VAT Issues & Controversies in Real Estate & Redevelopment Projects by CA Deepak Thakkar,

Transcription

1 VAT Issues & Controversies in Real Estate & Redevelopment Projects by CA Deepak Thakkar, 20 Dec 2015 AIFTP, CTC, JB Nagar CPE Conference at Silent Hill Resort, Palghar CA Deepak Thakkar 1 Sale of Unit after completion of construction, is not liable to Vat 1..It must be clarified that if the agreement is entered into after the flat or unit is already constructed, then there would be no works contract. But so long as the agreement is entered into before the construction is complete it would be a works contract.. [Para 19 of K. Raheja Development Corporation vs State of Karnataka (2005) 141 STC 298 (SC)] 2. When construction can be said as complete? On getting construction completion certificate from Architect? On application for Occupation Certificate (OC)? On getting Occupation Certificate (OC)? On application / getting Building Completion Certificate (BCC)? CA Deepak Thakkar 2 1

2 L&T Ltd & ors vs State of Karnataka & ors Civil Appeal # 8672 of 2013 SC Order dt 26 Sept 2013, 65 VST 1 (SC) Larger Bench of 3 Judges: R M Lodha J, J Chelameswar J, M B Lokur J CA Deepak Thakkar 3 3 L&T Ltd & ors vs State of Karnataka & ors Civil Appeal # 8672 of 2013 Order dt 26 Sept VST 1 (SC) Larger Bench of 3 Judges ( R M Lodha J, J Chelameswar J, M B Lokur J) Vat Issues in Agreements registered prior to 31 Mar 2010 for under construction properties: SC LB reconsidered its Division Bench ruling in K. Raheja Development Corpn v. State of Karnataka; (2005) 5 SCC 162 as referred by its Division bench ruling in L&T Ltd & Anr. v. State of Karnataka & Anr. SLP(C) No of 2007 SC considered 12 appeals from Maharashtra & 14 appeals from Karnataka, thus in all 26 appeals decided which include Promotors & Builders Asso. filed SLP # & of 2012 CA Deepak Thakkar 4 2

3 ..L&T Ltd & Ors vs St of Karnataka & Ors dt SC: Taxable Event in building construction: Stage from which vat liable: Importance of date of contract with flat buyer: Para 115: It may, however, be clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government. Para 117: The submission of Mr. K.N. Bhat (Karnataka Govt) that the view in Raheja Development that when a completed building is sold, there is no work contract and, therefore, no liability to tax is not correct statement of law, does not appeal to us. If at the time of construction and until the construction was completed, there was no contract for construction of the building with the flat purchaser, the goods used in the construction cannot be deemed to have been sold by the builder since at that time there is no purchaser. That the building is intended for sale ultimately after construction does not make any difference. CA Deepak Thakkar 5..L&T Ltd & Ors vs St of Karnataka & Ors SC: Approval of K. Raheja Dev. Ruling dt SC: Para 118. We are clearly of the view that Raheja Development lays down the correct legal position and we approve the same. Para 121: Thus, in our view, there is no merit in the challenge to the constitutional validity to the provisions of explanation (b)(ii) to Section 2(24) of MVAT which were amended with effect from Excerpts from Para 34 of BHC decision in MCHI:.. Whether there is a works contract in a given case is for assessing authorities to determine... the amended definition in the State legislation in the present case provides a clarification or clarificatory instances. Para 122: We are in agreement with the above view and reject challenge to amendment to the provisions of explanation (b)(ii) to Section 2(24) of MVAT Act. CA Deepak Thakkar 6 3

