Chapter II LEVY OF TAX

Levy of tax.-

1. (1) There shall be levied and collected a tax on entry of any goods specified in the FIRST SCHEDULE into a local area for consumption, use or sale therein, at such rates not exceeding five percent of the value of the goods as may be specified retrospectively or prospectively by the State Government by notification and different dates and different rates may be specified in respect of different goods or different classes of goods or different local areas.
2. (2) The tax levied under sub-section
3. (1) shall be paid by every registered dealer or a dealer liable to get himself registered under this Act or the Central Government or a State Government other than the State Government of Karnataka who brings or causes to be brought into a local area the goods whether on his own account or on account of his principal or any other person or who takes delivery or is entitled to take delivery of such goods on its entry into a local area. Explanation.- Where the goods are taken delivery of on its entry into a local area or brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person shall be deemed to have brought or caused to have brought the goods into the local area.
4. (3) Notwithstanding anything contained in sub-section
5. (1) or sub-section (2), no tax shall be levied on and collected from a dealer who brings or causes to be brought into a local area any goods,-
   • (i) in respect of which tax has been paid or has become payable in any other local area under sub-section (1), or
   • (ii) other than Gutkha in respect of which tax has been paid or has become payable under section 4-B of the Karnataka Tax on Luxuries Act, 1979 (Karnataka Act 22 of 1979).
6. (4) The provisions of sub-sections
7. (3) shall not apply unless the dealer preferring claim under the said sub-section furnishes to the assessing authority declaration in the prescribed form issued by the dealer who is liable to pay tax on such goods under this Act or the stockist who is liable to pay tax on such goods under the Karnataka Tax on Luxuries Act, 1979 (Karnataka Act 22 of 1979), as the case may be.

(4A) Notwithstanding anything contained in sub-sections

1. (2) and (3), where a dealer purchases any scheduled goods within the same local area from another dealer having more than one place of business in two different local areas, he shall not be eligible for preferring claim under sub-section
2. (3) of section 3 unless such dealer furnishes to the assessing authority a declaration in the prescribed form obtained from the selling dealer.
3. (5) Where a dealer brings or causes to be brought goods into a local area and claims exemption by furnishing a declaration as provided in sub-section
4. (4) and it is found that the said declaration is false, he shall be liable to pay the tax on such goods in addition to the penalty if any payable under section 28A.
5. (6) No tax shall be levied under this Act on any goods specified in the SECOND SCHEDULE on its entry into a local area for consumption, use or sale therein. (6A) No tax shall be levied on a defence unit which causes entry of any goods liable to tax under the Act, into a local area for use by it in the manufacture, repair or research and development of defence and defence related goods.
6. (7) Every manufacturer who brings or causes to be brought any goods into a local area or every dealer who brings or causes to be brought any goods into the State, the aggregate value of which is not less than one lakh rupees in a year and any other dealer who brings or causes to be brought any goods into a local area, the aggregate value of which is not less than two lakh rupees, shall not be liable to pay tax for that year: Provided that every non-resident dealer including his agent or manager, or every occasional dealer shall be liable to pay the tax each year at the rates specified irrespective of the aggregate value of the goods brought or caused to be brought into the local area during the year.
7. (8) The tax shall be assessed, levied and collected in such manner and in such installments if any, as may be prescribed.
8. (9) Subject to such rules as may be prescribed the Assessing Authority may assess a dealer for any year as if, the aggregate value of the goods brought or caused to be brought into local area in such year had been received as in the previous year.

Collection of tax by registered dealer.-

1. (1) A person who is not a registered dealer shall not collect any amount by way of tax or purporting to be by way of tax under this Act, nor shall a registered dealer collect any amount by way of tax or purporting to be by way of tax at a rate or rates exceeding the rate or rates specified in a notification issued under section 3.
2. (2) No dealer shall collect any amount by way of tax or purporting to be way of tax in respect of the entry of any goods on which no tax is payable by him under the provisions of this Act.

Penalty for collection in contravention of section 3A.- If any person contravenes any of the provisions of section 3A the assessing authority may, after giving such person a reasonable opportunity of being heard by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times of such amount :

Collection of tax by Central Government or State Government.- Notwithstanding anything contained in this Act, the Central Government or the State Government shall be entitled to collect by way of tax any amount which a registered dealer would be entitled to collect by way of tax under this Act.

