BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY

Two Day Orientation WorkshopDAY 1.

Friday 24th April 2015

INTRODUCTION TO VAT ( Under MVAT Act, 2002 )

ByCA AMAR N SHUKLA

INTRODUCTION TO VAT

• Sales Tax ( VAT ) is a State Subject.

• Major source of revenue for Maharashtra State Govt.• Sales Tax And Vat Collection :

2010-11 : Rs. 47542.98 Cr2011-12 : Rs 56591.21 Cr2012-13 : Rs 65083.25 Cr2013-14 : Rs 69777.23 Cr

2014-15 : 70,000 + Cr

• No. of Dealers regd. in Maharashtra : 718963 ( 2014 data )

• MVAT Act, 2002 w.e.f 01-04-2005 replaced the erstwhile BST Act, 1959

2CA AMAR N SHUKLA

INTRODUCTION TO VAT • What is VAT ?

• Multi point levy of tax on sales subject to certain exceptions.

• Tax on Value Addition at every stage of chain in the hands of each intermediary vendor.

• Set - off of taxes paid on purchases

• Tax on Sale of goods effected from state of Maharashtra.

• Every sale of goods is taxable under MVAT Act

3CA AMAR N SHUKLA

INTRODUCTION TO VAT

• Capital / Revenue

• Mfgd / Import / URD / Resales

• 5 Schedules (A,B,C,D & E)-Charging sec. 4- 7

Schedule A- Exempt u/s 5

Schedule B- @ 1%

Schedule C- @ 5% Tax (Industrial Inputs etc)

Schedule D- @ 4%-33% (Petrol, Diesel, Liquor)

Schedule E- @ 12.5% ( Residual Entry)

4CA AMAR N SHUKLA

Some Definitions- Important Points

• Dealer: Sec. 2(8)

Any person who in the course of his business buys or sells in the state for commission, remuneration or otherwise including Trust, Society, Govt. Dept. etc with certain exceptions

• Business: Sec. 2(4)

Includes service, trade, commerce, mfg., or any

adventure …. with or without profit.

• Goods: Sec. 2(12)

Every kind of movable property with certain exceptions

5CA AMAR N SHUKLA

Some Definitions- Important Points

• Person: Sec. 2(17)

Includes individual, State & Central Govt., Society,

Clubs, HUF, BOI, AOP

• Sale: Sec. 2(24)

Sale of goods within State for cash or deferred payment or other valuable consideration

Excludes mortgage, hypothecation, charge or pledge

Explanation : ( deemed sale )

(a) Sale inside the State as per Sec. 4 of CST Act,1956

6CA AMAR N SHUKLA

Some Definitions- Important Points

(b)(i): Transfer of property (T.O.P ) in goods otherwise

than in pursuance of a contract

(b)(ii): T.O.P in goods involved in execution of a Works Contract

(b)(iii) Hire Purchase / Installment Sales

(b)(iv): Transfer of right to use any goods for any purpose

(b) (v) : Sales by Association..

(b)(vi) : Hotel Sales for consumption

Sale Price: Sec. 2(25)

Valuable consideration paid or payable to a dealer including the sum charged for anything done at the time of or before delivery other than cost of insurance for transit or of installation if charged separately.

7CA AMAR N SHUKLA

Some Definitions- Important Points

Expl. I : Includes Duties under Central Excise Act or Customs Act

Expl. II : Excludes tax paid /payable to a seller

Expl. III: Includes amt received as deposit whether refundable or not or by way of separate agreement or not

• Certain Sales / Purchase not to be liable to tax:- Sec 8

8(1)(a) : Outside the state….

8(1)(b) : in the course of inter-state trade..

8(3) : SEZ unit / developer ; Software Tech Park, Electronic Hardware Tech Park

8(4) : Sales by PSI Units

8(5) : As Notified

8CA AMAR N SHUKLA

SET OFF/INPUT CREDIT-SEC. 48 R.W. RULES 52 TO 55

Eligibility Conditions –

• RD at the time of purchases and Sales except u/r 55(1)(a)

• RD Purchases of Capital Assets, Goods and

purchases debited to P & L Account

• Tax paid separately on purchases within the state and supported by “Tax Invoice”

• Irrespective of disposal

subject to

Restrictions in rule 53,

Negative list –rule 54 and

Special rule 52A ( Mega Units )

9CA AMAR N SHUKLA

RETENTION/REDUCTION IN SET OFF U/R 53• 53(1) : Purchases of fuel- -3% of Pur Price

• 53(1A) : Natural Gas- - 3% of Pur. Price.

• 53(2)(a) : Mfg. of Tax Free Goods--2% of Pur Price

• 53(2)(b) : Resale of Tax Free Goods--2% of Pur Price of corresponding Packing Material

• 53(3)(a) : Transfer of Taxable goods to branch in other state--4% of Pur. Price.