4 ..L&T Ltd & Ors vs St of Karnataka & Ors dt SC: Mode of valuation of goods provided under Rule 58(1A) needs clarity from Maharashtra State Govt: Para 123: Sub-rule (1A) was inserted into Rule 58 by a notification dated The challenge was laid to Rule 58(1A) of the MVAT Rules before the Bombay High Court.. Para 124: The value of the goods which can constitute the measure of the levy of the tax has to be the value of the goods at the time of incorporation of goods in the works even though property in goods passes later. Taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property. The mode of valuation of goods provided in Rule 58(1A) has to be read in the manner that meets this criteria and we read down Rule 58(1-A) accordingly. The Maharashtra Government has to bring clarity in Rule 58 (1-A) as indicated above. Subject to this, validity of Rule 58(1-A) of MVAT Rules is sustained. [So Land cost or land value as per SDRR, whichever higher?? Evidence??] CA Deepak Thakkar 7..L&T Ltd & Ors vs St of Karnataka & Ors dt SC: Mah. AG assures that implementation of Rule 58(1A) shall not result in double taxation; Circulars are only clarificatory in nature, so not binding to tax payer: Para 125: Once we have held that Raheja Development1 lays down the correct law, in our opinion, nothing turns on the circular dated and the notification dated The circular is a trade circular which is clarificatory in nature only. The notification enables the registered dealer to opt for a composition scheme. The High Court has dealt with the circular and notification. We do not find any error in the view of the High Court in this regard. Moreover, the Advocate General for Maharashtra clearly stated before us that implementation of Rule 58(1-A) shall not result in double taxation and in any case all claims of alleged double taxation will be determined in the process of assessment of each individual case. Double taxation qua: sub-contract; stamp duty & vat; Land value deduction; etc?? Para 126: After having given answer to the reference, we send the matters back to the Regular Bench for final disposal. CA Deepak Thakkar 8 4

5 Mah. State Govt. amended Rule 58(1A), (1B), (1C) & 58(2) retrospectively effective from 20 June 2006 vide Notification # VAT 1513/CR-147/Tax-1 dt. 29 Jan 2014 in pursuance of SC ruling in L&T Ltd dt 26 Sept 2013 CA Deepak Thakkar 9 9 Recent BHC Ruling in CREDAI & Builders Association of India & Ors v/s State of Mah. & Ors (30 Apr 2015) VIL-195-BOM CA Deepak Thakkar

6 CREDAI & Builders Association of India & Ors v/s State of Mah. & Ors ( ) VIL-195-BOM WP at BHC against: (1) Notification dt 29 Jan 2014 amending Rule 58(1A), (1B), (1C) & 58(2) retrospectively effective from 20 June 2006 (2) Trade Circular # 7T dt & 12T dt alleging that directions of SC are not fully complied with J. Sunil P. Deshmukh & J. S C Dharmadhikari Held: (1) We are not impressed by the submissions of Petitioners that valuation of goods u/r 58 would not let the proper authority to probe into transactions of land dealings by the developers, depending upon facts & circumstances of & evidence in particular case, as it would be open for the competent authority to make proper enquiry & seek details of the transactions & the price at which the property had been purchased. (2) Investigation & inquiries incidental to valuation assessment & recovery of tax are not precluded or prohibited under the scheme of the rules (3) Predominant challenges are not sustainable, the measures & mode being not ultra vires,...do not call for any indulgence... (4) Writ petitions dismissed. Filing of SLP in SC, under process... CA Deepak Thakkar 11 Trade Circular # 7T dt 21 Feb 2014 Revised returns by Developers permitted for the period 20 Jun 2006 to 31 Dec 2013 till 30 Apr 2014; Revised returns can be filed even where notice of assessment is received by developer; If assessed then claims can be put up before appellate authority; developers shall discharge tax liability by selecting any one option out of four options available under MVAT Act; No other option (such as Cost + GP) would be admissible. CA Deepak Thakkar 12 6

7 Trade Circular # 12T of 2014 dt 17 Apr 2014: Replies to 28 Queries raised wrt Vat Computation for Developers Tax computation method and value of goods liable to tax: (Q # 5,23,24,28,14,15): The taxable turnover of goods is to be valued and computed following the computation rule 58. From the agreement value of the flat/unit the deduction is to be taken for land value, sub-contract payments, labour/services expense and stage of construction completed at the point of entering into contract, as provided u/r 58 to arrive at the gross taxable turnover for deemed sale of goods on which Vat is calculated. The circular clarifies that no other method shall be permitted for Vat calculation. No vat on Stamp Duty. (Vat on Service Tax??...Refer next slide...) Land value deduction (Q # 4,6,8,9): The deduction for land value is available based on land rates given in the Stamp Duty Ready Reckoner (SDRR) relevant for the calendar year in which the agreement is executed. If the actual land cost is higher as compared to SDRR land value then to take the higher deduction the certificate is to be obtained from The Department of Town Planning and Valuation (DTPV) which is informed by Vat Department, about such amendments made to rule 58(1A). DTPV will devise the procedure for issuance of such certificate. There is no prescribed format for such certificate. In absence of such certificate the deduction for land value will be available as per SDRR. CA Deepak Thakkar 13 Mah. Act # 17 of 2015 dt 18 Apr 2015: Definitions amended: Sr. # Sec ref & effective date 1 Expln. IA added to defn of SP Sec. 2(25) & PP Sec 2(20) wef from 1 April 2015 Gist of amendment Definition of Sale Price u/s 2(25): Sale Price shall not include the amount of service tax levied or leviable under the Finance Act, 1994 & collected separately by the purchaser Definition of Purchase Price u/s 2(20): Purchase Price shall not include the amount of service tax levied or leviable under the Finance Act, 1994 & collected separately by the seller Remark / Issue 1. Thus Vat shall not be levied on service tax shown separately in Tax Invoice for works contract 2. Amendment made following Mah. Tribunal ruling in Sujata Painters, VAT Appeal # 18 of 2013 dt 9 March 2015 which reversed DDQ dt 20 Jan Whether dealer following Composition Scheme, paying tax on Contract Value, liable to pay tax on service tax?; (Technocrat Engineers VAT SA # 237 of 2014 dt 3 Nov 2015 MSTT; Nikhil Comforts ruling of Mah. Tribunal is pending before BHC in Sales Tax Appeal # 21 of 2013 dt 15 July 2014) CA Deepak Thakkar 14 7