Payment and disbursement of amounts wrongly collected by dealers as tax Payment and disbursement of amounts wrongly collected by dealers as tax.-

1. (1) Where any amount is collected by way of tax or purporting to be by way of tax from any person by any dealer in contravention of section 3A, whether knowingly or not, such dealer shall pay the entire amount so collected to the assessing authority within twenty days after the close of the month in which such amount was collected, notwithstanding that the dealer is not liable to pay such amount as tax or that only a part of it is due from him as tax under this Act.
2. (2) If default is made in payment of the amount in accordance with sub-section (1),-
   • (i) the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the dealer ;
   • (ii) the dealer liable to pay the amount shall pay interest at the rate of one and a quarter per cent of such amount for each month of default; and
   • (iii) the whole of the amount remaining unpaid along with the interest calculated under clause
   • (ii) of this sub-section shall be recoverable in the manner specified in section 8. Explanation.- For the purpose of this sub-section, non-payment during any period during which recovery of any amount due under this Section is stayed by an order of any authority or Court in any appeal or other proceedings disputing such amount, shall be deemed to be a ‘default’, unless the appeal or other proceeding is allowed by such Authority.
3. (3) Notwithstanding anything contained in this Act or in any other law for the time being in force, any amount paid or payable by any dealer under sub-section
4. (1) shall, to the extent it is not due as tax be forfeited to the State Government and be recovered from him and such payment or recovery shall discharge him of the liability to refund the amount to the person from whom it was collected.
5. (4) Where any amount is paid or recovered by or from any dealer under sub-section
6. (1) or (3), a refund of such amount or any part thereof can be claimed from the State Government by the person from whom it was realised by way of tax provided an application in writing in the prescribed from is made to the Commissioner within two years from the date of the order of forfeiture. On receipt of any such application, the Commissioner shall hold such inquiry as he deems fit and if the Commissioner is satisfied that the claim is valid and admissable and that amount as claimed as refund is actually paid or recovered, he shall refund the amount or any part thereof, which is found due to the persons concerned.
7. (5) Where any amount is collected by way of tax or purporting to be by way of tax in contravention of section 3A at any time before the commencement of the Karnataka Taxation Laws (Amendment) Act, 1994 the provisions of sub-sections
8. (3) and
9. (4) shall apply to such amounts collected. 3C. Omitted 1[3C. x x x]1

¹ Inserted by Act 18 of 1989 and omitted by Act 5 of 1993 w.e.f.9.11.1992

1[4. Registration of dealers.-

1. (1) Every dealer,-
   • (a) who buys or receives goods liable to tax under this Act and who is doing business in a local area and 2[is registered or is liable for registration under section 10 of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) 3[or section 22 of the Karnataka Value Added Tax Act, 2003 (Karnataka Act 32 of 2004)]3]2 or
   • (b) who brings or causes to be brought such goods into a local area or takes delivery or is entitled to take delivery of such goods, the aggregate value of which is not less than 1[two lakhs]1 rupees in a year. shall get himself registered under this Act in such manner on payment of such fee and within such period as may be prescribed. The registration shall be renewed from year to year on payment of the prescribed fee until it is cancelled. 1[ Provided that every manufacturer who buys or causes to be brought any goods into a local area or every dealer who brings or causes to be brought any goods into the State, shall get himself registered under this Act, if the aggregate value of such goods brought into a local area or into the State, as the case may be, is not less than one lakh rupees in a year.]1
2. (2) Notwithstanding anything contained in sub-section (1),-
   • (i) every dealer undertaking execution of works contract involving the use or consumption of goods entering into a local area;
   • (ii) every non-resident dealer ;
   • (iii) every occasional dealer ;
   • (iv) every manager or agent or a non-resident dealer ; other than a dealer dealing exclusively in the goods specified in the schedule, shall get himself registered irrespective of the value of such goods;
3. (3) No dealer who is already registered under the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) 1[or the Karnataka Value Added Tax Act, 2003 (Karnataka Act 32 of 2004)]1, shall be required to pay registration or renewal fee under this Act.
4. (4) Nothing contained in this section shall apply to any State Government or the Central Government.]1 CHAPTER IIA [NO TITLE]

