About Entry Tax
Let us assume that you just want to run a clothing manufacturing business. To start producing, you will need raw materials first. Instead of purchasing raw materials from dealers or traders in your state, you decided to import them from other Indian states as it will be more cost-efficient.
But this movement of goods between states used to attract an Entry tax which has now been replaced with GST.
What is Entry Tax?
The resources are unevenly spread throughout the whole country. For instance, a state which is rich in cotton would export the same to businesses in other parts of the nation. Entry tax was introduced in September 2000 so that the government too has a record for this movement of resources between various Indian states.
So, as discussed above, Entry tax was a type of tax levied by the state governments on the movement of goods between various states. It was paid to the government of the state in which the good get entered. But generally, the tax was not levied on essential commodities like grains, milk, sugar, etc. It was mostly levied on resources that are not considered essential.
But some Indian states did impose the tax on some essential commodities as well. Some states also required vehicles to pay an Entry tax for entering the State.
What Type of Products/Goods Attracted Entry Tax?
Resource availability was one of the important considerations for different states in determining which products were covered under the Entry tax. As a result, the list of products that attracted Entry tax varied between states.
Some of the most common examples of goods/products that attracted the tax included electronic products, motor vehicles, LPG, oil, paints, and furniture.
What Was Entry Tax Rate?
As it was a state-levied tax, the tax rate was different between the states. Each state also had various product categories on which the tax was levied at different rates. For instance, Madhya Pradesh government levied an entry tax of 4% on all electrical goods and a 15% tax on new 2-wheelers, 3-wheelers, and 4-wheelers.
Goa, on the other hand, levied an entry tax of 12.5% on electrical goods and a 12.5% tax on all the various types of motor vehicles. So, the products on which the tax was levied, and the tax rates used to differ between states.
Was Entry tax refundable?
Yes, a person could claim a refund in case if the product/good was sent back to its place of origin for some reason. For instance, if you are taking any electronic good from Maharashtra to Karnataka, you were required to pay Entry tax in Karnataka. But if the buyer refused the delivery for any reason, you were eligible to claim a refund on the Entry Tax you paid to the Karnataka government.
But there was a limited window, generally of 1 month, within which the refund can be claimed.
The Sub-Sumption of Entry Tax by GST
On 1st July 2017, GST(Goods and Services Tax) was implemented in India. It replaced a host of central government and state government taxes, including all forms of Entry tax.
Under the new GST regime, Inter-state movement of goods now attracts IGST (Integrated GST). Intra-state transfers attracts CGST (Central GST) and SGST (State GST). The tax rate would depend on the product being moved between two different states.
Entry Tax is a tax on the movement of goods from one state to another state levied by the state governments in India. It is imposed by the recipient state to ultimately protect its Tax base. The tax was introduced on 1September 2000.
The tax was applied to different dealers, industrial, commercial or trading undertakings, Central and various State Governments companies, firms, societies and clubs which runs on business.