10CA AMAR N SHUKLA

RETENTION/REDUCTION IN SET OFF U/R 53

• 53(4) : Works Contract Composition --

64% of tax on purchases or

4% of PP in the case of construction contracts

• 53(5) : Business Discontinued- No set off on closing stock

• 53(6) : Sales less than 50% of gross receipts- special rule for

hotels/others :

set off only if the goods are sold within 6 months

• 53(7A) : Office Equip., furniture--3% of PP

11CA AMAR N SHUKLA

RETENTION/REDUCTION IN SET OFF U/R 53

• 53(7B) : Electricity generation--2% of PP

• 53(10) : Works contract of processing of textiles-2% of PP of RM / PM except Capital goods

• 52A Pur. from mega units:

Set off on sales to the extent of cst payable on sales (OMS)

Set off only in month of sale

12CA AMAR N SHUKLA

RULE 54 : NON ADMISSIBILITY OF SET OFF

54(a) : Passenger Motor Vehicles

54(b) : Motor Spirits- as notified u/s 41(4)

54(c) : Crude oil used by refinery

54(d) : Dealer principally engaged in Job / labour work or

where only waste or scrap is sold-

54(e) : PSI Units --refund of tax as per rule 79

54(f) : Incorporeal or intangible goods-copy right eligible for set off if sold within 12 months.

54(g) : Purchases as WCT resulting in Immovable property

other than Plant and Machinery-

54(h) : Purch. Used in erection of Immovable prop.

except P & M-

13CA AMAR N SHUKLA

NEGATIVE LIST

54(i) : Purchases of liquors schedule D – if Sold OMS ; Sale from

Customs Bond to Foreign going ships and aircrafts

54(j) : Purchases of mandap decoration/tarpaulin by a dealer

opting to pay tax under 42(4) composition scheme

54(k) : Purchases by Hotelier of the capital assets not used for

supply and sale of food-

54(l) : Purchases of Office equipments , furniture, fixtures

installation till 07/09/2006-

14CA AMAR N SHUKLA

TAX INVOICE: Sec. 86 r.w Rule 77

• “TAX INVOICE” in bold and prominent place

• Name, Address, RC no of Selling dealer

• Name, Address, RC no of Purchasing dealer

• Serial no and date

• Description , Quantity and Tax amount stated separately

• Signed by Selling dealer / Authorized person

• Appropriate Declaration as per rule 77(1)

• To be issued and preserved for value in excess of Rs 50/-

• Commissioner Approval for Electronic system of Preservation.

15CA AMAR N SHUKLA

REGISTRATION LIMITS-SEC-3

• (a) Dealer, who is an importer :

Limit of turnover : Rs. 1,00,000. and

taxable goods sold or purchased by him during

the year is not less than Rs. 10,000.

• (b) In any other case :

Limit of turnover : Rs.10,00,000. and

taxable sale/purchase not less than 10000.

• TO to include TO of purchases ( Only Sec 6A and 6B )

• Application within 30 days on crossing the limits

16CA AMAR N SHUKLA

Voluntary Registration

• No T.O. limits

• 25000/- Security deposit

• 5000/- processing fees

• DD in favour of

• Bank of Maharashtra a/c MVAT for Mumbai Region

• SBI a/c MVAT for other regions

• E application for registration

• Compliance of procedural requirements

• Specified categories of dealers –pre visit by dept.

• Advisory Visits after registration

17CA AMAR N SHUKLA

COMPOSITION SCHEME

• Option to pay tax @ lump sum rate

• Different types of dealers subject to certain conditions

• General Conditions for option

Non availability of set off

Tax Invoice can not be issued

Change only in the beginning of the FY

Form -1 : Restaurants, eating house, canteen,

clubs, hotels below 4 star grade

Only food & non alcoholic drinks tax @ 5%/10% urd

Form-2 : Caterers- same as above

Form-3 : Bakers- First 50 lacs TO ; Tax @4%

18CA AMAR N SHUKLA

COMPOSITION SCHEME

Form-4 : Retailers -TO limit ; 50 lacs-

90% of sales to non dealers-

@ 6% for drugs,

@5% Sch. A and goods taxable @5%,

@8% other cases

Form 5 : Dealers in Second hand motor vehicles and tractors-

--- rate 12.5% of 15% of sale price

19CA AMAR N SHUKLA

TAXATION OF WORKS CONTRACTS• Deemed Sales u/s 2(24)- transfer of property in execution of WCT

• Apply and Supply - Vat chargeable only on material on sale price of goods transferred

• Rule 58-Deductions from the contract value eg.Labour charges, sub contract charges, planning, designing ,architect fees, hire, cost of consumables etc.

