Tata Metal Ltd., Samsung India Electronics Pvt., Birla Tyres Ltd. and over 100 others have secured a major victory towards the West Bengal authorities in an oblique tax case. The West Bengal Taxation Tribunal’s ruling has a message for all state governments—that levies which have been subsumed underneath the products and providers tax can’t proceed, by no matter title known as.
Consensus between the central authorities and states on GST was described as a “grand cut price” again in 2016, Tarun Jain, associate at BMR Authorized, recalled. This meant states agreed to discontinue levies subsumed underneath the GST, and the centre determined to guard income by means of compensation, Jain mentioned.
This was performed by way of the Structure (a hundred and first) Modification Act, 2016 which changed varied central and state taxes similar to excise obligation, service tax, gross sales tax, entry tax and leisure tax with the GST.
The judgment is far celebrated on condition that it nullifies the try of the state to revive an enactment with none applicable supply of energy and opposite to a subsisting ruling of the jurisdictional excessive courtroom, Abhishek Rastohi, associate at Khaitan & Co., mentioned.
In 2013, a single bench of the Calcutta Excessive Court docket had struck down the state’s Entry Tax Act, 2012. Broadly, on grounds that it doesn’t meet the constitutional check to limit motion of products from different states. The West Bengal authorities appealed this earlier than the division bench, which is but to pronounce its ruling.
In the meantime, the parliament authorised the constitutional modification in September 2016 to introduce the GST. It additionally gave states a 12 months to amend or repeal their current oblique tax legal guidelines to align with the GST.
The West Bengal authorities used this transitional provision to introduce amendments to its oblique tax legislation. Through the Finance Act, 2017, the state authorities retrospectively amended the entry tax legislation. It essentially-
Negated the affect of the 2013 single bench order.
Launched tax on all varieties of switch of inventory and items bought, transported from one native space to a different native space throughout the state, aside from the products imported from outdoors of the state.
Tons of of firms argued towards these amendments earlier than the tax tribunal, saying:
The state legislature misplaced its legislative competence to levy entry tax after the a hundred and first Structure Modification Act. Material entry tax has already been dropped from the state listing.
Such loss is complete and absolute and can’t be revived or revalidated in a detour means underneath any circumstances.
The state had elevated the variety of taxpayers manifold retrospectively which isn’t solely discriminatory but additionally inconceivable to implement.
In brief, the businesses said that the West Bengal Finance Act, 2017 subjected new lessons of assesses to pay entry tax retrospectively, which is unreasonable, unjust, unfair and unconstitutional.
The tribunal discovered benefit in firms’ arguments.
It famous that in July 2017, the Entry Tax Act was repealed by way of provisions of the West Bengal Items and Companies Tax Act, 2017. The indubitable and plain place is that by advantage of the a hundred and first Structure Modification, entry tax was omitted, the tribunal mentioned.
The tribunal additionally dismissed the state’s argument that energy of the legislature to repeal is coextensive with the facility to enact underneath the transitional provision within the a hundred and first Structure Modification Act. The state legislature can’t be mentioned to have legislative competence to usher in the amendments and validate the entry tax legislation, the tribunal concluded.
It is a very constructive ruling since varied different states like Gujarat and Kerala have additionally created new liabilities underneath the VAT regime by making retrospective amendments, after agreeing to the GST framework, Ritesh Kanodia, associate at Dhruva Advisors, mentioned.
There will probably be monetary implications of this ruling if the West Bengal authorities has collected this levy from companies, Jain mentioned.
Will probably be a case-to-case evaluation, he mentioned.
