Treatment of Entry Tax under PVAT Act levied in Punjab

The Government of Punjab has recently imposed Entry Tax on 12 new items under section 3A of Punjab Tax on Entry of Goods into Local Areas Act, 2000 (Punjab Act No.9 of 2000). The List of which has already been provided in the articles published earlier. The Entry Tax has been levied in the hands of every person including a taxable person registered under PVAT Act 2005. The word person has been defined under the Punjab Tax on Entry of Goods into Local Areas Act, 2000 as including:

‘any company or association or body of individuals whether incorporated or not, and also a Hindu Undivided Family, a firm, a society, a club, an individual, a local authority or any State Government, the Central Government or any Union Territory.’

Thus it is clear that the entry tax has been imposed on all the persons whether an ultimate consumer (who is bringing any of the goods liable to entry tax purely for his personal use and is not in any way connected or liable under PVAT Act or CST Act) or a taxable person who is importing the said goods from outside the State of Punjab.

According to section 3(6) of Punjab Tax on Entry of Goods into Local Areas Act, 2000, the person bringing such goods from outside Punjab and who becomes liable to pay tax under PVAT Act 2005 or CST Act 1956 can adjust the entry tax paid on such goods against his liability to pay tax under the aforesaid Acts . But no such benefit is available to a person not liable to pay tax under PVAT Act or CST Act and bringing such goods in Punjab purely for his personal use.

There may be some cases where Firms situated outside the State of Punjab who sells their goods in the State of Punjab directly to the ultimate consumer. For example the Big capacity Diesel Generating Sets  may be directly sold to the ultimate consumer in Punjab using such goods for their personal use and not liable under PVAT Act or CST Act, by the firms or companies situated outside Punjab.

In such cases it is advisable that such firms or companies should open a branch office in Punjab and instead of selling the goods directly to ultimate consumer as that way not only the entry tax can be adjusted from liability arising under PVAT Act due to sale of goods by the branch office to the ultimate consumer but the CST can also be saved which will come in play when the goods are sold directly to the consumer with the help of F forms under CST Act 1956 applicable in case of Branch Transfer. This can be explained with the help of an example as follows:

1. The amount of Tax involved when goods liable to entry tax are directly sold to the consumer not liable for any tax under PVAT Act 2005 or CST Act 1956

Rs.

D.G Sets (suppose taxable@12.5% in delhi)

Sold from Delhi in Punjab                                            100000

CST@12.5%                                                                          12500

Entry Tax Paid in Punjab @12.5%                               14062

Total Tax paid by consumer                                         26562

2.The amount of Tax involved when goods liable to entry tax are transferred to the Branch office situated in Punjab registered as taxable person under PVAT Act 2005.
Rs.

D.G Sets transferred from Delhi in Punjab Branch

against F Form                                                               100000

CST applicable                                                                   NIL

Entry Tax Paid in Punjab @12.5%                                  12500

VAT in Punjab@12.5%                                                     12500

Total Tax Paid by consumer                                             12500

The Branch office in Punjab will not have to pay any VAT in Punjab collected from the consumer since the entry tax paid shall be adjusted against the output tax.

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