• Alternative Table Method at Specified %after deducting the part of contract on which tax is paid by sub contractor , Subject to exchange of forms(406/407/408/409)Balance value is to taxed in the ratio of purchasesNo bar on Contractor to issue tax invoice

20CA AMAR N SHUKLA

COMPOSITION SCHEME FOR WCT• @ 8 % Flat u/s 42(3) without deduction of labour-

No bar on collection- set off to the extent of 64% of taxes paid on purchases -53(4)

• @ 5% from 20/06/2006 for Notified (a) Construction contracts (b) Any Works contract incidental -ancillary to contracts of Const.- Set

off/input credit on raw materials subject to retention of 4% of purchase price- rule 53(4)

• 1% Scheme for Builders and Developers- u/s 42(3A)

Tax @ 1% on agreement value or stamp duty valuation which ever is higher

Under construction units- No set off- Purchases

C Forms Not allowed

Not to issue Tax Invoice

21CA AMAR N SHUKLA

TDS FOR WCT TRANSACTIONS Section 31 r.w. rule 40

• List of the Employers liable to deduct WCT TDS

As per notification dated 29/8/2005-

• Central Govt, state Govt., Co., Cos registered under companies Act, Regd dealer , Society, trust, local authority.

• TDS 2% - Regd Contractor. / 5% of URD Contractor

• Threshold limit 5 lacs and above

• No TDS on service tax or tax amount

• TDS Not to exceed the tax payable by contractor

• No TDS On interstate WCT

• No TDS On sub contract payments

• TDS Applicable even on Advance payment

• Certificate for No Tax Deduction( 410)

22CA AMAR N SHUKLA

• TDS Credit available for the period to which it

• belongs or as and when received

• Payment by MTR-6 on or before 21st of next month

• Failure to pay tax- Dealer in Arrears

• Annual TDS Return in form 424 to be filed b

Before JC Returns in Mumbai/JC Adm for other Area

• Unregistered Employers to pay the tax directly to DC of Sales Tax E 810 Mumbai by DD alongwith MTR-6/ for other area STO Returns Br. ( Bank of Maharashtra A/c MVAT/ SBI A/c Mvat)

• Employer to issue TDS Certificate in form 402 to the contractor

• Employer to maintain separate register in Form 404 23CA AMAR N SHUKLA

FILING OF RETURNS ( SEC.20)

• Correct, complete and self consistent return

• Various Return forms; 231 to 235 for Vat

• Rule 17 and 18 for periodicity of returns- Periodicity as depicted on the Maha Vat portal

• All dealers to make e payt. - Form MTR-6- from 31/3/2011.

• Due Dates for Payment of taxes:

21st Of subsequent month -quarterly / monthly returns

31st October /30th April -- Half yearly returns

• Electronic returns to be uploaded within 10 days from due date not a late return Cir No. 16T/2008

Circular 1T /2009 7T/2012

24CA AMAR N SHUKLA

REVISED RETURNS

• u/s 20(4)(a) Within 10 month from the end of the year to which return belongs by the dealer

• u/s 20(4)(b) Within 30 days from the date prescribed for furnishing Audit Report on the recommendation of the vat auditor. Single revised return for full year w.e.f. 1/5/2013

• u/s 20(4)(c) within 30 days from the date of receiving any intimation from the department and acceptance of the discrepancies pointed out in the intimation. Single revised return for full year w.e.f. 1/5/2013

• wef. 1/5/11 not more than one revised return can be filed under each of above situation

25CA AMAR N SHUKLA

ASSESSMENT PROVISIONS ( SEC.23)23(1)- Returns not filed by dealer by prescribed date Assessment by

Commissioner without notice- limitation of 3 years for order

23(2)- Returns filed by dealer not found as correct and complete-Ass. by Comm- Limit 4 yrs

23(3)- Returns not filed by dealer by prescribed date Assessment by Commissioner notice- limitation of 5 years for order

23(3A)- Assessment for the period ending on or before 31/03/2008 within 7 years from year end

23(4)- URD Dealers – time limit 8 years

23(5)- Cases of tax evasion or claim of excess set off

23(6)-Opinion of Commissioner TO of sales pur not disclosed-limitation 6 years

26CA AMAR N SHUKLA

ASSESSMENT PROVISIONS ( SEC.23)

Sec. 23(7)- Fresh Assessment in pursuance to the order of Higher Court/Apex Court etc Limitation of 36 months from communication

Sec. 23(8)- Discretion of the Commissioner to call for the record and conduct the examination – cases where ruling is against the dept.

