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Gujarat VAT & CST

SC to lift entry tax cap, Rs 10k cr bonanza for states

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States can expect a revenue bonanza of up to Rs 10,000 crore to be paid by big corporate houses in the manufacturing sector as the Supreme Court on Friday said it would in April vacate its three-year-old interim order asking authorities to collect only 50% of entry tax.

Approximately Rs 30,000 crore is due from corporate houses, including Vedanta, Adani, Tata, Reliance Industries, Bharti Airtel, Hindalco, Bhushan Steel, Honda Siel, Xpro India, Essar and LG Electronics, as entry tax for raw material entering the states to reach their manufacturing units.

The constitutional validity of entry tax was challenged by several corporate houses in various high courts, which gave conflicting judgments. The matter reached the Supreme Court which three years ago ordered states – mainly Odisha, Madhya Pradesh and Uttar Pradesh – to collect only 50% of entry tax and not ask for payment of penalties.

The bunch of petitions challenging validity of entry tax got referred to a five-judge constitution bench. It was then referred to a seven-judge bench and now stood referred to a nine-judge constitution bench, Odisha’s counsel Kirti Renu Misra said. Initially, the court had allowed collection of 33% of entry tax which was later enhanced to 50%. However, states were restrained from collecting penalty for delay in depositing entry tax.

A bench of Chief Justice T S Thakur and Justice U U Lalit said it was unfair to deprive "poor" states like Odisha of revenue that was due to it from entry tax.

This observation came when Nalco, through senior advocate Jagdeep Dhankar, sought parity with other companies in payment of entry tax. It had been asked by tax authorities to pay Rs 4.18 crore as entry tax and Rs 8.37 crore as penalty.

Making a departure from the interim order, the bench asked Nalco’s counsel Kedarnath Tripathy to deposit the entire entry tax demand of Rs 4.18 crore but stayed payment of the penalty amount. Taking this formula for payment of entry tax, states could reap a revenue of Rs 10,000 crore from the total estimated due of Rs 30,000 crore.

[Source: timesofindia.indiatimes.com]

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