Recent Amendment in MVAT & CST Laws & Issues in MVAT Set off. Recent Amendment in the Central Sales Tax Act, 1956

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1 Recent Amendment in MVAT & CST Laws & Issues in MVAT Set off Presented by CA Harsh Bajaj On Sunday 3 rd July, 2011 For J. B. Nagar CPE Study Circle of WIRC. Recent Amendment in the Central Sales Tax Act, 1956 Finance Act No. 8 of 2011 dt had amended section 15 of the CST Act, 1956 Earlier Provision Local Sales Tax on Declared Goods not to exceed 4% Amended Provision - Local Sales Tax on Declared Goods not to exceed 5% 2 1

2 Rate of VAT for Schedule C Goods Rate of VAT for Schedule C Goods for FY 11-12: Upto 30th April 2011 Declared Goods (eg Iron & Steel, etc.) 4% Other Goods - 5% Wef 01st May 2011 All Schedule C Goods 5% Rate of VAT for Schedule C Goods for FY 10-11: Declared Goods (eg Iron & Steel, etc.) 4% Other Goods - increased from 4% to 5% wef 01 st April, Recent Amendments to the MVAT Laws Section 16: Registration Earlier Provision: To deposit Rs /- as advance towards tax, interest or penalty The amount deposited may be adjusted against the tax, interest or penalty payable Wef 01st May 2011: To deposit Rs /- by way of Security Deposit The amount deposited shall not be adjusted against the tax, interest or penalty Refund of Security deposit* 4 2

3 Recent Amendments to the MVAT Laws * Rule 60A: Grant of Refund of Security Deposits Inserted wef 01st May 2011 Time limit for making refund application: Where RC Cancelled before 36 months within 6 months from the date of service of the order of cancellation. Other Cases after 36 months but before 48 months from the month from which registration is effective. 5 Recent Amendments to the MVAT Laws Rule 60A: Grant of Refund of Security Deposits Registering authority shall within 90 days from the receipt of application refund Security Deposit if: Filed all the returns Paid the tax due as per return Made application within time. 6 3

4 Recent Amendments to the MVAT Laws Section 20: Returns and self-assessment Particulars Period of Filing of Revise Return on his own No. of times a dealer can revise return on his own No. of times a dealer can revise return as a result of Audit u/s. 61 No. of times a dealer can revise return as a result of audit or any proceeding by department Earlier 9 months from the end of the year Any Any Any Wef 01st May months from the end of the year One One One 7 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Calling of information on receipt of Refund Application Earlier Provision - Within 1 months of receipt of application Wef 01st May Any time after filing of application but before the due date of grant of refund 8 4

5 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Grant of refund for newly registered dealer Earlier Provision - Within 6 months from the end of the succeeding year Wef 01st May Beneficial provision deleted 9 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Periodicity for filing of MVAT Refund Application in case of dealer making inter state sales Earlier Provision - Monthly / Quarterly / Six Monthly / Annual Wef 01st May Annual (i.e., after the end of the year) 10 5

6 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Exporter eligible to file Refund application as per return periodicity Earlier Provision - Any exporter (irrespective of the turnover of export) Wef 01st May Exporter whose turnover of export during the period under refund is not less than 50% of total turnover of sales. 11 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Grant of Refund Earlier Provision within 3 months of receipt of application or receipt of additional information whichever is later

7 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Grant of Refund Wef 01st May 2011 If application is filed on or after 01st April 2011 within 18 months from the end of the month in which application is received. Application filed till 31st March 2011: For period ending 31st March 2010 on or before 30th Sept 11 FY on or before 30th June Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Time Limit for making application Earlier Provision - Within 3 years from the end of the year Wef 01st May Within 18 months from the end of the year 14 7

8 Recent Amendments to the MVAT Laws Section 51: Grant of Refunds Rule 55A : Conditions and restrictions for grant of refund Due date for filing of Refund Application MVAT Refund Application for FY FY Due Date 31st March th September Recent Amendments to the MVAT Laws Section 61: Accounts to be audited in certain cases Particulars Dealer should after getting accounts audited furnish in time What is complete Audit Report? Earlier Provision Audit Report in Form 704 Wef 01st May 2011 Audit Report (which is Complete) in Form 704 An audit report shall be deemed to be the complete audit report only if all the items, certifications, tables, schedules and annexures are filled appropriately and are arithmetically self-consistent. 16 8

9 Recent Amendments to the MVAT Laws Section 61: Accounts to be audited in certain cases Particulars Penalty equal to 0.1% of the total sales Earlier Provision Failure to furnish Audit Report in time Wef 01st May 2011 Failure to furnish Audit Report in time And / or On Knowingly furnishing Audit Report which is not complete 17 Recent Amendments to the MVAT Laws Section 74: Offences and penalty Insertion of New Section 74(1A) Whoever knowingly with the intention to defraud revenue, issues or produces a false tax invoice and thereby makes a false claim in respect of the set off or the refund, or claims any other deduction that results into reduced tax liability or enhances the amount of refund, or Abets any of the aforesaid offences, Shall, on conviction, be punished with rigorous imprisonment for a term which shall not be less than one year but which may extend to two years and with fine. 18 9

