Current Issues & Vat Compliance in Maharashtra by CA Deepak Thakkar, Mumbai at STPAM Mumbai 3 Oct 2013

Transcription

1 Current Issues & Vat Compliance in Maharashtra by, Mumbai at STPAM Mumbai Mahalaxmi Cotton. Vs St. of Mah. (11 May 2012) 51 VST 1 (Bom) & SLP # of 2013 dt 25 Feb 2013 (SC dismissed the SLP)... Mah. State Govt filed affidavit & confirmed : 1. To chase sellers who are defaulters for Returns & recovery of taxes, invoking full machinery under the Act 2. To prosecute hawala / suspicious dealers, recovery proceedings & cancellation of their registration (2059 Suspicious / hawala dealers list put up on website) 3. To take action against dealers who have defaulted in filing vat audit reports 4. The e-system is capable of providing transparent & accountable governance for tax payer 5. In case of short filers, buyers will be granted proportionate setoff 6. Defaulters list will be uploaded on website & setoff will be denied PHD & Associates 2 1

2 ... Mahalaxmi Cotton. Vs St. of Mah. (11 May 2012) 51 VST 1 (Bom) & SLP # of 2013 dt 25 Feb 2013 (SC dismissed the SLP) 7. To prevent a cascading effect, tax will be recovered only once i.e. Either from buyer or defaulter seller 8. At the end of each FY the Dept will reconcile data & inform the dealer about the input tax credit of which he can seek an additional claim of refund 9. During FY Dept will set up Dealer Info System & put on web to grant additional claim of setoff to affected buyers 10. After exhausting all legal proceedings for recovery, when default is made good by seller & paid taxes then input tax credit shall be allowed to buyer, to the extent of such recovery, in assessment or appeal or review, in proportionate to all buyers, even without any refund application PHD & Associates 3 Data of Non-filers & Short-filers of Returns available on Dept website FY Number of Non-filer Dealers Number of Short-filer Dealers Gross Tax payable by Short-filers Unpaid Tax by Short-filers Apr 2013 Jul ,720 7, crores 246 crores ,78,741 81, crores 871 crores (Note: A Dealer defaults for 2 returns counted as 2) PHD & Associates 4 2

3 Current Issues & Sr # Compliance & Issue 1 e-annexure J1 & J2 with Return / Vat Audit Report; Mismatch of Seller s J1 & Buyer s J2 Error can be qua TIN (name), Net amt, Vat amt, DN, CN, Year end transactions, etc Purchases from URD or during URD Period; Dealer has not given any data in J1 or J2; Reasons & Seller: Error in data or Suppression of sales; Liability to pay sales tax Buyer: Inflation of purchases (claim of higher setoff; Disallowance of setoff iff claimed) or Suppression of pur. So Tax on its GP?; Double tax collection by Dept Mahalaxmi Cotton... Vs St.of Mah. (11 May 2012) 51 VST 1 (Bom) & SLP # of 2013 dt 25 Feb 2013 (SC) be followed; Reconciliation; Filing of J1 by seller; Revision of Returns; Supplementary / Revision of J1 or J2? Submit Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, etc. in a proceeding PHD & Associates 5 Sr # Compliance & Issue Reasons & 2 Mismatch of Sellers J1 & Buyers J2; Seller declared as defaulter as Non-filer or Short-filer on Dept. website under Dealers Services menu Seller: Error in data or Suppression of sales; Liability to pay sales tax Buyer: Inflation of purchases (claim of higher setoff) or Suppression of pur.; Disallowance of setoff iff claimed Reconciliation; Filing or Revision of Returns; Supplementary / Revision of J1 or J2? Submit Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, copy of return & challan of seller, etc. in a proceeding PHD & Associates 6 3

4 Sr # Compliance & Issue Reasons & 3 Mismatch of Sellers J1 & Buyers J2; Seller declared as Hawala dealer on Dept. website under List of Suspicious Dealers in pop-up menu of whats new Seller: Issue of only bills (without delivery of goods); Cancellation of TIN; Liability to pay sales tax; No assessment or Assessment as NIL Turnover. Buyer: Beneficiary of Hawala purchases; Disallowance of setoff iff claimed; Grant of setoff to the extent vat paid by seller Reconciliation; Filing or Revision of Returns; Supplementary / Revision of J1 or J2? Submit Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, etc. in a proceeding; Affidavit, Cross examination, etc PHD & Associates 7 4 Mismatch of Sellers J1 & Buyers J2; TIN mentioned by Buyer in J2 is incorrect or fake; Incorrect TIN: TIN of sister concern recorded or wrong recording of supplier / TIN. Buyer: Disallowance of setoff iff claimed; Filing or Revision of Returns; Supplementary / Revision of J1 or J2? Obtain correct TIN of Seller & its evidence; Submit Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, etc. in a proceeding; PHD & Associates 8 4

