In a reprieve for e-trailers, the Allahabad High Court has stayed the levy of entry tax on goods purchased on e-commerce portals for personal use or consumption of individuals and brought in by Bengaluru-based logistics service firm Instakart Service in UP.

The impugned provisions prescribe collection of entry tax at 5% of the value of goods from the logistics service provider firm. The goods are brought in the state on account of inter-state transaction between the seller and the consumers on which appropriate central sales tax is paid.

Earlier, the Patna HC had held that levy of entry tax on online buys is illegal and unconstitutional and had quashed the Bihar government’s notification.

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Instakart Service had challenged the September notifications of impugned provisions of Sections 2(1)(b)(x) and 4A of the Uttar Pradesh Tax on Entry of Goods Into Local Areas Act 2007, inserted by the UP Tax on Entry of Goods Into Local Areas (Amendment) Act, 2016. It said the law seeks to limit the inter-state movement of goods by imposing discriminatory tax on goods which have been subjected to CST in the originating state and accordingly, violate Articles 301 and 286 of the Constitution.

Stating that the impugned provisions are liable to be struck down, advocate Tarun Gulati, appearing for the company, argued that the entry tax at a higher rate is being imposed on goods transacted through e-commerce as opposed to a lower rate of entry tax imposed on the similar goods when transacted through any other traditional mode creating a hostile discrimination against e-commerce medium and this is in violation of Article 14 of the Constitution.

He further argued that the impugned provisions are without any authority of law and in violation of Article 265, in as much as, on the date of notification of the impugned provisions, Entry 52 in List II of the Seventh Schedule to the Constitution of India giving power to the UP government to levy entry tax, was omitted by way of the Constitution.