M/s Sagar Mines Pvt. Ltd. V The State of Madhya Pradesh [W.P. No. 16148 of 2007]
The decisions have been made on the underlying principle that the building activity is prior to commencement of business. Besides it is not incidental or ancillary for the purpose of business. Hence, such expenditure is not liable to entry tax.
– Aditya Singhania & Nischal Agarwal