Taxation SEM 4 MCOM

7/24/2019 Taxation SEM 4 MCOM

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CHAPTER I

INTRODUCTION TO VALUE ADDED TAX

WHAT IS VALUE ADDED TAX?

Value Added Tax is a broad-based commodity tax that is levied at multiple stages of

production. The concept is akin to excise duty paid by the manufacturer who, in turn, claims a

credit on input taxes paid. Excise duty is on manufacture, while VAT is on sale and both work

in the same manner, according to the white paper on VAT released by finance minister

hidambaram. The document was drawn up after all states, barring !", were prepared toimplement VAT from April. #t is usually intended to be a tax on consumption, hence the

provision of a mechanism enabling producers to offset the tax they have paid on their inputs

against that charged on their sales of goods and services. !nder VAT revenue is collected

throughout the production process without distorting any production decisions.

WHY VAT IS PREFERRED OVER SALES TAX?

$hile theoretically the amount of revenue collected through VAT is e%uivalent to sales tax

collections at a similar rate, in practice VAT is likely to generate more revenue for

government than sales tax since it is administered on various stages on the production &

distribution chain. $ith sales tax, if final sales are not covered by the tax system e.g. due to

difficulty of covering all the retailers, particular commodities may not yield any tax.

'owever, with VAT some revenue would have been collected through taxation of earlier

transactions, even if final retailers evade the tax net.

There is also in-built pressure for compliance and auditing under VAT since it will be in the

interest of all who pay taxes to ensure that their eligibility for tax credits can be

demonstrated. VAT is also a fairer tax than sales tax as it minimi(es or eliminates the problem

of tax cascading, which often occurs with sales tax. These are facilitated by the fact that VAT

operates through a credit system so that tax is only applied on value added at each stage in the

production & distribution chain. At each intermediate stage credit will be given for taxes paid

on purchases to set against taxes due on sales. )nly at consumption stage where there are no

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further transactions will there be no tax credits. +ack of input credit facility in sales tax often

results in tax on inputs becoming a cost to businesses which are often passed on to

consumers. ales tax is often applied again to the sales tax element of the cost, thus there is a

problem of tax on tax. This is not the case with VAT, which makes it a neutral tax as it

provides the least disturbance to patterns of production and the generation and use of income.

#n addition, the audit trail that exists under the VAT system makes it a more effective tax in

administration terms than sales tax as it helps with the verification of VAT amounts declared

as due. This is made possible by the fact that one persons output is anothers input. As with

sales tax imports are treated the same way as local goods while exports are (ero- rated to

avoid anti-export bias.

otwithstanding the advantages mentioned above, it is worth noting that VAT is aconsiderably complex tax to administer compared with sales tax. #t may be difficult to apply

to small companies due to difficulties of record keeping and its coverage in agriculture and

the services sector may be limited. To cover the high administration costs, VAT rates of */-

0/ per cent are generally recommended. The e%uity impact of the relatively high rates have

been a cause for concern as it is possible that the poor spend relatively high proportions of

their incomes on goods sub1ect to VAT. Thus the concept of (ero VAT rate on some items has

been introduced.

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DIFFERENCE BETWEEN VAT AND CST

!nder the T Act, the tax is collected at one stage of purchase or sale of goods. Therefore,

the burden of the full tax bond is borne by only one dealer, either the first or the last dealer.

'owever, under the VAT system, the tax burden would be shared by all the dealers from first

to last. Then, such tax would be passed upon the final consumers.

!nder the T Act, the tax is levied at a single point. !nder the VAT system, the retailers are

not sub1ect to tax except for the retail tax.

!nder the T Act, general and specific exemptions are granted on certain goods while VAT

does not permit such exemptions. !nder the T law, concessional rates are provided on

certain taxes. The VAT regime will do away with such concessions as it would provide the

full credit on the tax that has been paid earlier.

!nder VAT law, first, the dealer pays tax on the sale or purchase of goods. The subse%uent

dealer pays tax on the portion of the value added upon such goods. Thus, the tax burden is

shared e%ually by the last dealer. To illustrate the whole procedure of VAT, an example is as

follows2

At the first point of sale, the value of goods is 3s.*//. The tax on this is *0.45. Therefore,

the net VAT would be *0.45. At the second change of sale, the sale value is 3s.*0/ and the

tax thereon is *45. The tax that is to be paid at every point is *45. The input tax is *45. The

dealer will get a credit for first change in sale of 0.45-- i.e. *45 -*0.45. Therefore, 0.45

will be the net rate. At the third change of sale, the sale value is 3s.*4/ and the tax on this is

*6.745. At the last stage, the tax paid is *6.745. The #nput Tax is *6.745. 8ealers get a

credit for second change in sale9 i.e. *6.745 -*45 : ;.745. Therefore, ;.745 would be the

net VAT. This means that VAT is paid in the last point tax under the sale tax regime.

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WHO GAINS?

tate and entral governments gain in terms of revenue. VAT has in-built incentives for tax

compliance < only by collecting taxes and remitting them to the government can a seller

claim the offset that is due to him on his purchases. Everyone has an incentive to buy only

from registered dealers < purchases from others will not provide the benefit of credit for the

taxes paid at the time of purchase. This transparency and in-built incentive for compliance

would increase revenues. #ndustry and trade gain from transparency and reduced need to

interact with the tax personnel. =or those who have been complying with taxes, VAT would

be a boon that reduces the cost of the product to the consumer and boosts competitiveness.

VAT would be ma1or blow for tax evaders, both manufacturers who evade excise duty

payments and traders who evade sales-tax.

WHATLL BE THE TAX BURDEN?

The overall tax burden will be rationali(ed as itll be shared by all dealers, and prices, in

general, will fall. >oreover, VAT will replace the existing system of inspection by a system

of built-in self-assessment by traders and manufacturers. The tax structure will become

simple and more transparent and tax compliance will improve significantly. #t will also be

simpler and offer easy computation and easy compliance. VAT will prevent cascading effect

through input rebate and help avoid distortions in trade and economy by ensuring uniform tax

rates.

WHO PAYS?

All dealers registered under VAT and all dealers with an annual turnover of more than 3s 4

lakh will have to register. 8ealers with turnovers less than 3s 4 lakh may register voluntarily.

HOW TO PAY?

VAT will be paid along with monthly returns. redit will be given within the same month for

entire VAT paid within the state on purchase of inputs and goods. redit thus accumulated

over any month will be utili(ed to deduct from the tax collected by the dealer during that

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month. #f the tax credit exceeds the tax collected during a month on sale within the state, the

excess credit will be carried forward to the next month.

WHICH GOODS WILL BE TAXABLE UNDER VAT?

All goods except those specifically exempt. #n fact, over 44/ items will be covered under the

new tax regime, of which ?@ natural and unprocessed local products would be exempt from

VAT. About 07/ items, including drugs and medicines, all agricultural and industrial inputs,

capital goods and declared goods would attract ?5 VAT. ut, following opposition from

some states, it was decided that states would have option to either levy ?5 or totally exempt

food grains from VAT but it would be reviewed after one year. Three items < sugar, textile,

tobacco < under additional excise duties will not be under VAT regime for one year but

existing arrangement would continue.