5 5 Mismatch of Sellers J1 & Buyers J2; TIN mentioned by Buyer in J2 is cancelled as on the date of transaction; Reason for cancellation: discontinuation of business, change in constitution, non-filing of Returns, etc. Buyer: Disallowance of setoff iff claimed; Filing or Revision of Returns; Supplementary / Revision of J1 or J2? Obtain new & valid TIN of Seller & its evidence; Submit Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, etc. in a proceeding; PHD & Associates 9 6 Mismatch of Sellers J1 & Buyers J2; TIN mentioned by Buyer in J2 is of Composition dealer (Retailer or Restaurant or Bakery or Second-hand motor vehicle dealer) Buyer: Disallowance of setoff iff claimed; Ask refund from seller or claim setoff? Filing or Revision of Returns; Supplementary / Revision of J1 or J2? Verify whether there is a Tax Invoice for such transaction? If so produce Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, etc. in a proceeding; PHD & Associates 10 5

6 7 Mismatch of Sellers J1 & Buyers J2; TIN mentioned by Buyer in J2 is of Works Contractor who pays Composition 5% Buyer: Disallowance of setoff iff claimed; Verify whether it is a purchase of 5% vat or a works contractor s bill? Whether eligible for setoff or deduction u/s 45(4)? Filing or Revision of Returns; Supplementary / Revision of J1 or J2? Verify Tax Invoice for such transaction? Obtain form 408 & 407 from sub-contractor & Produce Invoices, delivery evidence, ledger a/c, payment proof, bank statements, orders, communications, etc. in a proceeding; PHD & Associates 11 8 Vat Audit Report recommended to: (1) Pay additional tax & interest or (2) Pay back excess refund recd (3) Reduce the refund claim Dealer accepted recommendation; Dealer did not accept recommendation. Dealer did not file revised return & / or did not pay dues as per recommendation, fully or partly. Payment of dues with interest up to date; Revision of Returns; Produce necessary documents & details, in justification of action taken by dealer, in a proceeding; PHD & Associates 12 6

7 9 Vat Audit Report Annexure H reports pending Local H forms & Annexure I reports pending CST forms Liability for differential tax & interest thereon for pending forms Produce forms & necessary documents & details, in justification of claims made by dealer, in a proceeding; Payment of Tax dues with interest up to date; Revision of Returns? Interest u/s 30(4)? PHD & Associates Buyer s J2 shows purchases of Rs. 60 lakhs or more from a particular Seller but Seller has not filed Vat Audit Report Default of Seller for non-filing of Vat Audit report. Penalty u/s 61(2) Reconcile turnover & Produce necessary documents & details, in justification of stand taken by dealer, in a proceeding; Filing of Vat Audit Report though late, if required. PHD & Associates 14 7

8 11 Dealer has not given any data of CST forms in e-annexure G/H/I though required Default of filing incomplete Annexure / Return File / Revise Annexure PHD & Associates Import Purchases reported at Annexure J6 & Highseas Sales reported at Annexure J5 as per Vat Audit Report Dept may try to tally this; Reconcile such turnover & Submit necessary details & documents to prove the transactions PHD & Associates 16 8

9 13 Local Purchases not supported by Tax Invoice or Interstate Purchases reported at Annexure J2 Disallowance of setoff, iff claimed Reconcile such turnover & Submit necessary details & documents to prove the transactions else revise returns & pay such setoff claimed & interest, in any. PHD & Associates Setoff claimed on negative list u/r 54 or Setoff retention u/r 53 not made [e.g. Interstate stock transfer, sale of tax free goods, composition dealer, dealer hit by rule 53(6), closing stock lying when business discontinued, setoff on passenger motor vehicles/ intangibles, etc.] Disallowance of setoff, iff claimed Reconcile such setoff claims & Submit necessary details & documents to prove the claim else revise returns & pay such setoff claimed & interest, in any. PHD & Associates 18 9