10 Recent Amendments to the MVAT Laws Schedule Entry A 45 vis-a-vis Sales u/s. 8(3C) Amendment in the Additional Duties of Excise (Goods of Special Importance) Act, 1957 Accordingly Schedule Entry A-45 amended to continue exemption to sugar and fabric No consequential amendment carried out in the notification issued with respect to sales u/s. 8(3C) i.e., textile processor 19 Taxation of Liquor There is no change in the rate of wine (20%) Rate of VAT increased from 25% to 50% for Entry 1, 2 and 3 of Schedule D wef 01 st May No set off available on purchase of Liquor covered by Entry 1, 2 and 3 of Schedule D [Rule 54(i)]. Notification issued with respect to taxation of liquor: Separate treatment for cases where goods are purchased: On or after 1 st May 2011 On or before 30 th April

11 Taxation of Liquor There are separate exemptions provisions for the following categories of dealer: Manufacture Wholesaler Retailer Restaurants and Hotels having gradation of 4 Star or above. Restaurants and Hotels having gradation of 3 Star or below, clubs. Stock statement of goods as on 30 th April 2011 covered by D-1, 2 and 3 to be submitted with the department, on failing to do so set off on purchase thereof and packing material thereof will be disallowed. The date for submission of stock statement is extended from 31 st May 2011 to 30 th June Other Important Amendments to the MVAT Laws Section 18: Information to be furnished regarding changes in business etc.: As per Amendment following information also needs to be furnished: Any change in the nature of business Any changes in bank account Furnished within sixty days

12 Other Important Amendments to the MVAT Laws Section 29: Imposition of Penalty in certain instances Failure to comply with any notice in respect of any proceedings After giving reasonable opportunity may impose penalty. Penalty amount increased from Rs. 1000/- to Rs. 5000/-. 23 Other Important Amendments to the MVAT Laws Section 61: Accounts to be audited in certain cases From FY : The limit of turnover of sale or purchase is enhanced from Rs. 40 lakh to Rs. 60 lakh Liquor Dealer (irrespective of turnover) PSI Dealer (irrespective of turnover) Up till FY : The limit of turnover of sale or purchase was Rs. 40 lakh Liquor Dealer (irrespective of turnover) 24 12

13 Other Important Amendments to the MVAT Laws Section 85: Bar to certain Proceedings Interest order u/s. 30(2) and 30(4) Intimation issued u/s. 63(7) 25 Other Important Amendments to the MVAT Laws Section 86: Tax Invoice and Memorandum of sales or purchase To mention TIN of the purchasing dealer If the selling dealer fails to mention TIN of the purchasing dealer Invoice shall not be treated as Tax Invoice Accordingly set off shall not be allowed

14 Other Important Amendments to the MVAT Laws Rule 17: Submission of Returns Due date for payment of tax is 30 days in case of half yearly return. Additional time of ten days for uploading 27 Other Important Amendments to the MVAT Laws Rule 18: Special provision for first return Periodicity in case of first year Periods Upto March 2008 April 2008 to March 2010 April 2010 onwards Periodicity Quarterly Six-monthly Quarterly 28 14

15 Other Important Amendments to the MVAT Laws Rule 55A: Conditions and restrictions for grant of refund: Proviso is added in Section 51(1) enabling reduction of refund. Accordingly Rule 55A inserted, which provides for reduction of refund in case: Tax is not paid on earlier sales by vendor. Non-receipt of declaration forms under the CST Act. 29 ISSUES IN MVAT SET-OFF 30 15

16 ISSUE No. 1 M/s. Hardware Enterprises had entered into an AMC contract with M/s. Soft Packaging for maintenance of Computer. The term of the contract is from March 2011 to February M/s. Hardware Enterprises had debited the expense to Computer Maintenance and at the year end transferred appropriate amount as prepaid expenses. Whether M/s. Hardware Enterprises can claim full vat set off in the first year itself or the same is to be claimed on proportionate basis? 31 ISSUE No. 2 M/s. Blackberry Corporation had purchased Machinery in the month of March 2011, bill for the same is received and recorded in books of account in the same month. However the said machine was not put to use and hence was shown as Capital WIP in audited accounts. M/s. Blackberry Corporation had not claimed MVAT set off on the said purchase in FY Now the said machine is installed and put to use in the month of May Whether M/s. Blackberry Corporation can claim set off of the same in the month of May 2011? 32 16

17 ISSUE No. 3 M/s. Hi-fi Enterprises is a trader of Mobile, its parts and accessories. They are having offices / depot across India. During the FY they have transferred those goods from Maharashtra State to branches in Gujarat, Andhra Pradesh, Himachal Pradesh. Further there is also branch transfer movement of goods from outside the state to Maharashtra State. Whether the value of branch transfer for the purpose of retention is to be taken net or gross? 33 ISSUE No. 4 M/s. Strong Ltd is engaged in construction of bridges. They have received a contract towards construction of bridge in Lavasa in July They wishes to know whether the provisions of Rule 53(6) will be applicable even to them in cases wherein the transfer of the material in the works contract executed by them is less than 50% of the total contract value? 34 17