OTHER CONSIDERATIONS

#t is imperative that policy makers in considering adoption of VAT should be interested in the

economy wide impact of this tax. pecial emphasis is often placed on its effect on e%uity,

prices and economic growth. This is particularly important because of the potential effects on

consumption of certain commodities that have a direct or indirect effect on labour

productivity.

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VAT EFFECT ON INFLATION

#n considering the introduction of VAT, countries are often concerned that it would cause an

inflationary spiral. 'owever there is no evidence to suggest that this is true. A survey of

)E8 countries that introduced VAT indicated that VAT had little or no effect on prices. #n

cases where there was an effect it was a one time effect that simply shifted the trend line of

the consumer price index B"#C. To guard against any unforeseen price effects the authorities

may consider a tighter monetary policy stance at the introduction of VAT.

DISTRIBUTION EFFECTS OF VAT

Value added tax is widely critici(ed as being regressive with respect to income that is its

burden falls heavily on the poor than on the rich. This emanates from the fact that

consumption as a share of income falls as income rises. 'ence a uniform VAT rate falls

heavily on the poor than the rich. This criticism is valid when VAT payments are expressed

as a proportion of current income. 'owever if, following the premise that welfare is

demonstrated by the level of consumption rather than income, consumption is used as the

denominator the impact of VAT would be proportional. A proportional burden would also

be demonstrated if lifetime income rather than current income is used. A lifetime income

concept considers the fact that many income recipients are only temporarily at lower income

brackets as their earnings increase. #n order to address the regressivity of VAT the following

measures can be taken2

D The VAT itself can be used to differentiate taxation of consumer items that are

consumed primarily by the poor such that they pay less or at (ero rate or to tax luxury goods

at a higher than standard rate.

D VAT exemptions may also be granted on goods and services that are consumed mostly

by the poor.

D E%uity concerns may also be addressed through other ways, outside the VAT system,

such as other tax and spending instruments of government. This could be in the form of

lower basic income tax rates on the poor or some pro-poor expenditures of government. The

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use of multiple rates of VAT has however been widely discouraged for various reasons.

These include2

D The fact that sometimes it is almost impossible to differentiate between higher

%uality expensive products & e.g. food, consumed by the rich and ordinary products

consumed by the poor. Thus any concessions extended may tend to benefit the rich much

more than the poor.

D #ncreased costs of VAT administration as a differentiated rate structure brings

with it problems of delineating products and interpreting the rules on which rate to use.

D significantly increased costs of tax compliance for small firms, which are usually

unable to keep separate recordsaccounts for sales of differently taxed items. This resultsin the use of presumptive methods of determining the tax liability, which leads to

more difficulties in monitoring the compliance. The higher compliance cost resultant from

differentiation of VAT rates may also be regressive with respect to income since smaller firms

with lower income tend to bear proportionately more of the burden than do larger firms.

Exemptions refer to situations where output is not taxed but taxes paid on inputs are not

recoverable. The rationale behind exemptions is to reduce negative distributional effects of

tax through the effect on incomes. The effects of exemption may be as follows2

D falling of revenues & exemptions break the VAT chain. #f exemptions are granted at

prior to the final sale, it results in a loss of revenue since value added at the final stage

escapes tax.

D !n-recovered taxation of some intermediate goods may lead to producers substituting

away from such inputs thus distorting the input choices of the said producers.

D Exemptions may create incentives to Fself supplyG i.e. tax avoidance by vertical

integration.

D Exemptions tend to feed on each other giving rise to a phenomenon called Fexemption

creepG. This arises from the fact that each exemption gives rise to pressures on further

exemption. =or example creating an exemption to reduce the tax burden on a particular

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commodity or goods may lead to increased pressure for exemption or (ero rating of inputs

used for the production of such a commodity.

ased on the above, it is important that care is taken when introducing exemptions in order to

avoid distortions in the production process as well as to minimi(e revenue loss resulting from

such distortions.

Hiven the fact that the primary purpose of VAT is to raise government revenue in an efficient

manner and with as little distortions of economic activity as possible, distribution effects are

perhaps better addressed by other forms of tax and government expenditure policies which

can often be better targeted at these aims.

VAT EFFECT ON ECONOMIC GROWTH

Economic growth can be facilitated through investment by both government and the private

sector. avings by both parties are re%uired in order to finance investment in a non-

inflationary manner. ompared to other broadly based taxes such as income tax VAT is

neutral with respect to choices on whether to consume now or save for future

consumption. Although VAT reduces the absolute return on saving it does not reduce the netrate of return on saving. #ncome tax reduces the net rate of return as both the amount saved as

well as the return on that saving are sub1ect to tax. #n this regard VAT may be said to be a

superior tax in promoting economic growth than income tax. ince VAT does not influence

investment decisions on firms, by increasing their costs, its effects on investment can be said

to be neutral.

FEATURES OF VAT

*. 3ate of Tax VAT proposes to impose two types of rate of tax mainly2

a. ?5 on declared goods or the goods commonly used.

b. */-*05 on goods called 3evenue eutral 3ates B33C. There would be no

fall in such remaining goods.

c. Two special rates will be imposed-- *5 on silver or gold and 0/5 on li%uor.

Tax on petrol, diesel or aviation turbine fuel are proposed to be kept out from

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the VAT system as they would be continued to be taxed, as presently

applicable by the T Act.

0. !niform 3ates in the VAT system, certain commodities are exempted from tax. The

taxable commodities are listed in the respective schedule with the rates. VAT proposes

to keep these rates uniform in all the states so the goods sold or purchased across the

country would suffer the same tax rate. 8iscretion has been given to the states when it

comes to finali(ing the 33 along with the restrictions. This rate must not be less

than */5. This will ensure y doing this that there will be level playing fields to

avoid the trade diversion in connection with the different states, particularly in

neighboring states

;. o concession to new industries Tax oncessions to new industries is done away with

in the new VAT system. This was done as it creates discrepancy in investment

decision. !nder the new VAT system, the tax would be fair and e%uitable to all.?. Ad1ustment of the tax paid on the goods purchased from the tax payable on the goods

of sale All the tax, paid on the goods purchased within the state, would be ad1usted

against the tax, payable on the sale, whether within the state or in the course of

interstate. #n case of export, the tax, paid on purchase outside #ndia, would be

refunded. #n case of the branch transfer or consignment of sale outside the state, no

refund would be provided.

4. ollection of tax by sellerdealer at each stage. The sellerdealer would collect the tax

on the full price of the goods sold and shows separately in the sell invoice issued by

him

@. VAT is not cascading or additive though the tax on the goods sold is collected at each

stage, it is not cascading or additive because the net effect would be as follows2 - the

tax, previously paid on the sale of goods, would be fully ad1usted. #t will be like

levying tax on goods, sold in the last state or at retail stage.

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WHATS THE BIGGEST ADVANTAGE?