8 .Trade Circular # 12T of 2014 dt 17 Apr 2014: Replies to 28 Queries raised wrt Vat Computation for Developers. Stage-wise completion of construction deduction (Q # 1,2,3,7,11,13): Supreme Court in L&T s ruling had directed the Maharashtra state government to amend the Vat computation rule to grant the deduction for the turnover of construction which was completed prior to the stage of entering into the contract. In other words, the cost of construction incurred upto the stage of contract with the purchaser, is not taxable. To grant such deduction rule 58(1B) is inserted on 29 Jan 2014 effective retrospectively from 20 Jun The certificate about the date of completion of plinth level construction shall be obtained from the local body. The certificate about the date of completion of 100% RCC framework for the entire (???) building shall be obtained from the Registered RCC consultant. There is no prescribed format for such certificate. In absence of such certificate the deduction for stage-wise construction completion will not be available. Such deduction is not available under the composition scheme. CA Deepak Thakkar 15.Trade Circular # 12T of 2014 dt 17 Apr 2014: Replies to 28 Queries raised wrt Vat Computation for Developers Return / Tax payment and carry forward of negative turnover or refund: (Q # 10,12,19,20,21,16,17,18,26): The dealer has to rework the Vat computation based on above certificates and deductions and file the revised returns for the period from till dt for all the construction projects. The negative turnover arrived at after taking the above deductions can be carried forward to subsequent periods till the completion of entire project. The refund of set off can be carried forward upto March 2010 and thereafter it shall be claimed by filing refund application in form 501, soon or it may be granted in assessment. Tax collection, interest and assessment (Q # 22,25,27): Tax can be collected vide raising a debit note or letter. Interest will be levied as per the provisions of law. The developer will be assessed by one officer for the entire project for all the periods concerned. [ Earlier FAQs are relied upon by Department.] CA Deepak Thakkar 16 8

9 Issues for Land Value Deduction u/r 58(1A) Cost of land shall be determined as per Guidelines to Stamp Duty Ready Reckoner (SDRR) Cost if zero, still deduction available? Cost, if more than value as per SDRR, allowable? SDRR Land rate given per square mtr, whether to apply directly to area of each unit or area of plot & then to apply to each unit proportionately? SDRR Land rate given for FSI 1:1 which shall be enhanced by 40% if TDR loaded on said land; or FSI 3:1? TDR cost can be added to land cost? Corpus fund, rent, etc given to existing occupants in redevelopment project can be added to land cost? Constructed area given free to Land Owner Value? SDRR Land rate is issued as on 1 st Jan every year which is applicable to agreements registered in that calendar year CA Deepak Thakkar 17 Rule 58 amended vide Notification # VAT 1513/CR-147/Tax-1 dt. 29 Jan 2014, effective retrospectively from 20 Jun Rule 58(1): Labour & Exps. Dedn. : Note below Table for Std. Dedn. For labour amended: Total Contract Price (Booking / Agreement basis? Accrual /Receipt basis?) say Rs. 100 (1) Less: Cost of Land determined u/r 58(1A) say Rs. -40 (2) Less: Quantum of price on which tax paid by Sub-contractor & tax amt. charged separately by Sub-contractor..say (16+1=) Rs. -17 (a) Form 407 & 408 reqd? (b)goods supplied by Contractee to Contractor whether free of charge or at price or on reimbursement basis?? Balance Contract price.. Rs. = 43 Less: Std. Dedn. For 30% of balance i. e. of Rs Rs Balance deemed as material value in WC Rs. = 30 Rule 58(1A): Land Cost Dedn. : The value of goods at the time of transfer shall be calculated after deduction of cost of land which shall be determined as per Stamp Duty Ready Reckoner (SDRR) as on 1 st Jan of the year in which the agreement to sell property is registered. Proviso added: Provided that, after payment of tax on the value of goods determined as per this rule, dealer may prove before the Dept. of Town Planning & Valuation that the actual cost of land is higher than that determined as per SDRR then actual cost of land shall be deducted and excess tax paid, if any, shall be refunded. CA Deepak Thakkar 18 9

