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- Can States levy entry tax?
Can States levy entry tax?
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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.
- Resource mobilization
- Protection to state producers and manufactures
Arguments against entry tax
- Upward pressure on prices
- Delays and bottlenecks to movement of goods at state borders
- Reduction in competition and consumer choice
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.
The Right to Information (Amendment) Act, 2019 amended the Right to Information Act, 2005. The RTI Act, 2005 specified the tenure, terms of service and salaries of the Chief Information Commissioner (CIC) and Information Commissioners (ICs) at the central and state levels, in the parent law. The RTI (Amendment) Act, 2019 removed these provisions and stated that the central government will notify the term and quantum of salary through rules.[1],[2]
The Right to Information Rules, 2019 were notified on October 24, 2019.[3] These rules set out the tenure, terms of service and salaries of the CIC and ICs at the state and central levels. Table 1 compares the provisions related to the tenure and salary of the CIC and ICs under the Right to Information Act, 2005 and the Right to Information Rules, 2019
Table 1: Comparison of the provisions of the Right to Information Act, 2005 and the Right to Information Rules, 2019
|
Provision |
RTI Act, 2005 |
RTI Rules, 2019 |
|
Term |
The CIC and ICs (at the central and state level) will hold office for a term of five years. |
The CIC and ICs (at the central and state level) will hold office for a term of three years. |
|
Salary |
The salary of the CIC and ICs (at the central level) will be equivalent to the salary paid to the Chief Election Commissioner and Election Commissioners (Rs 2,50,000 per month) Similarly, the salary of the CIC and ICs (at the state level) will be equivalent to the salary paid to the Election Commissioners (Rs 2,50,000 per month) and the Chief Secretary to the state government (Rs 2,25,000 per month), respectively. |
The CIC and ICs (at the central level) shall receive a pay of Rs. 2,50,000 and Rs. 2,25,000 per month, respectively.
CICs and ICs (at the state level) shall receive a pay of Rs. 2,25,000 per month. |
Source: The Right to Information (Term of Office, Salaries, Allowances and Other Terms and Conditions of Service of Chief Information Commissioner, Information Commissioners in the Central Information Commission, State Chief Information Commissioner and State Information Commissioners in the State Information Commission) Rules, 2019; The High Court and the Supreme Court Judges (Salaries and Conditions of Service) Amendment Act, 2017; Indian Administrative Services (Pay) Rules, 2016; PRS.
[1] Right to Information Act, 2005, https://rti.gov.in/rti-act.pdf.
[2] Right to Information (Amendment Act), 2019, file:///C:/Users/Dell/Downloads/The%20Right%20to%20Information%20(Amendment)%20Bill,%202019%20Text.pdf.
[3] The Right to Information (Term of Office, Salaries, Allowances and Other Terms and Conditions of Service of Chief Information Commissioner, Information Commissioners in the Central Information Commission, State Chief Information Commissioner and State Information Commissioners in the State Information Commission) Rules, 2019, http://egazette.nic.in/WriteReadData/2019/213438.pdf.
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The core group of secretaries on disinvestment has recently approved the disinvestment of five public sector undertakings (PSUs). This includes the entire shareholding of the government in four PSUs: Bharat Petroleum Corporation (BPCL), Shipping Corporation of India (SCI), North Eastern Electric Power Corporation (NEEPCO) and THDC (operates and maintains the Tehri Hydro Power Complex), and 30% of the shareholding in Container Corporation of India Limited (Concor). The government currently holds 54.8% of Concor, so the sale will reduce its stake below 25%.
Over the last few years, the government has removed legislative barriers towards privatisation of several other PSUs. This raises the question whether the government plans to privatise them.
What was the Supreme Court’s order on privatisation of PSUs?
In 2003, a similar proposal had been raised by the government for the sale of its shareholding in HPCL and BPCL. This proposal was challenged in the Supreme Court on the grounds that it would violate the provisions of the laws that transferred ownership of certain assets to the government (which later formed these PSUs). For example, BPCL was formed by nationalising Burmah Shell in India through an Act of Parliament, and merging their refinery and marketing companies. The Court ruled that the central government cannot proceed with the privatisation of HPCL and BPCL (i.e., reduce its direct or indirect ownership below 51%) without amending the concerned laws. So the government continues to hold majority stake directly in BPCL, and indirectly in HPCL ( through ONGC, another PSU).
The five Companies approved for privatisation include BPCL and SCI (into which two nationalised companies, the Jayanti Shipping Company, and the Mogul Line Limited were merged). The relevant nationalisation Acts have been repealed over the last five years.
How did the government remove the legislative barriers for privatisation?
Between 2014 and 2019, Parliament passed six Repealing and Amending Acts which repealed around 722 laws. These included laws that had transferred the ownership of companies to the central government which later formed BPCL, HPCL, and OIL. These also repealed the laws that had transferred ownership of the companies to the central government which were later merged with the SCI. This implies that now the government can go ahead with the privatisation of these government companies as the conditions imposed by the Supreme Court’s order have been fulfilled. These Repealing and Amending Acts also repealed several other nationalisation laws that were later formed into PSUs. In the Table below, we have listed some of these companies. Note that the Law Commission of India (2014) had suggested the repeal of several of these laws (including the Esso Act, the Burmah Shell Act, the Burn Company Act) on the grounds that these laws do not serve any purpose with respect to the nationalised entity. However, it had suggested that a study of all the nationalisation Acts should be done before repealing these Acts, and if necessary a savings clause should be provided in the repealing Act.
Did Parliament scrutinise these Acts before passing them?
