Supreme Court upholds states’ rights to levy entry tax

In a major blow to companies, the Supreme Court on Friday upheld the rights of states to levy entry tax. By a seven-two majority verdict, the top court said states are well within their rights to reduce tax burden.

india Updated: Nov 11, 2016 13:04 IST
Soibam Rocky Singh
Soibam Rocky Singh
Hindustan Times
Supreme Court,Entry tax,Entry tax ban
The SC verdict came on petitions by corporate houses challenging the imposition of entry tax by state governments.(Mohd Zakir /HT Photo)

In a major blow to companies, the Supreme Court on Friday upheld the rights of states to levy entry tax. By a seven-two majority verdict, the top court also said states are well within their rights to reduce tax burden.

The verdict came on petitions by corporate houses challenging the imposition of entry tax by state governments. They arguing it violated their constitutional right to carry out free trade and commerce.

Entry tax is levied on movement of goods from one state to another and is charged by the recipient state to protect its tax base.

About two thousand petitions have been pending in the apex court since 2002 on the issue. Manufacturers and associations have challenged the constitutional validity of entry tax laws enacted by the states.

They claim that Entry Tax breaches Article 301 of the Constitution, which provides for freedom of trade and commerce within the country.

About Rs 30,000 crore is collected by states every year by way of entry tax. States such as Odisha earn around Rs 16,000 crore. Similarly, the Municipal Corporation of Greater Mumbai collects around Rs 7,500 crore annually through octroi levy - another form of entry tax.

First Published: Nov 11, 2016 12:54 IST