10 Rule 58 amended vide Notification # VAT 1513/CR-147/Tax-1 dt. 29 Jan 2014, effective retrospectively from 20 Jun 2006 Rule 58(1B) inserted: From Total Contract Price deduct Labour & Exps u/r 58(1) and Land Cost Dedn. u/r 58(1A); Determination of SP of goods in WC, based on the Stage of Construction during which contract is executed by Developer with purchaser: Furnish Certificate from Local or Planning Authority for date of completion of stages; Where such Authority does not have such procedure then such certificate from Registered RCC Consultant; Stage of Construction during which Contract executed with buyer (Stage qua Project or Bldg or Unit?? ) (a) Before issue of Commencement Certificate (CC) (b) From CC to completion of Plinth Level (PL) (C) After PL to completion of 100% of RCC framework (RCC) (of floor or entire building??) (d) After RCC to Occupation Certificate (OC) SP of goods involved in WC Remarks: Failure to produce such Certificate results in denial of said dedn. [Rule 58(1C)]?? 100% L of A; MOU; Offer Letter; Option Letter; Agreement dt; Agreement Regn. Dt; etc 95% Assumption of 5% of Total value of goods used till CC? 85% Assumption of 15% of Total value of goods used till PL? 55% Assumption of 45% of Total value of goods used till 100% RCC? (e) After OC (Part OC?...Deemed OC under Law?) Nil % OC Application or Grant of OC? CA Deepak Thakkar 19 Example for Vat Computation for Unit sold during construction, based on Rule 58 amended on 29 Jan 2014 wef 20 Jun 2006: Details of atransaction Rule 58: Std. Dedn. as per Table Rs. Rule 58: Actual Dedn for Labour & Exps as per Books of A/c Rs. Sec. 42(3): Composition 5% Rs. Total Agreement Value Less: Land Cost/Value (Whichever Higher) u/r 58(1A) say Less: RD Sub-Contracts u/r 58(1) (Form 407 & 408) say ?? (Para 101(xi) & 124) Balance WC = 43 = 43 = 43 or 83? Less: Labour, Exps, Profit, etc u/r 58(1) say (@ 30%) = -13 (Actual say..) Balance Goods Value = 30 = 20 = 43 or 83? Stage of Agrmnt. qua Constrn. u/r 58(1B) say SP = 85% Tax Payable = = 26 = 17 = 43 or 83? Or 85% of above balance?? respective vat rates & reduce setoff 5% & setoff in excess of 4% CA Deepak Thakkar 20 10

11 Way Forward Post Amended Rule 58 dt 29 Jan 2014 ADM relief orders shall be passed soon (2 days mentioned in circular) as confirmed by Commissioner in Trade Circular # 14T dt 6 Aug 2012 & 17T dt 25 Sep 2012 Refund of any amt be allowed to be c/f to any subsequent year/s without any limit or restrictions, instead of upto March 2010 Coercive recovery of tax, interest or penalty shall remain stayed in cases where dealer followed Trade Circular # 17T dt 25 Sep 2012 & obtained registration on or before 15 Oct 2012 and paid taxes & filed Returns upto 31 Oct 2012 as per directions of SC. The said payment shall be subject to final decision of HC/SC and amended law. Interest & penalty shall not be levied in such a case where basic levy & computation mechanism was before SC abinitio; Govt shall be fair to taxpayer New projects of RD Developers, shall apply composition scheme of 1% of agreement value or stamp duty value, whichever higher, or vat provisions, depending upon facts of each case. CA Deepak Thakkar 21 Time barring of assessment u/s 23(3A) of MVAT Act Section Circumstance Fin. Year Time barring date Remark 23(3A) RD filed Returns in-time or late then pass assessment order within 7 yrs from end of the yr Jun 2013 Proviso to sec. 23(3A) 23(3A) ----do Mar 2014 For Developers, till 30 Sep 2015 u/s 23(13) 23(3A) ----do Mar 2015 CA Deepak Thakkar 22 11