The biggest benefit of VAT is that it could unite #ndia into a large common market. This will

translate to better business policy. ompanies can start optimi(ing purely on logistics of their

operations, and not on based on tax-minimi(ation. +orries need not wait at check-points for

daysJ they can (oom down the highways to their destinations. 3educed transit times and

lower inventory levels will boost corporate earnings. =ollowing are the some more advantage

of VAT2 -

*. Simplific!i"#!nder the T Act, there are 6 types of tax rates- *5, 05, ?5, 65,

*/5, *05, 0/5 and 045. 'owever, under the present VAT system, there would only

be 0 types of taxes ?5 on declared goods and */-*05 on 33. This will eliminate

any disputes that relate to rates of tax and classification of goods as this is the most

usual cause of litigation. #t also helps to determine the relevant stage of the tax. This is

necessary as the T Act stipulates that the tax levies at the first stage or the last stage

differ. onse%uently, the %uestion of which stage of tax it falls under becomes another

reason for litigation. !nder the VAT system, tax would be levied at each stage of the

goods of sale or purchase.

0. A$%&'!m(#! "f !) pi$ "# p&*c+'($ ,""$'!nder the present system, the tax paid

on the manufactured goods would be ad1usted against the tax payable on the

manufactured goods. uch ad1ustment is conditional as such goods must either bemanufactured or sold. VAT is free from such conditions.

;. F&*!+(* '&c+ $%&'!m(#!of the purchased goods would depend on the amount of tax

that is payable. VAT would not have such restrictions. T would not have the

provisions on refund or carry over upon such goods except in case of export goods or

goods, manufactured out of the country or sale to registered dealer. imilarly, on

interstate sale on tax-paid goods, no refund would be admissible.

?. T*#'p*(#c-The tax that is levied at the first stage on the goods or sale or purchase

is not transparent. This is because the amount of tax, which the goods have suffered,

is not known at the subse%uent stage. #n the VAT system, the amount of tax would be

known at each and every stage of goods of sale or purchase.

4. Fi* #$ E.&i!/l(VAT introduces the uniform tax rates across the state so that

unfair advantages cannot be taken while levying the tax.

@. P*"c($&*( "f 'implific!i"#"rocedures, relating to filing of returns, payment of tax,

furnishing declaration and assessment are simplified under the VAT system so as to

minimi(e any interface between the tax payer and the tax collector.

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7. Mi#imi0( !+( Di'c*(!i"#the VAT system proposes to minimi(e the discretion with

the assessing officer so that every person is treated alike. =or example, there would be

no discretion involved in the imposition of penalty, late filing of returns, non-filing of

returns, late payment of tax or non payment of tax or in case of tax evasion. uch

system would be free from all these harassment

6. C"mp&!(*i0!i"# the VAT proposes computeri(ation which would focus on the tax

evaders by generating Exception 3eport. #n a large number of cases, no processing or

scrutiny of returns would be re%uired as it would free the tax compliant dealers from

all the harassment which is so much a part of assessment. The management

information system, which would form a part of integral computeri(ation, would

make the tax department more efficient and responsive.

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CHAPTER II

VALUE ADDED TAX IN MAHARASHTRA

1&ic2 Fl'+ Bc2

ales tax was first introduced in #ndia in the then ombay "rovince as early as >arch *I;6

where a tax was imposed on sale of tobacco within certain urban and suburban areas. #n the

year *I?@, a general sales tax was introduced levying sales tax at the last stage of sale of

goods.

The ombay ales Tax Act, *I4I introduced in *I4I underwent many changes thereafter and

in Kuly *I6*, first point tax was introduced wherein goods were classified into three main

schedules, broadly covering tax free goods, intermediate products and finished goods. The

T Act was repealed and >aharashtra Value Added Tax Act, 0//0 came into force w.e.f. *st

April, 0//4 to usher in the progressive value added tax system in place of the old sales tax

system.

VAT is a progressive and transparent system of taxation which eliminates the cascading

impact of multiple taxation through a multipoint taxation and set-off principle. #t promotes

transparency, compliance and e%uity and therefore, is both dealer friendly and consumer

friendly.

VAT being a multi point tax, envisages an increase in the number of dealers and is based on

the concept of self-assessment and self-compliance. #t is therefore, inevitable that the ales

Tax 8epartment transforms itself into a dealer friendly, focused and dynamic department to

cater to the ever increasing expectations of both the Hovernment and the Trade L #ndustry.

ales Tax 8epartment has taken up the challenge to transform their selves and be available

for assisting the dealers in complying with the provisions of the law. They are in the process

of installing a state-wide networked #T system to computerise entire tax administration and

hope to provide online service to the dealers in due course. They are also realigning their

organisational structure to meet the challenges of the new system and stakeholdersM

expectations.

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P*!3 4 I#!*"$&c!i"#

Bc2,*"$

>aharashtra is one of the 0* tates which have introduced the Value Added Tax BVATC

system of taxation from *st April 0//4. $ith the introduction of VAT, the ales Tax

8epartment has moved to a globally recogni(ed sales taxation system that has been adopted

by more than *;/ countries.

The design of >aharashtra tate VAT is generally guided by the best international practices

with regard to legal framework, as well as operating procedures. Another key factor in

preparation of the design of tate level VAT is the national consensus on certain issues. The

consensus has been arrived at through the discussions in the Empowered ommittee of tate

=inance >inisters on implementation of tate level VAT.

)n *st April 0//4, VAT replaced the single point sales tax. ingle point sales tax had a

number of disadvantages, primarily that of double taxation. VAT is a modern and progressive

taxation system that avoids double taxation. #n addition to offering the possibility of a set-off

of tax paid on purchases, VAT has other advantages for both business and government.

#t eliminates cascading impact of double taxation and promotes economic efficiency.

#t is primarily a self-policing, self-assessment system with more trust put on dealers.

#t provides the potential for a stronger manufacturing base and more competitive

export pricing.

#t is invoice based, and as a result it offers a better financial system with less scope for

error.

#t has an improved control, mechanism resulting in better compliance.

#t widens the, tax base and promotes e%uity.

VAT in >aharashtra is levied under a legislation known as the >aharashtra Value Added Tax

Act B>VAT ActC, supported by >aharashtra Value Added Tax 3ules B>VAT 3ulesC. VAT is

levied on sale of goods including intangible goods.

T+( m(#i#, "f 5,""$'6 f"* VAT p&*p"'('

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FHoodsG means every kind of moveable property including goods of incorporeal and

intangible nature but there are some exclusion, such as newspapers, actionable claims,

money, shares and securities and lottery tickets.

usinesses engaged in. the buying and selling of goods within the scope of the VAT law are

referred to as dealers.

T+( m(#i#, "f 7'l(7 f"* VAT p&*p"'('

A transaction of sale can be a2

normal sale of goodsJ

sale of goods under hire-purchase systemJ

deemed sale of goods used # supplied in the course of execution of works contractJ

deemed sale of goods given on lease.

The rate of tax applicable to the goods sold under various classes of sales is uniform.