18 ISSUE No. 5 The following is the position of Wealthy Bank Ltd, a registered dealer under the MVAT Act, 2002, with respect to its income for the FY (for the state of Maharashtra): Nature of Income Sale of movable assets acquired, old furniture etc Interest and other service income Amount (in lakhs) They have acquired Computers and Furniture during the year and had accordingly paid vat Rs. 20 lakh on such purchases. They had claimed set off of the same in their returns after retention in terms of Rule 53(7A). Whether the claim of set off in accordance with MVAT Laws? 35 ISSUE No. 6 M/s. Facebook Biotech Ltd is having a pharma factory in Navi Mumbai which was constructed in The management had entered into a contract with M/s. Colorsmart Corporation for carrying out factory painting in May The said work is completed by M/s. Colorsmart Corporation in the month of January They have raised a bill of Rs. 10,80,000/- (NET MVAT 8% Rs. 10,00,000/- and MVAT 8% Rs. 80,000/-). Whether M/s. Facebook Biotech Ltd is eligible to claim set off of Rs. 80,000/- taking into consideration Rule 54(g)? 36 18

19 ISSUE No. 7 M/s. Best Reality Enterprises, a works contractor, is carrying out construction of commercial building on contract basis and are opting composition method for discharging MVAT liability. They have purchased Plant & Machinery of Rs. 25 lakhs (Net MVAT 12.5% Rs lakh and MVAT 12.5% Rs lakh) in the month of June 2011 and have recorded the said purchase in the same month. Now at the time of finalizing MVAT Return for the month of June 2011 whether they should claim MVAT Set off of Rs lakh which is paid on purchase of Plant & Machinery? 37 ISSUE No. 8 M/s. Treatwel Engg Works (manufacturer) is a dealer registered under the MVAT Act, They have purchased DEPB license in the month of January 2011 and have accordingly paid VAT thereon. They have imported raw materials in the month of February The said DEPB credit is used towards the payment of custom duty. In the month of March 2011 they have utilized the said raw material in manufacturing finished goods. The said finished goods is transferred from the state of Maharashtra to Gujarat State. Whether vat credit on DEPB license which was claimed earlier is liable for reduction u/r. 53(3) as the finished goods are branch transferred? 38 19

20 ISSUE No. 9 M/s. Diamond Trading Corporation is engaged in trading of precious stones. During the FY they have purchase premises in Andheri. During the year they had purchased furniture & fixtures for the said premises and have capitalized the same. The said premises will be used as guest house for its staff and accordingly the cost of furniture capitalized is added to the cost of Premises and is reflected as investment in the audited accounts. While filing sales tax return M/s. Diamond Trading Corporation had taken set off on the purchase of furniture & fixtures after reduction u/r. 53(7A). Whether the claim of set off is in accordance with the MVAT Laws? 39 ISSUE No. 10 M/s. Tablet Trading System had purchased computers for its office in the state of Maharashtra in the month of April At the time of filing sales tax return for the month of April 2011 they have claimed set off in accordance with Rule 53(7A) i.e., after reduction of 3% set off. In the month of June 2011 they have opened up a new office in the state of Gujarat. They have transferred the computers which are lying ideal from office in Maharashtra to office in Gujarat. Whether on such transfer of computer from one state to another set off is liable to be reduced as per Rule 53(3)? 40 20

21 ISSUE No. 11 M/s. Lazy Tech Enterprises had obtained VAT registration in the month of June They have purchased a Machinery of Rs lakh (NET VAT 12.5% Rs. 20 lakh and VAT 12.5% Rs lakh) the date of tax invoice is 31st March The said machinery is recorded in books of accounts on 01st April Whether M/s. Lazy Tech Enterprises is eligible to claim set off of Rs lakh? 41 ISSUE No. 12 M/s. Hurry Trading Corporation had purchased computer of Rs /- in the month of June The said purchase is erroneously debited to profit & loss account. Whether vat set off is liable for reduction u/r. 53(7A)

22 ISSUE No. 13 M/s. ERP Software Corp is engaged in production and selling of customized accounting software to their clients. They had purchased Computers and licensed software for Windows, MS office, Adobe. Whether they will be eligible to claim set off on the purchase of said computer software's? What will be the answer if they are also engaged in trading in Tally ERP software? 43 ISSUE No. 14 M/s. Wisdom Oil Corporation had purchased iron & steel in the state of Maharashtra by paying MVAT. Iron & steel purchased is used by them in fabrication of storage tank (which is capitalized under the head Plant & Machinery). The same is later branch transferred to Tamil Nadu state for use therein. Whether set off reduction will be applicable on inter state branch transfer? 44 22

23 Thank You 45 23