12 Time barring of assessment u/s 23(2)/(3)of MVAT Act Section Circumstance Fin. Year Time barring date Remark 23(2) RD filed Returns in-time then pass assessment order within 4 yrs from end of the year; Jun rd Proviso to sec. 23(2) 23(2) ----do Mar 2014 For Developers, till 30 Sep 2015 u/s 23(13) 23(2) ----do Mar (2) ----do Mar 2016 and so on... 23(3) RD filed Returns late then pass assessment order within 5 yrs from end of the year; Mar 2014 For Developers, till 30 Sep 2015 u/s 23(13) Developer getting Adm relief as per Trade Circular # 14T dt 6 Aug 2012 & 17T dt 25 Sep (3) ----do Mar (3) ----do Mar 2016 and so on... CA Deepak Thakkar 23 Time barring of assessment u/s 23(4) of MVAT Act Section Circumstance Fin. Year Time barring date Remark 23(4) URD / URD period, then pass assessment order within 8 yrs from end of the year Mar (4) ----do Mar (4) ----do Mar 2016 and so on... CA Deepak Thakkar 24 12

13 Time barring of assessment u/s 23(5)/(6) of MVAT Act Section Circumstance Fin. Year Time barring date 23(5) Assessment of any Transaction where tax is evaded or excess setoff is claimed, initiate assessment in any search or other proceedings, where the prescribed authority has reason to believe such evasion;??? Proviso to sec. 23(5)(d) amended from 1 April 2015??? Time limit of 6 yrs from end of the relevant year is provided for. Remark No tax again on said transaction under any provision (Proviso to sec. 23(5)(d)); and so on... 23(6) Assessment of any undisclosed turnover or tax paid at lesser rate or setoff/deduction wrongly claimed, then pass order within 6 yrs of end of the year Mar 2016.& So on. and so on... [for Developers for FY & FY till 30 Sep 2015 u/s 23(13)] CA Deepak Thakkar 25 Time barring of assessment u/s 23(7) of MVAT Act Section Circumstance Fin. Year Time barring date Remark 23(7) Fresh assessment to give effect to any finding or direction contained in any order made by Tribunal or HC or SC To pass order within 36 mths from the dt of receipt of said order by Commr. CA Deepak Thakkar 26 13

14 Time barring of assessment u/s 23 of MVAT Act Section Circumstance 23(1) RD fails to file return for any period within time, results in ex-parte assessment, within 3 yrs from end of the yr, without hearing dealer; If dealer submits the return then said assessment order shall stand cancelled; (Automatic cancellation wef 1 May 2013) 23(8) Assessment order passed without considering decision of Tribunal given against the State or Commr, if an appeal is filed against said order which is pending; No order of recovery of tax, interest, penalty or forfeiture be passed in such case till final decision & hearing 23(9) Dealer may apply in Form 305 to Commr for issuance of direction to assessing authority for guidance, which is binding on authority 23(11) & (12) 23(13) inserted on 3 Mar 2014 Ex-parte assessment made u/s 23(2) or (3) or (4) for non-attendance & when dealer applies in Form 316, within 30 days of service of said order, then make fresh assessment within 18 mths from the date of service of cancellation order; Dealer can apply only once in respect of any period of assessment Mah. Ordinance # 7 of 2014 dt 3 Mar 2014: New Sec. 23(13) inserted wrt dealers undertaking construction of building & transferring it with interest in land: (Notwithstanding anything contained in sec. 23 ) Limitation period for making an order of assessment, for any period, expiring on 31 Mar 2014 extended till 30 Sep CA Deepak Thakkar 27 Vat Issues qua Redevelopment Projects 1. Free area given to occupants/tenants, on ownership basis in exchange of old existing area, liable to vat? 2. Additional area given free to occupants/tenants, on ownership basis in exchange of old existing area, liable to vat? 3. Additional area given for an agreed consideration, to occupants/tenants, on ownership basis in exchange of old existing area, liable to vat? 4. Corpus / Rent / Hardship allowance / shifting allowance given to occupants/tenants liable to vat? 5. Old flat/property sold to Developer & purchased new at an agreed consideration, before/during construction phase, liable to vat? CA Deepak Thakkar 28 14