'owever, in respect of normal sales of goods and deemed sales of goods under works

contract and specified deemed sale of goods given on lease, the Act provides for an optional

method for discharging tax liability by way of composition. eing so, the tax liability has to

be determined with reference to the option exercised by the dealer for discharging tax

liability.

B&'i#(''(' c"8(*($ /- VAT

The VAT system embraces all businesses in the production and supply chain, from

manufacture through to retail. VAT is collected at each stage in the chain when value is added

to goods. *t applies to al* businesses, including importers, exporters, manufacturers,

distributors, wholesalers, retailers, works contractors and lessors.

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P*! 9 4 R(,i'!*!i"# $(* VAT

R&l(' f"* *(,i'!*!i"#

#f a dealers annual turnover exceeds the below mentioned threshold, then it must register

with the local office of the ales Tax 8epartment.

All =igures in 3s.

ategory Annual Turnover of

ales

Turnover of sales or

purchase of taxable

goods not less than

=ees payable on

registration

#mporter *,//,/// */,/// *//

)thers 4,//,/// */,/// *//

#f the dealers turnover is less than the above threshold, then they are not liable to collect and

pay VAT. 'owever, if a dealer wishes to avail the benefits of being a registered dealer, then

they may apply for voluntary registration by paying a fee of 3s.4,/// -.

B(#(fi!' "f /(i#, *(,i'!(*($ $(l(*

As a registered dealer, they are entitled to2

collect VAT on the salesJ

claim set-off of tax Binput tax creditC paid on purchasesJ

#ssue tax invoices and, be competitive.

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Eff(c!i8( $!( "f *(,i'!*!i"#

The effective date of registration, that is, the date front which a dealer may charge VAT on

salesJ will depend on the date they first become liable to pay VAT. This date will be

determined as follows2

: N(; /&'i#(''('oreover, such an option can be exercised by the contractor on contractto contract basis.

P*! 4 Clc&l!i#, !) li/ili!-

#n, order to calculate how much tax a dealer has to pay, he must, first determine his turnover

of sales and turnover of purchases. The second stage is to ascertain the amount of tax due for

payment.

Clc&l!i#, !&*#"8(* "f 'l(' #$ p&*c+'('

The turnover of sales is the total of the amounts received or receivable Bexcluding VAT

charged separatelyC in respect, of the sale of goods, less the amount refunded to a purchaser

in respect of goods returned, within six months of the date of the sale.

imilarly, the turnover of purchases is the total of the amounts paid or payable Bexcluding

VAT charged separatelyC in respect of the purchase of goods less Bthe amounts repaid to

dealer in respect of goods they return, within six months of the date of purchase.

C*($i! #"!(' #$ $(/i! #"!('=

#f the sale price, or the purchase price, of any goods is varied and either a credit note or a

debit note is issued, then the credit note or the debit note, as the case may be, should

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show separately, the tax and the price.

be accounted for in the period in which the appropriate entries are made in their books of

accounts.

Sp(cil c'('

A&c!i"#((*'

#f dealer is an auctioneer, then they must include in their turnover, the price of the goods they

auction for their principal

H"!(l'

There are special rules for hotels and other establishments that provide boarding and lodging

for an inclusive amount.

The rules provide a formula to enable them to calculate their turnover of sales for meals Bfood

and beveragesC which they provide.

The supply of food in a restaurant also includes an element of service. ut the full amount

charged is the sale price for the purposes of calculating turnover and tax.

W"*2' c"#!*c!'

VAT applies only to the sale of goods. upply of services is not liable to VAT. $orks

contracts are deemed sales where both, goods and services are provided in a transaction and

cannot be separated.A works contract may involve the creation of immoveable property, e.g. a house, a factory or

a bridge. ome other examples of works contracts are photography, repairs L maintenance

etc.

To calculate the amount a dealer should include it in their turnover of sales, so that they may

deduct it from the total contract price, the

costs of labour and service charges.

amount paid to sub-contractors.

charges for planning and designing, and any architectMs fees.

hiring charges for machinery and tools.

cost of consumables, such as, water, gas and electricity.

8ealers administrative costs relating to labour and services and any other similar

expenses.

any profit element that relates to the supply of labour and services.

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Alternatively, in lieu of the deductions as above, a dealer may choose to discharge the

liability arising on works contracts by referring to the table prescribed in the rules.

#f the dealer finds that it is too complicated to calculate the deductions, then they may opt for

a composition scheme for any works contract.

Sl(' #$ p&*c+'(' #"! li/l( !" !) $(* VAT

The VAT law specifically excludes from value added tax all imports, exports and inter-state

transactions. These transactions are covered by the T Act. imilarly, transactions that take

place outside >aharashtra are not within the scope of >VAT Act.

P"i#! "f l(8- i# c(*!i# c'('

Hi*( p&*c+'($here there is a hire purchase agreement or an agreement for sale by installments, the date of

the sale is deemed to be the date of the delivery of goods. This is despite the fact that legal

ownership of the goods only passes to the buyer after payment of the final installment.

#f the hire-purchase agreement specifies the interest component then in calculating the sales

price, dealer should disregard the interest component included in the agreement.

Clc&l!i#, !+( m"! "f VAT $&( "# 'l('

8ealer should also make some ad1ustments to the total turnover of sales to arrive at the

amount on which tax is due.

=rom the total sales one should deduct

the total of exports and inter-tate sales.

the total of sales of goods that are tax free, and

branch consignment transfers to locations in >aharashtra as well as other tates.

the tax collected.

To calculate the tax due, dealer should start allocating their turnover of sales in the return

period Bnet of the above deductionsC to the rates of tax they have been charged. They should

also ensure that the correct tax rates are applied. The information should be readily available

from their records. This gives the total of sales tax due.

Clc&l!i#, !+( !&*#"8(* "f p&*c+'('

3ecords will provide the total figure, but they may not have paid VAT on all their purchases.

They must now deduct the total value of

imports from out of #ndia.

inter-tate purchases.

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purchases of tax free goods.

direct purchases from exempted units under the "ackage cheme of #ncentives.

consignment transfers, and

local purchased from unregistered dealers.

local purchases from registered dealers not supported by tax invoice.

The resulting figure represents purchases against tax invoices from registered dealers.

Clc&l!i#, !+( m"! "f '(! "ff $&( VAT pi$ "# p&*c+'(':

This is the next stage of tax calculation. At this stage VAT is charged on total purchases.

8ealer must, however, make some ad1ustments to this amount for, in certain cases, the full set

off of the VAT paid on purchases is not available.

A$%&'!m(#!' !" !) 8il/l( f"* '(! "ff

#f dealers purchases include goods, used

o as fuel, or

o for the manufacture of any tax-free goods, or

o as packaging for tax-free goods, this goods should be sold.

