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Levy of Entry Tax on E-Commerce Transactions in Rajasthan

The Government of Rajasthan has made amendments in the provisions of Rajasthan Entry Tax Act, 1999 via Finance Act, 2016 which are effective from 09-04-2016. By virtue of these amendments the government has brought the e-commerce transactions under the purview of the Entry Tax.

Following are the brief discussions regarding such amendments.

 

Amendment in Section 4

The first amendment is the insertion of following clause in section 4 of the Act which governs the incidence of Tax.

(1A)       Every person who, in the course of business, whether on his own account or on account of a principal or any other person, brings or causes to be brought into a local area, or takes delivery or is entitled to take delivery into a local area of, any goods in pursuance of sale or purchase effected through electronic media shall be liable to pay tax on the taxable purchase value of the goods. (This clause is added by Finance Act, 2016 w.e.f. 09-04-2016]

 

Analysis of Amendment in Section 4

If we see the portions of this clause 1A, there are following parts in it.

  • Every person
  • Who in the course of business
  • Whether on his own account or on account of a principal or any other person
  • Brings or causes to be brought into a local area
  • Or takes delivery or is entitled to take delivery into a local area
  • Of any goods in pursuance of sale or purchase effected through electronic media.
  • Shall be liable to pay tax on the taxable purchase value of the goods.

 

Here, I want to point out the wordings of clause 1 of section 4 of the Act, which is as below.

Section 4(1):       On the commencement of this Act, every dealer whose annual turnover of import of goods liable to tax under this Act, made:-

(i)  during the year ending on 31.03.1999 or

(ii)  during any year commencing on 1st April, subsequent to year mentioned in clause (i) exceeds Rs. 1 Lac, shall be liable to get himself registered as a dealer in the manner as may be prescribed, and be liable to pay tax on the taxable purchase value of the goods

In clause (1) of the section 4, the word “dealer” is used, whereas in clause (1A), the word “person” is used.

 

Definition of “Dealer” in Rajasthan Entry Tax Act

Section 2(e) of the Act defines “Dealer” as follows.

Dealer means any person who, in the course of business or otherwise, whether on his own account or on account of a principal or any other person, brings or causes to be brought into a local area any goods or takes delivery or is entitled to take delivery of goods on its entry into a local area and includes an occasional dealer.”

Here, the words are used “dealer means any person who, in the course of business or otherwise ……”

 

Definition of “Business” in Rajasthan Entry Tax Act

Section 2(c) of the Act defines “Business” as follows.

“Business includes any trade, commerce or manufacture of any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern and any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern.”

Thus, from above points it appears that, normally the entry tax is leviable in Rajasthan irrespective of whether the person importing the goods is a “Dealer” or not. But while including the e-commerce transactions in the tax net, only those persons are included which are importing such goods during the course of the business.

 

Impact of inclusion of clause 1A in section 4 of the Rajasthan Entry Tax Act

  • Every person who in the course of any business, will be liable to pay entry tax on goods which are purchased through e-commerce route and used for their business purpose.
  • Individual customers which are not engaged in any business, who are purchasing goods through e-commerce sites and used for their personal purpose are not liable to pay tax under these provisions.

 

Situations where such entry tax will be not be leviable

  • Persons, who in the course of their business, have purchased goods through e-commerce web site and such goods are delivered to them by a Seller situated in the state of Rajasthan.
  • If the person purchasing the goods from e-commerce sites during the course of his business and selling it in Rajasthan and paying VAT in Rajasthan, then the entry tax is exempted vide notification no. 12(23)FD/Tax/2015-211 dated 09.03.2015.

 

Situations where such entry tax will be leviable

  • Persons, who in the course of their business, have purchased goods through e-commerce web site and such goods are delivered to them by a Seller situated outside the state of Rajasthan.
  • If the person purchasing the goods from e-commerce sites during the course of his business and using or consuming those goods in the course of business.

 

Liability of Registration under Entry Tax Act

Section 11 of the Rajasthan Entry Tax Act covers the liability of registration under Rajasthan Entry Tax Act. Following are the relevant extracts of section 11 of the Act.

Section 11(1) Every Dealer;

(a)  Who buys or receives goods liable to tax under this Act and who is doing business in a local area; and

(b) who brings or causes to be brought such goods liable to tax into a local area or takes delivery or is entitled to take delivery of such goods, the aggregate value of which is not less than 1 Lac rupees in a year, shall get himself registered under this Act in such manner on payment of such fee and within such period as may be prescribed and such registration shall remain in force until the same is cancelled

Section 11(2) Notwithstanding anything contained in sub section (1);

 (i)  every dealer undertaking execution of works contract involving the use or consumption of goods entering into a local area; or

(ii) every dealer not ordinarily resident of a local area; or

(iii)  every manager or agent of a dealer not ordinarily resident of a local area; other than a dealer dealing in exclusively in the goods as may be specified; or

(iv)  every lessor or lessee, who brings or cause to be brought goods into a local area; or

(v)  every person who, in the course of business, whether on his own account or on account of a principal or any other person, brings or causes to be brought into a local area, or takes delivery or is entitled to take delivery into a local area of, any goods in pursuance of sale or purchase effected through electronic media. (This clause is added by Finance Act, 2016 w.e.f. 09-04-2016]

shall get himself registered irrespective of the value of his annual turnover of goods brought into a local area.

 

Analysis of amendments in section 11

  • Every person, who in the course of his business, purchases goods through e-commerce sites and which are delivered to him by seller situated outside Rajasthan shall have to take Registration under entry tax.
  • The minimum turnover limit of Rs. 1 lacs will not be applicable in this case.

 

Whether basic exemption of Rs. 1 Lac is applicable in case of E-commerce transactions

As per provisions of section 4, the basic exemption of Rs. 1 lacs has not been provided to e-commerce transaction and such exemption will not be available.

 

Which goods have been notified for levy of Entry Tax in case of E-commerce transactions and what is the Rate of Entry Tax applicable

  • Entry tax is leviable on notified goods. The goods and rate of tax have been notified in this Notification no. 12(23)FD/Tax/2015-211 dated 09-03-2015
  • Vide notification no. 12(61)FD/Tax/2014-Pt-I-25 dated 16-06-2016 all goods covered in Schedule 3, 4, 5 and 6 of Rajasthan VAT Act and which are not covered under the previous notification as covered and entry tax rate of 5.50% has been specified.

 

Amit Mundhra FCA

The author is a Fellow Member of ICAI and he can be reached at amit.mundhra@gmail.com, Mobile : 9 8 2 9 0 1 0 1 7 2

 

Disclaimer: The views express here in above are based on author’s interpretation of law, which may differ from case to case and person to person. Views expressed above are neither intended nor liable to be used as professional advice or a legal opinion in any manner. The author or publisher is not responsible for the result of any action taken on the basis of this work or for any error or omission to any person.

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3 Responsesso far.

  1. Bhumika says:

    Sir I had made interstate purchase of DG set in 2012 by issuing c form and receiving form E1 although billing is in the name of seller in udaipur but shown as consignment sale. Will I liable to pay entry tax

  2. NITESH AGARWAL says:

    What is the taxable value of purchase for tax calculation

  3. DEEPAK says:

    We received parts & units from principle and replace to our customer free of cost. after replace we return defective unit to principle. then can we liable to pay entry tax to govt. for entry of goods.

    we are service center.

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