Many of these repeals were made through the Repealing and Amending Act, 2016. These include the Acts relating to BPCL, HPCL, OIL, Coal India Limited, SCI, National Textiles Corporation, Hindustan Copper and Burn Standard Company Limited. The Bill was not referred to a Parliamentary Standing Committee, and was passed after a cursory debate (50 minutes in Lok Sabha and 20 minutes in Rajya Sabha). Similarly, the two Acts passed in 2017, that enable privatisation of SAIL, PowerGrid, and State Trading Corporation were not examined by a Standing Committee.
So what comes next?
The repeal of these Acts have cleared the legislative hurdle for privatisation of these companies. That is, the government does not need prior approval of Parliament to sell its shareholding. Therefore, it is now up to the government to decide whether it wishes to privatise these entities.
A version of this article was published by the Business Standard on October 20, 2019.
Table 1: Some Nationalisation Acts repealed since 2014 (list not exhaustive)
|
Company |
Act being repealed |
Repealing Act |
|---|---|---|
|
Shipping Corporation Of India (SCI) |
The Jayanti Shipping Company (Acquisition of Shares) Act, 1971 |
Repealing and Amending Act, 2016 |
|
The Mogul Line Limited (Acquisition of Shares) Act, 1984 |
||
|
Bharat Petroleum Corporation Limited (BPCL) |
The Burmah Shell (Acquisition of Undertakings in India) Act, 1976 |
Repealing and Amending Act, 2016 |
|
Hindustan Petroleum Corporation Limited (HPCL) |
The Esso (Acquisition of Undertakings in India) Act, 1974 |
Repealing and Amending Act, 2016 |
|
The Caltex [Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) Limited] Act, 1977 |
||
|
The Kosangas Company (Acquisition of Undertaking) Act, 1979 |
||
|
Coal India Limited (CIL) |
The Coking Coal Mines (Emergency Provisions) Act, 1971 |
Repealing and Amending Act, 2016 |
|
The Coal Mines (Taking Over of Management) Act, 1973 |
||
|
The Coking Coal Mines (Nationalisation) Act, 1972. |
Repealing and Amending (Second) Act, 2017 |
|
|
The Coal Mines (Nationalisation) Act, 1973. |
||
|
Steel Authority of India Limited (SAIL) |
The Bolani Ores Limited (Acquisition of Shares) and Miscellaneous Provisions Act, 1978 |
Repealing and Amending (Second) Act, 2017 |
|
The Indian Iron and Steel Company (Acquisition of Shares) Act, 1976 |
||
|
Power Grid Corporation of India Limited |
The National Thermal Power Corporation Limited, the National Hydroelectric Power Corporation Limited and the North-Eastern Electric Power Corporation Limited (Acquisition and Transfer of Power Transmission Systems) Act, 1993. |
Repealing and Amending (Second) Act, 2017 |
|
The Neyveli Lignite Corporation Limited (Acquisition and Transfer of Power Transmission System) Act, 1994. |
||
|
Oil India Limited (OIL) |
The Burmah Oil Company [Acquisition of Shares of Oil India Limited and of the Undertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited] Act, 1981 |
Repealing and Amending Act, 2016 |
|
State Trading Corporation of India Ltd. (STC) |
The Tea Companies (Acquisition and Transfer of Sick Tea Units) Act, 1985 |
Repealing and Amending Act, 2017 |
|
National Textile Corporation Limited (NTC) |
The Sick Textile Undertakings (Taking Over of Management) Act, 1972 |
Repealing and Amending Act, 2016 |
|
The Textile Undertakings (Taking Over of Management) Act, 1983 |
||
|
The Laxmirattan and Atherton West Cotton Mills (Taking Over of Management) Act, 1976 |
||
|
Hindustan Copper Limited |
The Indian Copper Corporation (Acquisition of Undertaking) Act, 1972 |
Repealing and Amending Act, 2016 |
|
Burn Standard Co Ltd |
The Burn Company and Indian Standard Wagon Company (Nationalisation) Act, 1976 |
Repealing and Amending Act, 2016 |
|
Indian Railways |
The Futwah-Islampur Light Railway Line (Nationalisation) Act, 1985 |
Repealing and Amending Act, 2016 |
|
Braithwaite & Co Limited, Ministry of Railways |
The Braithwaite and Company (India) Limited (Acquisition and Transfer of Undertakings) Act, 1976. |
Repealing and Amending (Second) Act, 2017 |
|
The Gresham and Craven of India (Private) Limited (Acquisition and Transfer of Undertakings) Act, 1977 |
||
|
Andrew Yule & Co. Ltd. |
The Brentford Electric (India) Limited (Acquisition and Transfer of Undertakings) Act, 1987 |
Repealing and Amending (Second) Act, 2017 |
|
The Transformers and Switchgear Limited (Acquisition and Transfer of Undertakings) Act, 1983 |
Repealing and Amending Act, 2019 |
|
|
Alcock Ashdown (Guj) Limited, Government of Gujarat Undertaking |
The Alcock Ashdown Company Limited (Acquisition of Undertakings) Act, 1973. |
Repealing and Amending Act, 2019 |
|
Bengal Chemicals & Pharmaceuticals Ltd. (BCPL) |
The Bengal Chemical and Pharmaceutical Works Limited (Acquisition and Transfer of Undertakings) Act, 1980 |
Repealing and Amending (Second) Act, 2017 |
|
Organisations under Department of Pharmaceuticals |
The Smith, Stainstreet and Company Limited (Acquisition and Transfer of Undertakings) Act, 1977 |
Repealing and Amending (Second) Act, 2017 |
|
The Bengal Immunity Company Limited (Acquisition and Transfer of Undertakings) Act, 1984. |
Sources: Repealing and Amending Act, 2015; Repealing and Amending (Second) Act, 2015; Repealing and Amending Act, 2016; Repealing and Amending Act, 2017; Repealing and Amending (Second) Act, 2017; Repealing and Amending Act, 2019.
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