Then a dealer must calculate the value of those items and deduct tax O ?5 of the

corresponding purchase price from the amount otherwise available for set off. Bot applicable

to "# dealers other than the ew "ackage cheme of #ncentives for Tourism "ro1ects, *III

and also to manufacturers of tax-free sugar or fabrics covered by Entry A ?4 and where such

goods are sold in the course of export falling under section 4 of the T Act, *I4@C.

imilarly, if the goods are stock transferred by way of branch consignment transfer to a

place outside the tate, deduct tax O ?5 B* 5 in respect of goods covered by chedule C of

the corresponding purchase price from the amount otherwise available for set off.

8ealer must also make further ad1ustments as follows2 -

#f they have been used any goods Bother than capital assetsC as part of a works contract

for which they have been opted for payment composition O 65 on the total contract

value, they must also deduct ;@5 of the amount from the set off otherwise available

B?5 of purchase price in respect of construction contracts for which they have been

opted for payment of composition O 45 on total contract valueC.

$here a dealers sales are less than 4/ 5 of their gross receipts, then they can claim

set off only on those purchases of goods or packing materials effected in that year

06


29/49

where the corresponding goods are sold within six months of the date of purchase or

consigned within the said period to another tate by way of stock transfers.

#n respect of office e%uipment, furniture or fixtures which have been treated as capital

assets, a dealer should reduce set-off otherwise entitled by an amount e%ual to ?5 of

the purchase price.

#f a dealer is the retailer of li%uor vendor and its actual sale prices are less than the

>aximum 3etail "rice, there is a special formula for calculating the amount of the

ad1ustment. Effectively this means that, if a dealer sells at 745 of the >3" then they

can claim set off only to the extent of 745 of the tax paid.

A dealer can not claim any set off for the tax paid on any purchases that remain unsold

on the date when business discontinues.

All this information should be available from their records, including tax invoices and bills or

cash memorandum they have issued, and the tax invoices they have received.

S(! "ff #"! 8il/l(

There are various items on which set-off is not available such as, goods of incorporeal or

intangible character other than those specified, passenger motor vehicles, motor spirits, crude

oil, building material used for construction etc.

C"#$i!i"#' f"* climi#, '(! "ff

A dealer can claim set off only for VAT paid on purchase if they have a valid tax invoice for

that transaction and they had maintain account of purchases showing the specified details.

T) p-/l(

The amount of set-off admissible can be ad1usted against tax payable. The amount of net tax

payable is the total of sales tax collected on sales less the set-off available.

R(f$ c'('

0I


30/49

#f the amount of set-off admissible during the period is more than the amount of tax payable,

then dealers return would reflect a balance refundable to the dealer. The amount of set-off

can be more than the tax payable for a variety of reasons, such as

#nputs are taxable at higher rate as compared with the rate of tax on output.

)utputs are tax-free goods while inputs carry tax.

)utputs are export sales.

)utputs are T sales which are taxable at the concessional rate of T.

>anufactured goods or trading goods are transferred to branches outside the tate or

are sent on consignment transfers.

Apart from part of the admissible set-off which can remain unutili(ed, excess credit can be on

account of2

unutilised portion of tax deducted at source or

refund payment order or

ad-hoc payment made is more than tax payable.

$hatever may be the reason for credit in excess of tax due and payable during a tax period,

dealers are eligible to claim refund of such excess credit. =or the purpose of granting refund,

dealers have been classified under two categories vi(. aC specified class of dealers and bC

other dealers

R(f$ !" 'p(cifi($ cl'' "f $(l(*'

pecified classes of dealers are 2 -

Exporters exporting out of the country or dealers selling to an exporter against form

'.

A unit set-up in EP or T" or E'T" or a *//5 E)! unit. These units have to be

certified by the ommissioner of ales Tax.

An Entitlement ertificate holder availing of the benefit of incentives under the

"ackage cheme of #ncentives B"#C.

pecified class of dealers and the dealers who have made a sale in the course of inter-tate

trade or commerce and in the return he has shown any amount to be refundable are eligible to

;/


31/49

claim refund in each of the returns filed by them. =ull amount of excess credit can be claimed

as refund due for the return period.

The dealer eligible to claim refund has to file refund application in =orm 4/*. The application

has to be filed with the 3efund ranch. The 3efund ranch may ask for ank Huarantee and

any relevant information for checking correctness of refund claimed. ormally, refund would

be granted within one month from the receipt of ank Huarantee or within three months from

the date of receipt of refund application in =orm 4/*, or as the case may be, the date of

receipt of the additional information, whichever is later.

R(f$ !" "!+(* $(l(*'

)ther dealers are not eligible to get refund in each of the return filed. They are re%uired tocarry forward excess credit to the next return within the same financial year and claim refund

of excess credit in the return for the period ending >arch.

The dealer claiming refund in >arch return has to make refund application in =orm 4/*. The

application has to be filed with the 3efund ection. ormally, refund would be granted

within six months of the end of the year to which the return relates. 'owever, refund would

be granted within six months to the new dealers at the end of the year succeeding the said

year.

A&$i! "f *(f$ clim'

The refund granted to dealer would be sub1ect to audit by the 3efund Audit ection. The

audit may be taken up before granting the refund or after the refund is granted. ormally,

refunds made against ank Huarantee would be taken up for audit after the refund has been

granted. 8uring the course of the audit, the audit team will check dealers eligibility to claim

refund and the correctness of the amount of refund claimed by them.

I#!(*('! "# $(l-($ *(f$

o interest is payable on the refund due to a dealer as per returns filed by a dealer. 'owever,

if granting of refund is delayed beyond the above mentioned periods, dealer is eligible for

interest for delayed payment. imple interest at the rate of @5 per year would be payable for

the period from the due date to the date of refund.

;*


32/49

S"m( !ip' f"* ,(!!i#, !im(l- *(f$

8ealers claim of refund would be processed faster if2 -

They had filed the return with the 3eturns branch as per the prescribed time schedule.

The return filed by the dealers should be correct, complete and self-consistent.

They should have claimed refund as per the appropriate periodicity.

The amount of refund due to them should be computed correctly.

3efund application in =orm 4/* is filed with the 3efunds branch in time.

They should have promptly furnished ank Huarantee and other details when called

for.

They should keep ready all the documents and records for audit.

They should file the return for a period for which they are re%uired to file.

Thus, if they are re%uired to file a %uarterly return, but they file a monthly return, then the

refund would not be granted for the monthly return. #n order to be eligible for refund, they

would have to file a %uarterly return.

P*! 4 Fili#, *(!&*# #$ p-i#, !+( !)

VAT is a self-assessment system and dealers are expected to make self assessment for a

given tax period and declare their VAT liability by filing returns. The returns have to be filed

in the prescribed form and by the specified dates. =urther, they are also re%uired to pay the

tax due as per the return filed.

#n >aharashtra, return form is return-cum-chalan. As such, filing of returns along-with

payment of tax on or before the due date at the notified bank would be considered as

sufficient compliance. 'owever, where any amount of tax including interest or penalty is due

as per a fresh or revised return, then they should first pay such amount in Hovernment

Treasury and file the return in the local office of ales Tax 8epartment along with a self

attested copy of the chalan. #f no payment is due or a refund is claimed as per the return, they

are also re%uired to file the return in the local office of the ales Tax 8epartment.