15 Issues in 1% Composition Scheme for Developers & Builders CA Deepak Thakkar Vat 1% on sale during construction phase under Notification # VAT. 1510/CR-65/TAX-1 dt 9 July 10 wef 1 Apr Composition Scheme (CS) u/s 42(3A) of MVAT Act for Registered Dealer (RD) who undertakes construction of flats, dwellings or buildings or premises and transfer them in pursuance of an agreement along with land or interest underlying the land 2. 1% of the aggregate amt specified in agreement or Stamp Duty Value under Bombay Stamp Act, 1958, whichever is higher a. Developer following Vat Rule 58 for certain construction works contract (for certain Units sold prior to 1 Apr 10), eligible for this new CS for other Units sold on or after 1 Apr 10? b. Developer following 5% u/s 42(3) for certain construction works contract (for certain Units sold prior to 1 Apr 10), eligible for this new CS for other Units sold on or after 1 Apr 10? (Ans to Q.16 of Trade Circular # 14T dt 6 Aug 12, permits for CS 1% as 4 th Option for tax computation method for Developers) 3. Conditions & restrictions specified in new 1% shall be fulfilled CA Deepak Thakkar 30 15

16 Vat 1% on sale during construction phase wef 1 Apr 10.Conditions & Restrictions of CS 1. All agreements registered on or after 1 Apr 10 shall be covered under this CS a. Unit booked prior to 31 Mar 10 but agreement registered after 1 Apr 10, covered? b. Agreements regd upto 31 Mar 10, not covered? May be eligible? c. All Agreements qua building or qua project or qua dealer? 2. Such Turnover of sales shall be included in the Return period in which agreement is regd & make e-payment of tax a. To pay 1% fully on entire turnover or can pay as & when installment is due? b. Turnover will include deposits or charges for: i. Layout, Infrastructure, labour cess & Development chs.? ii. Common areas & facilities like compound, passage, terrace, garden, play area, swimming pool, club house, gymnasium, etc.? iii. Parking space/stack parking facility, allotted on license basis? (Use is operational on giving possession of Unit sold) CA Deepak Thakkar 31 Vat 1% on sale during construction phase wef 1 Apr 10.Conditions & Restrictions of CS iv. Cost of Installation of Electric meter, sub-station, Gas meter, water meter, etc.? v. Cost of Society/Company formation, registration, legal chs., share money, entrance fees for membership? vi. Security Deposit for building maintenance chs., removal of debris for interior work, Advance maintenance chs., property tax, Non- Agriculture Tax, land revenue, etc? vii. Onetime Membership fees for club house or Gymnasium? viii. Service Tax for said agreement? (Technocrat Engineers VAT SA # 237 of 2014 dt 3 Nov 2015 MSTT; Nikhil Comforts, ST Appeal # 21 of 2013 dt 15 July 2014 BHC) iv. Stamp Duty for said agreement? 3. Said dealer shall not be eligible for setoff in respect of purchases a. Purchases qua said building or project or dealer? 4. Said dealer shall not transfer property in goods purchased under form C in the contract opted for said CS a. Form C can be used for other projects / business? b. Form C can be used for purchase of Construction Equipments / machinery for said project? c. Form C if issued in past for purchases then eligible for CS 1%? CA Deepak Thakkar 32 16

17 Vat 1% on sale during construction phase wef 1 Apr 10.Conditions & Restrictions of CS 5. Said dealer shall not issue form 409 to his sub-contractor in respect of WC opted for said CS a. Form 407 & 408 obtained from Sub-contractor, still 1% payable? 6. Said dealer shall not be entitled to change the method of computation of tax liability in respect of contract opted for said CS a. For other contract, other computation method can be opted? b. Such other contract may be in same building or same project? 7. Said dealer shall not issue Tax Invoice a. Qua other transactions? b. Other trading business activity? Note: No application needed for exercise of option for 1% Issue: If any condition broken then what consequence? Since when? CA Deepak Thakkar 33 Mah. Tax Laws (Levy, Amendment & Validation) Act 2015 vide: Mah. Act # 17 of 2015 dt 18 Apr 2015 available on 22 Apr 15 passing L.A. Bill # 16 of 2015 dt. 26 Mar 2015 available on 1 Apr 2015 Vat Notfn. # VAT 1515/CR-39 (1) & (2) / Tax-1 dtd. 27 Mar 15 available on 1 April 2015 amending Vat rates Effective date: As specified / notified, prospectively / retrospectively, by Mah. State Govt. & different dates applicable for different provisions. Trade Circular # 6T dt 14 May 2015 explains amendments CA Deepak Thakkar 34 17