1[CHAPTER IIA 1. Chapter IIA Sections 4A to 4E inserted by Act 45 of 1994 w.ef.1-4-1995

4A. Definitions.- In this Chapter, unless the context otherwise requires,-

1. (a) "accessories" means air-conditioners, music system and any other articles fitted to a motor vehicle and which are not included in the original invoices ;
2. (b) "entry of motor vehicle into a local area from outside the State" with all its grammatical variations and cognate expressions, means entry of motor vehicle into a local area from any place outside the State for use or sale therein;
3. (c) "importer" means a person who brings a motor into a local area from any place outside the State for use or sale therein and who owns the vehicle at the time of its entry into a local area;
4. (d) "motor vehicle" means a motor vehicle as defined in clause

1. (28) of section 2 of the Motor Vehicles Act, 1988 ;
   • (e) "person" includes any company or association or body of individuals whether incorporated or not and also a Hindu Undivided family, a firm, a society, a club, an individual, the Central Government or the Government of any other State, Union Territory, or a local Authority ;
   • (f) "purchase value" means the value of motor vehicle as ascertained from the invoice and includes the value of accessories fitted to the vehicle, insurance, excise duty, countervailing duties, sales tax, transport fee, freight charges and all other charges incidently levied on the purchase of a motor vehicle : Provided that, where purchase value of a motor vehicle is not ascertainable on account of non-availability or non-production of invoice or when the invoice produced is proved to be false or if the motor vehicle is acquired or obtained otherwise than by way of purchase, then the purchase value shall be at the value or price of being sold in open market ;
   • (g) "State" means the State of Karnataka.

1[4B. Levy of Tax.-

1. (1) Notwithstanding anything contained in Section 3, there shall be levied and collected a tax on the purchase value of a motor vehicle an entry of which is effected into a local area for use or sale therein and which is liable for registration or assignment of a new registration mark in the State under the Motor Vehicles Act, 1988, at such rate as may be fixed retrospectively or prospectively by the State Government by notification but not exceeding the rates specified in respect of motor vehicles under the Karnataka Sales Tax Act, 1957: 1[or the Karnataka Value Added Tax Act, 2003]1 Provided that, no tax shall be levied and collected in respect of a motor vehicle which is registered in any Union Territory or any other State under the Motor Vehicles Act, 1988 fifteen months prior to the date on which a new registration mark is assigned in the State under the said Act.
2. (2) The tax levied under the section shall be paid by the importer in such manner and within such time as may be prescribed.

1[CHAPTER IIA 1. Chapter IIA Sections 4A to 4E inserted by Act 45 of 1994 w.ef.1-4-1995 4A. Definitions.- In this Chapter, unless the context otherwise requires,- (a) "accessories" means air-conditioners, music system and any other articles fitted to a motor vehicle and which are not included in the original invoices ; (b) "entry of motor vehicle into a local area from outside the State" with all its grammatical variations and cognate expressions, means entry of motor vehicle into a local area from any place outside the State for use or sale therein; (c) "importer" means a person who brings a motor into a local area from any place outside the State for use or sale therein and who owns the vehicle at the time of its entry into a local area; (d) "motor vehicle" means a motor vehicle as defined in clause (28) of section 2 of the Motor Vehicles Act, 1988 ; (e) "person" includes any company or association or body of individuals whether incorporated or not and also a Hindu Undivided family, a firm, a society, a club, an individual, the Central Government or the Government of any other State, Union Territory, or a local Authority ; (f) "purchase value" means the value of motor vehicle as ascertained from the invoice and includes the value of accessories fitted to the vehicle, insurance, excise duty, countervailing duties, sales tax, transport fee, freight charges and all other charges incidently levied on the purchase of a motor vehicle : Provided that, where purchase value of a motor vehicle is not ascertainable on account of non-availability or non-production of invoice or when the invoice produced is proved to be false or if the motor vehicle is acquired or obtained otherwise than by way of purchase, then the purchase value shall be at the value or price of being sold in open market ; (g) "State" means the State of Karnataka.

Exemption of tax in certain circumstances.

Restriction of registration etc.

BB. Reduction of tax liability.-

1. (1) Where a person liable to pay tax under this Act becomes liable to pay tax under the Karnataka Sales Tax Act, 1957 1[or the Karnataka Value Added Tax Act, 2003]1 on t