R(!&*# f"*m'

The return forms prescribed are as follows.

;0


33/49

F"*m N"= T" B( U'($ B-

00* All VAT dealers other than dealers executing works contract, dealers engaged

in leasing business, composition dealers Bincluding dealers opting for

composition only for part of the activity of the businessC, "# dealers and

notified )il ompanies.

000 All composition dealers whose entire turnover is under composition

Bexcluding works contractors opting for composition and dealers opting for

composition only for part of the activity of the businessC.

00; VA T dealers who are also in the business of executing works contracts,

leasing and dealers opting for composition only for part of the activity of the

business.

00? "# dealers holding Entitlement ertificate BTransactions by "# dealers

relating to the business of execution of works contracts, leasing, frading and

composition only for part of the activity of the business to be included in a

separate return in =orm 00;C.

004 otified )il ompanies BTransactions by )#+ ompanies relating to the

business of execution of works contracts, leasing and composition only for

part of the activity of the business to be included in a separate return in =orm

00;C.

A dealer can refer to the instructions given in the form before filling the return.

"lease ensure that the return for a tax period covers all the transactions of sales, purchases,

branch transfers received, branch transfers made etc. =urther, they must ensure that all the

columns of the return are duly filled in and are clearly legible. #f a particular column is not

relevant, please do not leave it blank but mentionQ not applicableQ. The return filed by them

must be correct, complete and self-consistent.

Tim( 'c+($&l( f"* fili#, *(!&*#'

P(*i"$ici!- "f fili#, *(!&*#' i' ' f"ll";'< 4

3etailers who have opted for composition should file six-monthly returns.

ewly registered dealers should file %uarterly returns until the end of the year in

which they first register.

All package scheme dealers should file %uarterly returns.

;;


34/49

All other dealers should file returns as given below 2-

o 8ealers whose tax liability in the previous year was less than 3s.*,)),)))1-

B3s.*lakhC or whose entitlement for refund was less than 3s.*/,)),)))1-

B3s.*/lakhC should file six-monthly returns.

o 8ealers whose tax liability in the previous year was more. than 3s.*/,//,///-

B3s.*/lakhC or whose entitlement for refund was more than 3s.l,//,//,///-

B3s*croreC should file monthly returns.

o All other dealers should file %uarterly returns.

=iling and payment dates for return-cum-chalan are as follows2

R(!&*# F*(.&(#c- Fili#, J P-m(#! $!(

>onthly 0* days from the end of the return periodRuarterly 0* days from the end of the return period

ix >onthly 0* days from the end of the return period

Sc*&!i#- "f *(!&*#' fil($

The return filed by the dealer should be correct, complete, and self-consistent in every

respect. The ales Tax )ffice will check the return to ensure that there are no obvious errors

in consistencies or contradictions in calculations. #f this check reveals discrepancies, then the

dealers will be advised and invited to submit a fresh return. The department will issue this

defect notice within four months of receiving their return. Then they should file their fresh

return within ;/ days of the notice. #f they fail to do so, it will be deemed not to have filed the

return within the time allowed, and will so liable to a penalty charge.

At the same time, as the department issues the defect notice, dealers will be sent a Mshow

causeM notice, explaining that a penalty may be imposed.

;?


35/49

Off(#c(' *(l!i#, !" fili#, "f *(!&*#' #$ p-m(#! "f !)

The following are the offences liable for interest penalty prosecution etc.

hort- payment non- payment of tax due

=ailure to file returns

8elay in filing returns

Nnowingly furnishing false returns

=iling of incorrect or incomplete or inconsistent returns

C"#'(.&(#c(' f"* fili#, *(!&*# ;+ic+ i' #"! c"**(c! c"mpl(!( #$ '(lf4c"#'i'!(#!

Each of the returns filed by them is checked to confirm that the same is correct, complete and

self-consistent. #n case the return is defective, a defect notice is issued by the 3eturns ranch

pointing out the error or the omission. )n receipt of the notice, it is re%uired to file fresh

return which is correct, complete and self-consistent and should also pay differential tax due,

if any.

The return filed by them in response to defect notice is termed as =resh 3eturn and the dealer

should indicate so on the return in the space provided for the same.

=resh return rectifying the defects has to be filed within the time limit specified in the defect

notice. =ailure to comply with the notice would be construed as non-filing of return and

conse%uently, il!(*l ()4p*!(: ''(''m(#! "*$(* ;"&l$ /( p''($ .

;4


36/49

Fil&*( !" fil( *(!&*#

#f dealers fails to file a return within the time allowed, then they are committing an offence

and, in addition to any tax and interest that may be due, which is liable to a penalty.

As no return has been filed by them, a unilateral assessment without giving them a notice will

be made. This unilateral assessment order is non-appealable. 'owever, they can get this

assessment order cancelled only by filing the return and paying the tax and interest due as per

the return. =or this purpose they should file application in =orm ;/? and submit to 3eturns

ranch.

P-i#, !+( !) $&(

All the dealers or the person must file their return and should pay the tax due, in a bank that

is authori(ed to accept the return. #f they are re%uired to file a revised return, and the tax due

exceeds the amount which they had paid when submitted earlier form, then they should pay

the balance amount which is due now.

The bank will give them an acknowledgement of the receipt of their return and payment. #f

there is any doubt that where to file the return and pay the tax due, then can ask to their local

sales tax office.

R(8i'($ *(!&*#

ubse%uent to filing the return, in case dealer notices any error or omission, then they can file

a revised return before expiry of eight months from the end of the financial year to which the

return relates or before a notice for assessment is served, whichever is earlier. uch return

should be accompanied by payment of tax and interest, if any. #n case the return filed by them

is a revised return, then they should indicate it on the return form in the space provided for

the same.

The various types of returns and their description have been summarised as under2

T-p( Of

R(!&*#

D('c*ip!i"#

)riginal The return filed by the dealer originally along with the payment in the

bank.

;@


37/49

=resh The return filed by the dealer after the department issues a defect

notice.

3evised The return filed by them to correct any error or omission.

Fili#, "f *(!&*#' i# 'p(cil c'('

The first return for the newly registered dealer is for the period up to the end of the %uarter

containing the date of its registration.

E)mpl( 3

The turnover exceeds the threshold on *st ovember. Then they should apply for registration,

which is granted on ;/th ovember and the date of effect is *st ovember. The first return is

for the %uarter ended ;*st 8ecember covering the period *st, April to ;*st 8ecemberJ and the

second return is for the %uarter ending following ;*st >arch.

E)mpl( 9

#f turnover exceeds the threshold on *st ovember. ut dealer apply late for registration i.e.

on */th 8ecember, and the registration is granted on l/th 8ecember, then the date of effect

registration is */th 8ecember i.e., 8ate of application. The first return is due for the %uarter

ending on ;*st 8ecember Bcovering. the period */th 8ecember to ;*st 8ecemberC. .

;7


38/49

Fili#, "f *(!&*# i# c'( "f c#c(ll!i"# "f *(,i'!*!i"#

8ealers registration may be cancelled if they discontinue, transfer or sell the business. They

may also choose to cancel their registration if their turnover falls below the threshold limit.

