Friday, 30 December 2016

Allahabad HC provides interim stay on levy of entry tax on e-commerce transactions post Constitutional amendment

This Tax Alert gives an update on the recent decision of the Allahabad High Court (HC) wherein a writ petition was filed challenging the legality of the levy and collection of Entry tax on goods brought into local areas of Uttar Pradesh (UP) through online purchase and e-commerce transaction.


By virtue of Constitution (101st Amendment) Act, 2016, Entry 52 has been omitted from State List of Schedule VII. In terms of Clause 19 of notification dated 8 September 2016, only such laws which were in force immediately before commencement of Constitutional Amendment Act have been saved for a period of one year.

On 16 September 2016, Section 4A was inserted in Uttar Pradesh Tax on Entry of goods into Local Areas Act, 2007 in order to levy entry tax on e-commerce transactions which were earlier outside the purview of entry tax.

HC held as follows:

►        Prima facie, insertion of Section 4A is completely beyond the authority and competence of the State Legislature as Clause 19 of the Constitution (101st Amendment) Act, 2016 does not in any way save the imposition of the tax on online purchase or e-commerce transaction..

►        There is a complete lack of legislative competence and the impugned provisions are rendered unconstitutional.

►        Petitioner can trade through e-commerce and online purchase system. However, in order to secure the interest of the State, petitioner shall furnish Bank Guarantee to the satisfaction of the authorities concerned. 

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