Applications for LAMP Fellowship 2025-26 are now open. Apply here. The last date for submitting applications is December 21, 2024
The government of West Bengal has recently imposed a tax on the entry of goods into the local areas of the State. According to the Finance Minister, this will help meet 'cost for facilitating trade and industry in the State'. Many States impose entry tax on goods coming into their areas of jurisdiction. Entry Tax is imposed by States under the provisions of Entry 52 of the State List and Article 304 of the Indian Constitution. These read as under: Entry 52, List II of the Seventh Schedule (State List) “Taxes on the entry of goods into a local area for consumption, use or sale therein.” Article 304: Restriction on trade, commerce and intercourse among States "Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law – (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." Are there any restrictions to the power of States to impose entry taxes? The use of the words 'so, however, as not to discriminate ' and 'reasonable restrictions' in the above articles constrain the power of States to some extent. Several petitions challenging the imposition of entry taxes have been filed before courts. In 2008, the Supreme Court has referred the entry tax issue to a larger bench. This case is currently pending. What are the arguments in favour and against the imposition of such taxes? Arguments in favour of entry tax
Arguments against entry tax
In addition to the above, it can also be said that an entry tax goes against the principle envisaged under the Goods and Services Tax (GST) regime. The GST aims to create a common market throughout India without any taxes on inter-state movement of goods. A Constitutional Amendment Bill to facilitate the implementation of GST is currently pending in Parliament.
In the last decade, some schemes have been recast as statutory entitlements – right to employment, right to education and right to food. Whereas schemes were dependent on annual budgetary allocations, there rights are now justiciable, and it would be obligatory for Parliament to allocate sufficient resources in the budget. Some of these rights also entail expenditure by state governments, with the implication that state legislatures will have to provide sufficient funds in their budgets. Importantly, the amounts required are a significant proportion of the total budget. There has been little debate on the core constitutional issue of whether any Parliament can pre-empt the role of resource allocation by future Parliaments. Whereas a future Parliament can address this issue by amending the Act, such power is not available to state legislatures. Through these Acts, Parliament is effectively constraining the spending preferences of states as expressed through their budgets passed by their respective legislative assemblies. I have discussed these issues in my column in Pragati published on August 16, 2013.