10 15 Highseas sales / Sales on form H / Sale-intransit to Suspicious / Hawala dealer Such sales may be not allowed as exempt but taxed Reconcile such turnover & Submit necessary details & documents to prove the claim else revise returns & pay tax on such sales interest, in any. PHD & Associates Tax paid data as per Annexure A & B as per Vat Audit Report or Tax payment by Other Dealers VAT & CST paid data will be cross checked with its deposit in Govt Treasury / Mahavikas & its Credit taken by the dealer Error in showing wrong TIN / ACT / Period while making online tax payment Follow Trade Circular # 17T dt 25 Nov 2011; Submit VAT & CST paid challans with bank statements & other necessary details & documents to prove tax credits taken PHD & Associates 20 10

11 17 Vat TDS data as per Annexure C for TDS Cert recd & Annexure D for TDS Cert issued for works contracts as per Vat Audit Report Vat TDS data will be cross checked with its deposit in Govt Treasury & its Credit taken by the works contractor Submit TDS Cert & other necessary details & documents to prove TDS credits taken & TDS deposits made. PHD & Associates 21 Cross-checking of transactions (Sec. 65): o Commissioner has power to collect information regarding sales & purchases from dealers & to cross check same, with a view to prevent evasion of tax & ensure proper compliance of MVAT Law. o For FY : Refer Circular # 1A dt 11 Jan 2013 o For FY : Refer Circular # 9A dt 19 Aug 2013 o Mismatch of J1 & J2 data to be prepared & given by EIU o Mismatch of J1 & J2 to be cross checked by Cross Check Branch / LTU who will verify Sales Registers, Vat Returns & Vat Payments o Either seller will be asked to pay differential tax or buyer s setoff will be disallowed o Cross check result be finished & sent to EIU for FY by & for FY by PHD & Associates 22 11

12 Interest for late payments u/s 30(1), (2) & (3): o Int. for URD person or URD period, for all such years, simple 15% p.a. on tax payable for each month or part thereof from 1 Apr of respective year to the date of payment of tax. Provided that such int. shall not exceed amount of tax payable [Sec. 30(1)] o RD who pays tax late shall pay simple 15% p.a. on tax payable for each month or part thereof from due date till the date of payment of such tax. Tax payable with fresh/revised return is also liable for such int. from due date of original return [Sec. 30(2)] o RD for tax dues on assessment shall pay simple 15% p.a. on tax payable for each month or part thereof from the last date of period of assessment till the date of order of assessment [Sec. 30(3)] PHD & Associates 23 Interest on additional tax u/s 30(4): o Additional tax payable as per Return / Revised Return filed by dealer after the commencement of: o Business audit (u/s 22) or o Inspection of accounts, registers & documents kept at POB [Notice in Form 603 issued u/s 64(1)] or o Entry & Search of POB / any place where dealer has kept his accounts, registers, documents or stocks [u/s 64(2),(3),(4)] or o In consequence of any intimation issued u/s 63(7) [Form 604] o then he shall be liable to pay 25% of the additional tax payable [Sec. 30(4)] o Sec. 30(4) was inserted wef 1 July 2009 vide Mah. Act # 17 dt ; Refer Trade Circular # 22T dt 6 Aug 2009 PHD & Associates 24 12

13 Penalty for concealment u/s 29(3): o Sec. 29(3): While..the Commissioner on noticing...that any person / dealer has concealed the particulars or has knowingly furnished inaccurate particulars of any transaction liable to tax or...has knowingly claimed setoff in excess of what is due to him, the Commr may, after hearing... impose upon him a penalty equal to the amt of tax found due as a result of aforesaid acts of commission or omission. o Trade Circular # 22T dt 6 Aug 2009, Para 4(b)(viii): In case a dealer files revised return and pays 25% of the additional tax payable as per Sec. 30(4) then penalty u/s 29(3) shall not be levied. PHD & Associates 25 Vat Audit Report Form 704 amended wef FY due on 15 Jan 2014 (Notification # VAT/AMD-2013/1B/Adm-8 dt 23 Aug 2013 issued by Commissioner of Sales Tax u/r 17A(2) of MVAT Rules) Report any similar issue involved in Auditee s case where a decision against the State Govt or Commr was given by the Tribunal and the Reference / Appeal is pending before appropriate forum in the following dealer s case which is/are appearing in the list of pending references/appeals kept on website of the Dept.: Sr. # / Reference / Appeal # / Name of Dealer Web site data / updation / various issues / Onerous task for Auditor Report PAN of URD works contractor for VAT TDS data in Annex D Annex G / I / J1 / J2 : Number of Rows increased from 1000 to 5000 Minor other modifications not covered here PHD & Associates 26 13

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