Levy of Entry Tax on E-Commerce is Unconstitutional: Allahabad HC grants interim relief on Instakart’s plea [Read Order]

In a writ petition filed by the Instakart Services Pvt Ltd, against the levy of Entry Tax on E-Commerce, the Allahabad High Court granted interim relief to the petitioners to continue trade through E-Commerce and on Online Purchase system upon certain conditions.

The petition had been filed against the levy of entry tax on e-commerce vide amendment in the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 and Uttar Pradesh Tax on Entry of Goods into Local Areas (Amendment) Act, 2016 (UP Act No.18 of 2016) notified on 16th September, 2016.

The State contended that the legislation is within the constitutional limits since the State legislature Clause 19 of the Constitution (One Hundred and First Amendment) Act, 2016 saves the existing provisions of the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 for a period of one year until amended or repealed by a competent Legislature, then in that event, the Legislature was competent to have brought into force the provisions of Section 4-A by the impugned notification that is under challenge before this Court. They further denied the allegation of discrimination as raised by the petitioner and contended that there being no unconstitutional exercise of power so as to create a restriction on trade commerce or intercourse between the States, the levy is constitutionally valid.

The bench comprising of Justice Ravindra Nath Mishra and Justice Amreshwar Pratap Sahi observed that, the levy seems to be unconstitutional for the want of legislative competence.

Allowing interim relief to the petitioner with a condition of furnishing security bond, the bench observed that “amendment inserted by way of U.P. Act No.18 of 2016 to be completely beyond the authority and competence of the State Legislature as it ex facie introduces the levy of tax which was not existing under the old Act and therefore, could not be introduced by way of the amendment as has been done now. Consequently, Clause 19 of Constitution (One Hundred and First Amendment) Act, 2016 does not in any way prima facie saves the imposition of the tax through Online Purchase or E-Commerce particularly for personal use. Thus there is a complete lack of legislative competence as such the impugned provisions are rendered unconstitutional.”

Read the full text of the order below.