18 Mah. Act # 17 of 2015 dt 18 Apr 2015 : Entry Tax Sr. # Ref. & WEF Gist of amendment Remark / Issue 3 Sch. of goods liable for Entry Tax expanded by adding Entry # 17 wef 1 April 2015? Or 18 Apr 15? Entry tax (ET) is levied on specified/notified goods when purchased/brought in Maharashtra State from outside. 5% is to be levied on goods covered by clause (iv) & (v) of Sch. Entry C-55 of MVAT Act: C-55- (iv): Steel bars (rounds, rods, square flats, octagons & hexagons, plain & ribbed or twisted in coil form as well as straight lengths); C-55-(v): Steel structurals (Angles, joints, channels, Tees, sheet pilling sections, Z sections or any other rolled sections) 1. RD Dealer who brings such goods for resale in state or sale in interstate trade / export, shall not pay ET. 2. Sale in interstate trade shall not include a sale u/s 3(b) / 6(2) of CST Act [Sec. 3(5) of ET Act] 3. If such goods are consumed /dealt in any other manner, then pay ET in succeeding month. (Sec 3(5) of ET Act) CA Deepak Thakkar 35 Mah. Act # 17 of 2015 dt 18 Apr 2015 : Sr. # Entry Tax Gist of amendment Remark / Issue 3 Article 52 of State List II of The Constitution empowers levy of Entry tax; Importer [Sec. 2(g)]: who imports goods, whether on his own account or on account of a principal or any other person, into local area for consumption, use or sale therein ; Import [Sec. 2(f)]: means bringing or causing to be brought or receiving any goods into local area from a place outside the State Purpose of levy of ET; 1] Jaika Automobiles Pvt. Ltd. vs State of Mah. (1994) 92 STC 248 (Bom); 2] Shaktikumar M Sancheti & ors Vs State of Mah & Ors (1995) 96 STC 659 (SC); 3] Article 286(1): State govt cannot impose tax on sale or purchase during imports or exports. In State of Travancore vs Shanmugha Vilas (1953) 4 STC 205 (SC), it was observed that object underlying the exemption is to avoid double taxation of foreign trade, which is of so great importance to the nation s economy 4. Basic exemption limit of turnover is Rs. 10,000/- 5. ET paid is eligible for setoff as per setoff provisions under MVAT Rules 6. On Interstate stock transfers to Mah. State, ET payable? 7. On imports from outside India, ET payable?? [Tata Power BHC?] CA Deepak Thakkar 36 18

19 Mah. Act # 17 of 2015 dt 18 Apr 2015 : Interest Sr.# Section reference & effective dt 4 Sec. 30 (2) proviso inserted wef 1 April 2015 Gist of amendment Remark / Issue Tax liability finally pointed by Vat Auditor or by Assessing Officer and which is accepted by the dealer, shall pay Interest on such additional tax dues from 1 st October of the year to which the annual return relates till the dt of payment: Exception: 1. In case of new registration effective from 30 September onwards, interest to be calculated from effective date of registration 2. In case of cancellation of registration effective prior to 30 September, then interest to be calculated from effective date of cancellation of registration certificate. Effective for FY ? (Method of calculation of interest is applicable to all annual revised returns filed from 1 Apr 15 Trade Cir # 6T dt 14 May 2015) CA Deepak Thakkar 37 Notifn VAT.1515/CR-81/Taxation-1 dt. 5 Nov 2015 effective from 1 Dec 2015: Interest rate increased from 1.25% PM to upto 2% PM u/r 88 of MVAT Rules Sr.# Section ref. & effective dt 5 Rate of Interest prescribed u/rule 88(1); for Int. levied u/sec. 30 (1), (2) & (3) Amended from 1 Dec 2015 Gist of amendment 1) Wef 1 Apr 2005 till 30 Nov 2015: Rate of 1.25% of tax dues, for each month or for part thereof. 2) Wef 1 Dec 2015: Int. rate increased on foll: Sec. 30(1): Int payable by URD/during URD Period Sec. 30(2): Int. payable by RD for late payment of tax dues as per return / revised return Sec.30(3): Int. payable by RD for tax dues arising during assessment Delay upto 1 mth: 1.25% PM / Part Delay for next 2 mths: 1.5% PM / Part Delay beyond 3 mths: 2% PM / Part Remark / Issue 1) Int. on refund Unchanged: 0.5% for maxm 18mths 2) Int levy is automatic & non-appealable 3) Said Int. provisions are applicable also to CST (Trade Cir # 18T dt 20 Nov 2015 & BST Act Trade Cir # 11T dt 8 July 2004) 4) For old tax dues CA Deepak Thakkar 38 19

