Entry Tax on Goods

Under Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002, tax is attracted on tiles imported from outside the State of Maharashtra for consumption, use or sale. The charging section 3 of the said Act provides as under:

“3 (1) There shall be levied and collected a tax on the entry of the goods specified in column (2) of the Schedule, into any local area for consumption, use or sale therein, at the rates respectively specified against each of them in column (3) thereof and different rates may be specified in respect of different goods or different classes of goods or different categories of persons in the local area. The tax shall be levied on the value of the goods as defined in clause (n) of sub-section (1) of section 2. The State Government may, by notification in the Official Gazette, from time to time, add, modify or delete the entries in the said Schedule and on such notification being issued, the Schedule shall stand amended accordingly;

(2) Notwithstanding anything contained in sub-section (1), there shall also be levied a tax in addition to the tax leviable in accordance with sub-section (1) on the entry of Petrol and High Speed Diesel Oil in any local area for consumption use or sale therein at the rate of one rupee per litre.
(3) …
(4) …

(5) Notwithstanding anything contained in subsection (1) and (2), no tax shall be levied on the specified goods, imported by a dealer registered under the [the Value Added Tax Act], who brings goods into any local area for the purpose of resale in the State or sale in the course of inter-State trade or commerce or export out of the territory of India:

Provided that, if any such dealer, after importing the specified goods for the purpose of resale in the State or sale in the course of inter-State trade or commerce or export out of the territory of India, consumes such goods in any form or deals with such goods in any other manner except reselling the same, he shall inform the assessing authority before the 25th day of the month, succeeding the month in which such goods are so consumed or dealt with and pay the tax, which would have been otherwise leviable under sub section (1) or (2).

(6) If any dealer having imported the specified goods for the ostensible purpose of resale or, as the case may be, sale, deals with such goods in any other manner or consumes the same and does not inform the assessing authority as provided in sub-section (5) or does not pay the tax as required under sub-section (5) within the specified period, the assessing authority shall assess the amount of tax which the dealer is liable to pay under subsection (1) or (2) and also levy penalty equal to the amount of tax due. ….”

It may be noted that section 3(5) exempts from levy, the specified goods, which are for resale.

 Thus, if the tiles are held to be imported for resale, no Entry Tax can be attracted. The issue will be whether use of tiles in works contract will be considered to be ‘resale’, so as not to attract any liability under Entry Tax Act?

Section 2(2) of Entry Tax Act, 2002 provides as under:

“2 (2) Words and expressions used but not defined in this Act but defined in the [the Value Added Tax Act, or the Maharashtra Value Added Tax Rules, 2005] shall have the meanings respectively assigned to them under that Act or the Rules.”

Therefore the terms not defined in Entry Tax Act will carry the meaning as given in MVAT Act, 2002.

The term ‘resale’ is defined in section 2(22) of MVAT Act, 2002 as under:

“(22) ‘resale’ means a sale of purchased goods-

(i) in the same form in which they were purchased, or

(ii) without doing anything to them which amounts to, or results in, a manufacture, and the word ‘resell’ shall be construed accordingly;”

As per facts, as stated above, the tiles are used by contractor in construction activity and they will be used in the same form as they are ready tiles for fitting. It is also a fact that works contract is a ‘sale’ transaction. This position is clear from definition of ‘sale’ in section 2(24) of MVAT Act, 2002, which defines ‘sale’ as under:

““(24) “sale” means a sale of goods made within the State for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge; and the words “sell”, “buy” and “purchase”, with all their grammatical variations and cognate expressions, shall be construed accordingly;

Explanation,-—For the purposes of this clause,—

(a) a sale within the State includes a sale determined to be inside the State in accordance with the principles formulated in section 4 of the Central Sales Tax Act, 1956;

(b) (i) the transfer of property in any goods, otherwise than in pursuance of a contract, for cash, deferred payment or other valuable consideration;

(ii) the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract including, an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property…”

In works contract, tax is levied on the basis that there is sale of individual items used in the contract. It is due to the above position, the contractor is liable to pay tax under MVAT Act, 2002 as per goods involved and transferred during the execution of works contract. The net result is that there is sale of tiles by use in works contract and it is ‘resale’ within the meanings of section 2(22) of MVAT Act, 2002. Under the above circumstances, no Entry Tax is attracted on the contractor. This will be the position whether the contractor is discharging liability by statutory method of Rule 58 of MVAT Rules or under Composition method.

This position will apply to all notified goods which are used as it is in ‘works contract’ and on which tax liability under MVAT Act is discharged.