E)mpl(

#f dealers file the returns %uarterly and their, last return was for the %uarter ending ;/th

eptember. #f a dealer closes the business on *4th ovember, then their final return will be

for, the period *st )ctober to *4th ovember. The return should be filed within one month,

that is, before *4th 8ecember.

D(l(* $(* !+( Pc2,( Sc+(m( "f I#c(#!i8('

#f dealers hold a ertificate of Entitlement granting an exemption from payment of tax or

deferment of payment of tax, it should be for the unit which is eligible for the incentives, file

a %uarterly return, in F"*m 99. They must continue to file %uarterly return till the ertificate

of Entitlement remains valid.

$hen the validity of the ertificate of Entitlement ends, then dealer must file2 -

a %uarterly return, in f"*m 99, for the period from the first day of the %uarter in

which the event occurs to the date the ertificate of Entitlement ceases, #$

a %uarterly return, i# f"*m 993 "* 999 "* 99>as the case may be, for the remainder

of that financial year. =or succeeding years, the period and fre%uency of the returns

will be determined on the basis of the tax liability or entitlement for refund of the

preceding financial year.

Fili#, m&l!ipl( *(!&*#'

8ealers are re%uired to file a single return at its principal place of business for all its

businesses or places of business. #f they desire to file separate returns for separate places

divisions, then they must apply for F"*m 933for permission to file multiple returns. 8ealer

should ensure that correct, complete and self-consistent returns are filed at all the locations in

the tate.

T) $($&c!i"# ! '"&*c( /- # (mpl"-(* i# ;"*2' c"#!*c!

;6


39/49

The works contractor is obliged to pay the tax on the works contracts executed by him.

'owever, the employer i.e. the notified person who has engaged the works contractor is

obliged to deduct tax at the specified rate from the amount payable to the works contractor,

excluding the amount of tax, if any, separately charged or service tax levied by the

contractor.. The tax amount so deducted and paid to the Hovernment treasury # considered

as a payment made on behalf of the works contractor.

The employer is re%uired to deposit this tax and issue a certificate of tax deduction at source

in the prescribed format based on which the works contractor is allowed to take the credit of

the same while discharging his tax liability.

P*! 4 R(c"*$' #$ cc"!'

K((pi#, *(c"*$'

"roper records are an essential part of effective management and control of their business.

8ealers are re%uired by law to keep a true and accurate account of the transactions effected

by them. This will also help them to correctly %uantify their tax liability or refunds, as the

case may be.

They should keep all their accounts, registers and documents relating to their stocks of goods,

purchases, sales and deliveries of goods, at their place of business. #f they wish to keep them

at a different location they may do so, but only if they have the permission of the

ommissioner of ales Tax.

N!&*( "f *(c"*$'

ormally, this department will not expect them to keep any special records for VAT purposes.

'owever, the records that they do keep should have sufficient details to enable them to

correctly calculate the amount of VAT due for payment and file their return.

#f ales Tax )ffice happens to find that their records are not properly maintained, then they

will issue a notice, informing dealers about what records they must keep.

A dealer should maintain the following records2 -

;I


40/49

to identify the nature and value of goods purchased and soldJ

distinguish between -

o local sales, interstate sales L exports.

o local purchases, interstate purchase L imports.

indicate value of -

o sale and purchase of tax free goods.

o sales exempted from tax.

o purchases from !38.

o rate-wise purchases L sales.

o local purchases from registered dealer with VAT shown separately.

record payments for the purchases and sale of goods in cash book bank book.

include a summary of VAT paid separately on purchases, VAT charged on sales, VAT

paid to the tate treasury and VAT refundable refunded to the dealers.

contain ade%uate proof that goods have been exported or importedJ

be supported by invoices for all goods purchased, and copies of invoices, and bills or

cash memoranda, issued for goods sold.

T) i#8"ic(' #$ m(m"*#$ "f 'l(' "* p&*c+'('

As a registered dealer, they should issue a tax invoice when they sell goods to another

registered dealer and charge VAT. =or sales made to consumers and unregistered dealers, they

must issue a tax invoice, or a bill or cash memorandum. 'owever, if a dealer is a composition

dealer other than a works contractor, they must issue a bill or cash memorandum only and not

a tax invoice. =ailure to issue a tax invoice or a bill or cash memorandum may result in a

penalty.

The tax invoice must contain2 -

the words MTax invoiceM, printed in bold letters at the top or at a prominent placeJ

dealers name, address and registration number BT#C.

the name, address and the registration number of the purchaserJ

serial number of the invoiceJ

date of issueJ

description of the goods, the %uantity and price of the goods soldJ

?/


41/49

rate and the amount of the tax charged and indicated separatelyJ

prescribed declaration regarding validity of the registration and payment of taxJ

And it must also be signed either by dealer or by someone who is authori(ed by the dealer.

#f a dealer issues a bill or cash memorandum, it must contain2 -

words Mill cash memorandumM, printed in bold letters at the top or at a prominent

placeJ

if a dealer is Ma composition dealer Bother then works contractorC then the words

omposition 8ealer at the top of the bill cash memorandumJ

dealers name, address and registration number BT#CJ

the name and address of the purchaserJ

serial number of the bill cash memorandumJ

date of issueJ

description of the goods, the %uantity and price of the goods soldJ

prescribed declarationM regarding validity of the registration and payment of taxJ

And it must also be signed either by dealer or by someone who is authori(ed by the dealer.

R(!(#!i"# "f *(c"*$'

A dealer must keep all their records including tax invoices bill cash memorandum, relating

to their stock of goods, purchases, sales, deliveries and payments made or received for the

purchase or sale of goods for a minimum of five years from the end of the year to which they

relate.

'owever, in case any legal proceedings are pendingJ the records pertaining to that period

should be retained till the proceedings reach finality.

I#$(p(#$(#! &$i! "f cc"!' /- C+*!(*($ Acc"!#!

#f dealers annual turnover of sales exceeds 3s.?/lakhs, or if they hold a license for the

manufacture or sale of li%uor, then they must have their books of accounts audited by a

practicing chartered accountant.

?*


42/49

The hartered AccountantMs audit report, to be made on =orm 7/? and it must be submitted

within 6 months from the end of the financial year. #f they fail to submit the audit report to

the ales Tax 8epartment within the prescribed time, then they may be liable to a penalty.

P*"$&c!i"# #$ i#'p(c!i"# "f cc"!' #$ $"c&m(#!'

#f the concerned sales tax authorities have reason to believe that there may have been

attempts to evade the payment of tax, they may re%uire dealer to produce all their books of

accounts.

#f a dealer fails to comply with such a re%uirement, it may commit an offence and will be

liable to a penalty.

P*! 4 B&'i#('' A&$i!

usiness Audit is a new function of the ales Tax 8epartment. This will be conducted by the

ales tax officials ordinarily at the dealerMs place of business. This audit is independent from

the audit by a hartered Accountant. usiness Audit is however, not an activity of

enforcement for search and sei(ure at dealersM business premises.