20 Setoff claim...r/w Sec. 48(5) of Mvat Act Sec. 48(5):...in no case setoff/refund on any purchase of goods shall exceed the amt of tax in respect of same goods, is actually paid...into Govt. Treasury......except to the extent of purchase tax payable BHC ruling: Mahalaxmi Cotton vs. State of Mah. (2012) 51 VST 1 3. Trade Circular # 8T dt 21 June On assessment (FY ) Setoff disallowed based on: data of electronic system; no evidence produced by buyer; MSTT set aside PP order & directed to rehear stay application (Metro Steel Traders VAT Appeal # 321/2014/ MSTT) CA Deepak Thakkar 39...Setoff claim...r/w Sec. 48(5) of Mvat Act Suppliers were non-genuine dealers so based on investigation, setoff was disallowed in assessment (FY & ) by Rs. 65L / 58L; Total dues Rs. 128L / 103L; PP Order in appeal Rs. 19L / 17L; Appellant s submissions: No investigation made of purchases effected ; setoff disallowed on mere presumption MSTT s observation: Books though not produced before assessing authority, can be produced in appeal; Assessment suffers from infirmity; MSTT order for PP: PP reduced & fixed at Rs. 50K for each year (Steel Syndicate VAT Appeal # 603 & 631/2014/ MSTT) CA Deepak Thakkar 40 20

21 ...Setoff claim...r/w Sec. 48(5) of Mvat Act Setoff disallowed by Rs. 36L as Suppliers were defaulters for tax payment & returns; PP was ordered for Rs. 77L against total dues; Dept had not informed on what basis they says so; These suppliers are RD till date on Dept. website; MSTT s observation: Issue is debatable; It requires verification of facts & reco of tax payment by suppliers MSTT order for PP: PP reduced to 1/3 of disputed tax i.e. fixed at Rs. 12L -17 (Shri Swami Samarth Shetkari... Girni Ltd. VAT Appeal # 482/2014/ MSTT) 7. Penalty maximum, for concealment u/s 29(3) & for no reply to notice u/s 29(7), due to mis-match of J2 with J1 of suppliers (FY ) ; MSTT order: Appellant suffers kidney problem & hospitalised so penalties reduced by 50%. (Shriram Ent. VAT SA # 228/2014/ MSTT) CA Deepak Thakkar 41 Buyer / Contractee liable for Vat TDS: Sec. 31 & Rule 40 of MVAT 1. Employers of Works Contracts liable to deduct TDS - Notification dt & , Notifying Employers liable to deduct TDS - RD under VAT Act, Company, Banks, Trusts, Govt., Co-op. Societies, etc. - Non RD Individuals, Firms, HUF are not liable to deduct TDS 2. TDS applicable, if Aggregate Value of WC, Per Contractor, is Rs. 5 Lakhs or more, in a Financial year 3. Rate of TDS on Total Contract Value (excluding Service Tax if charged separately) 2% if Contractor is RD under MVAT Act 5% if Contractor is URD (upto 31 Mar 4%) 4. TDS quantum shall not exceed the quantum of tax payable towards such works contract 5. No TDS for Sale / Purchase to which section 8 applies 6. No TDS on Sub-Contracts given by Principal Contractor CA Deepak Thakkar 42 21

22 TDS UNDER VAT 7. Pay TDS by Challan Form MTR-6 (previously Form 210) w.e.f within 21 days from the expiry of the month in which tax is deducted - Interest is payable for late payment of TDS 8. Annual Return in e-form 424 wef 1 May 2013 (previously Form 405) within 3 months from the end of the year. (Trade Cir # 42T dt and 37T dt & 4T dt ) 9. TDS Certificate in Form 402 to be issued immediately after tax deduction or TDS depositing in Bank??? 10. TDS Register in Form 404 showing amt of tax deducted, TDS Certificates issued & remittances made 11. Advance payments liable to TDS only when it is adjusted against the amount payable for WC 12. Employer is liable to deposit TDS even if not deducted from payments made to Contractor 43 CA Deepak Thakkar CA Deepak Thakkar 44 22

23 CA Deepak Thakkar CA Deepak Thakkar 45 23