Gujarat HC upholds Entry Tax on Goods purchased from E-Commerce Portals

In a major setback to Flipkart Internet Pvt Ltd, Amazon Seller Services Pvt Ltd, and Instakart Services Pvt Ltd the division bench of Gujarat High Court dismissed petition challenging the validity of notification levying entry tax on goods that are being purchased through the e-commerce portals.

The petitioners has challenged the validity of notification levying 6 to 21 percent entry tax on goods that are being purchased through the e-commerce. Amazon challenges the state government’s amendment to the law to levy entry tax on goods purchased through e-commerce portals, which has apparently been done to provide a level- playing field to traders and retailers in the state.

The Gujarat Tax on Entry of Specified Goods into Local Areas (Amendment) Bill, was passed on March 31 this year. From April 1, any goods being purchased online is being subject to entry tax. While normal goods are being levied five per cent tax, specified goods are subject 6 to 21 per cent tax.

Flipkart, Amazon has claimed that the tax is discriminatory, because no such tax is imposed on goods brought into Gujarat through other modes of sale. It has held that it only provides an online platform to manufacturers, traders and buyers and itself is not involved in selling any product and hence the tax is unjustified.

The division bench comprising of Justice M R Shah and Justice B N Karia while upholding the Gujarat State Government notification cited recent Supreme Court Judgment on Entry Tax.

On November 11th a Nine Judge bench of Supreme Court of India upheld the Constitutional validity of the various State Government legislations to levy Entry Tax for goods coming outside from its territory.

The bench led by Chief Justice of India ruled that the tax legislation by the state does not require the consent of the President under Article 304 B of the Constitution of India. Entry Tax is not violative of the constitutionally recognised right to free trade commerce and intercourse guaranteed under Article 301 of the Constitution of India.

On September 30, despite of above rulings the division bench of Patna High Court ruled that, levy of entry tax on online purchases is illegal and unconstitutional. Tax cannot be levied on entry of goods into local areas, in terms of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Act, 1993, over the transactions, made on e-commerce portals, for personal use or consumption of individual consumer.