Sec. 23(9)- On Application by Dealer- directions for Assessment to the Assessing officer ( deleted wef 26-6-2014 )

Sec 23(10)-Assessment in respect of more than one period of the same year by single notice

Sec 23(11)- Cancellation of Assessment on Application within 30 days by dealer

Sec 23(12)- Assessment within 18 months after cancellation from the date of service

27CA AMAR N SHUKLA

REVIEW,RECTIFICATION,APPEAL• Review u/s 25-Any order can be reviewed either suo moto or

on receipt of information-order limitation 5 years-No order on receipt of application from dealer or person

• Rectification u/s 24- mistake apparent on record within 2 years from end of FY in which order is served- rectification on receipt of missing declaration

• Appeal section 26 & 27-

• order of STO-Appeal with DC then to Tribunal

• Order of DC-Appeal with JC then to Tribunal

• Order of JC/Add.Com.-Appeal to Tribunal

Form 310/311 within 60 days from Communication

28CA AMAR N SHUKLA

REFUND PROVISIONS

• Tax Refund as per Returns filed as per section 51-Application in form 501 within 18 months from the year end-Commissioner to grant the refund within 18 months from receipt of app.

• Reduction of Refund on Non receipt of Declarations under CST act

• No Interest on refund under this section

• Section 50(2) refund of Rs. 5 lacs or less can be carried forward to succeeding year and can be adjusted against the return dues of the subsequent period.

29CA AMAR N SHUKLA

INTEREST –SECTION 30

Sec. 30(1)- Interest to the extent of tax payable by URD not to exceed the tax payable as per the order passed

Sec. 30(2)- Failure to pay the tax within the prescribed time as per Original/ revised return

Sec. 30(3)- Interest on the tax remaining unpaid up to one month after Assessment

Rate of Interest 1.25% p.m. or 15% p.a

Additional Interest u/s 30(4): Interest @ 25% of the tax as a

result of Business Audit/Inspection of accounts and in

consequence of any intimation received from dept u/s 63(7)30CA AMAR N SHUKLA

PENALTIES

Sec. 29(2A)- Failure to apply for registration- Equal to amt of tax payable

Sec. 29(3)- Concealment, excess set off- equal to amt of tax found due

Sec. 29(4)- Knowingly producing any false bill, cash memo- equal to amt of tax found due

Sec. 29(5)-Buyer enjoys exemption and does not comply with conditions-equal to one and half times of tax payable on sale

Sec. 29(6)- contravention of prov.of Sec. 86- equal to half the amt tax would have been assessed or Rs. 1000/-, whichever is more.

Sec. 29(7)- failure to comply with notice-Rs.5000/-

31CA AMAR N SHUKLA

PENALTIES

29(8)- Failure to file within prescribed time- Fixed penalty of Rs. 5000/-

29(9-c)- Incomplete and self consistent return- Rs. 1000/-

29(10)- Collection of sum of tax in contravention of prov. of Sec. 60-Not exceeding Rs.2000/-

61(2)- failure to furnish Audit Report-1/10th % of total sale turnover

61(2A)- failure to file complete Audit Report-1/10th % of total sale TO

Rule 90- Breach of any rule-Fine upto Rs. 2000/- and continuing offence with daily fine not exceeding Rs. 100/-

32CA AMAR N SHUKLA

PUNISHABLE OFFENCES

74(1)-False Representation as RD, False return , False bill, false accounts, wrong declarations with the intention to defraud the revenue and abatement of offence- 1yr <RI <2yrs

74(2)- Willful evasion of tax or payment- 6months <RI <1yr with fine

74(3)-Failures without sufficient cause for compliances-RI upto 6 months

74(4)- Abatement or inducement- 1month <RI <1yr

74(5)- Continuing Offence-Daily fine < Rs. 100/-

33CA AMAR N SHUKLA

ACCOUNTS & AUDIT

Accounts- 63- True accounts of value of goods sold /purchased

Preservation of accounts for a period of 8 yrs

Production of accts /documents / search of premises- Sec. 64

MVAT Audit u/s 61 : TO in excess of 100 lakhs

Furnishing of Audit Report within 9 months and

15 days in Form E- 704 by dealer

Failure to furnish the Audit Report/Incomplete Audit Report liable to penalty @ 1/10th % of sale turnover u/s Sec. 61(2) & Sec. 61(2A)

34CA AMAR N SHUKLA

: WORDS OF CAUTION :

• Views expressed are the personal views of faculty based on his interpretation of law .

Application / implications of various provisions will vary on facts of the case and law prevailing on relevant time.

Contents of this presentation should not be construed as legal or professional advice.

This is an educational meeting arranged with clear understanding that neither Faculty nor Study Circle /Association will be responsible for any error, omission, commission and result of any action taken by participant or anyone on the basis of this presentation.

35CA AMAR N SHUKLA

THANK YOU

&

GOOD LUCK

PRESENTED BY

CA AMAR N SHUKLA09967512281 /26843399

amarshukla.ca@gmail.com

36CA AMAR N SHUKLA