O/%(c!i8(' "f B&'i#('' A&$i!

The ob1ective of a usiness audit is to close any possible gap between the tax declared byM a

dealer and the tax legally due. #t aims to ensure optimum revenue collection and voluntary

compliance. The aim of usiness audit is to encourage the highest possible level of voluntary

compliance in a system of self-assessment.

S(l(c!i"# f"* &$i!

The main purpose of an audit is to ensure tax compliance, cross check of transactions and

initiate corrective actions, if necessary. The returns filed by the dealers will be examined for

discrepancies. ased on such examination and pre-determined criteria, some dealers will be

selected for audit. Henerally, cases selected for audit will include those dealers &

who file its returns late

?0


43/49

in whose case they have reason to believe that the return may not be correct or a

detailed scrutiny is necessary

chosen randomly, on the basis of certain criteria.

A dealer who consistently and regularly complies with the VAT law and files correct,

complete and self consistent returns will normally not be selected for audit. The selection of

audit cases will be by exception rather than as a rule.

T+( B&'i#('' A&$i! P*"c(''

#f any of the dealers business is selected for an audit, then ales Tax )ffice will inform them

and then fix a suitable date.

The audit officer will inspect the books of accounts and supporting documents. At that time

dealer should make available any information or documents that he may re%uire to enable

him to carry out the audit effectively and speedily.

The audit officer may like to understand dealers business process and examine their stocks

of goods. 'e may also like to interview the person or its employees for this.

The audit officer cannot remove any books of accounts or documents from their premises.

'owever, audit officer can re%uest for copies.

R('&l!' "f !+( &$i!

#f the audit shows that the returns filed do not reflect the true picture of the dealers business,

then the auditor may discuss the matter with the dealer and will give guidance to them to

prevent recurrence and will also explain them about what action should be followed. The

audit may result in additional tax demand or a refund.

A$$i!i"#l !) $(m#$

?;


44/49

#f any additional tax is due, the auditor will issue a notice explaining the additional demand.

#f the dealer accepts the additional demand shown, then they should file a revised return

along-with the payment of tax.

'owever, if the dealer disagrees with the findings of the auditor, then they may proceed to

assess their case and issue an assessment order unless they are able to provide evidence and

convince the audit officer not to assess them for additional demand. The assessment order

will also include interest due from the date they should have paid the tax to the date of the

assessment. #n addition, they may also impose a penalty. They should pay the dues as per the

assessment order or they may prefer an appeal against this order.

Tim( limi! f"* &$i!

There is no time limit prescribed for conducting usiness Audit. ormally, they may carry

out an audit within two years of filing the return. They may follow the timelines as prescribed

for completion of assessments under the >VAT Act and >VAT 3ules.

I#8('!i,!i"#

ormally, the ales Tax 8epartment will make usiness Audit visits by appointment.

'owever, if the department suspects any tax evasion, it may conduct investigation of the

business including search and sei(ure operations at any time without giving notice. uch

investigation will be carried out by a duly authori(ed investigation officer Bnot audit officerC.

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45/49

CHAPTER III

APPENDIX

+ist of important forms referred to in the Huide

S*=

N"=

F"*m

N&m/(*

S&/%(c!

* */* Application for 3egistration under the >V AT Act, 0//0.

0 */; Application for cancellation of 3egistration ertificate.

; 0*/ halan in respect of payment made otherwise than with return by a

dealer under the >VAT Act, 0//0

? 00* 3eturn-cum-chalan for all VAT dealers other than dealers executing

works contract, dealers engaged in leasing business, composition

dealers Bincluding dealers opting for composition only for part of the

activity of the businessC, "# dealers and notified )il ompanies.

4 000 3eturn-cum-chalan for all composition dealers whose entire turnover

is under composition Bexcluding works contractors opting for

composition and dealers opting for composition only for part of the

activity of the businessC.

@ 00; 3eturn-cum-chalan for VAT dealers who are also in the business of

executing works contracts, leasing and dealers opting for composition

only for part of the activity of the business.

7 00? 3eturn-cum-chalan for "# dealers holding Entitlement ertificate.

BTransactions by "# dealers relating to the business of execution of

works contracts, leasing, trading and composition only for part of the

activity of the business to be included in a separate return in =orm

00;C.6 004 3eturn-cum-chalan for otified )il ompanies. BTransactions by )#+

ompanies relating to the business of execution of works contracts,

leasing and composition only for part of the activity of the business,

to be inc*uded in a separate return in =orm 00;C.

I ;/? Application for cancellation of assessment order under section B*C of

section 0; of the >aharashtra Value Added Tax Act, 0//0.

*/ ;*/ Appeal against an order of assessment, interest, penalty or fine.

** ;** Application for grant of stay against order of assessment, penalty,

interest or fine

*0 ?*? Application for tax clearance certificate.

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*; 4/* Application for refund under sub-section B*C of section 4* of the

>aharashtra Value Added Tax Act, 0//0.

*? 7/? Audit report under section @* of the >aharashtra Value Added Tax

Act, 0//0.

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Li'! "f Sl(' T) Offic(' i# !+( S!!( "f M+*'+!*

There are total Sl(' T) Offic( located all over the >aharashtra. )ut which some of

them are in2 M&m/iB'ead RuartersC, andra, 3aigad B8ivisionC, Thane B8ivisionC, Nalyan,

alasopara, "alghar, "une B8ivisionC, olapur, Nolhapur B8ivisionC, atara, angli, 3atnagiri,

asik B8ivisionC, Ahmednagar, Aurangabad B8ivisionC, agpur B8ivisionC, $ardha,

Amaravati B8ivisionC, Akola, and many moreS

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CHAPTER IV

C"#cl&'i"#

VAT BValue Added TaxC is a multistage tax system for collection of sales tax. The system

envisages levy of tax on the sale at each stage and contemplates allowing of set off of tax

paid on purchases. Thus, tax is getting paid on the value addition in the hands of each

intermediatory vendor. Through the whole chain, tate collects tax on actual consumer price.

The process covers whole chain of distribution i.e. from manufacturers till retailers. "rior to

*-?-0//4, the system for levy of tax in >aharashtra was, in general, single point tax system.

As a conse%uence to national consensus for introduction of VAT, the earlier ombay ales

Tax Act, *I4I is replaced by >aharashtra Value Added Tax Act, 0//0. The Act has come into

force with effect from /*/?0//4. Thus, from *-?-0//4, sales tax is being collected.

The system of Value Added Tax BVATC has been implemented, in the tate of >aharashtra,

w.e.f. * April 0//4. Every dealer, who becomes liable to pay tax under the provisions of

>VAT, shall apply electronically for registration, within ;/ days from the date of such

liability.

R!( "f T)otor pirits, etc. - 0/5 and above

chedule E & All other goods Bnot covered by A to 8C - *0.45

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3= Vl&( A$$($ T) B- Sl(' T) D(p*!m(#!=

9= ;;;=,"",l(=c"m

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Documents

Taxation SEM 4 MCOM