Taxable events VAT vs CST Transfer of property VAT Sale occasion the interstate movement Different types of sale Sales simplicitors HP / installment s

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1 Indirect Tax Refresher Course 2011 Part 1 VAT Levy of tax & rate of tax [including taxation of liquor] Presentation by CA Rajat B. Talati rajat@talatico.com on at WIRC of ICAI

2 Taxable events VAT vs CST Transfer of property VAT Sale occasion the interstate movement Different types of sale Sales simplicitors HP / installment sales Lease W/c Effective control & possession Enjoyment of right to use Transfer of property Billing schedule AS7 v/s running bills Sub-contracting Mis-matching of billing schedule CA Rajat B. Talati - Mumbai 2

3 Taxable events Works contract Is GP method possible Clarification Succession in business Amalgamation De-merger Hive off Change in constitution CA Rajat B. Talati - Mumbai 3

4 Taxable value Sale price Central excise /customs duty High seas sales disallowed Bond to bond sales Freight / octroi Service tax / cell In-transit sale [(sec6(2)] A & g projects (SC) Is 6(2) sale possible in EPC contracts? Splitting of the contract Is 6(2) sale possible in lease contract? CA Rajat B. Talati - Mumbai 4

5 Branch Transfer Form F compulsory Even for labour charges G/R Processing Diamond sent to surat CR sheets sent to OMS for fabrication [Trade circular no. 5T/2009 dt ] CA Rajat B. Talati - Mumbai 5

6 Amendment to schedule entries Particulars Schedule entry Amended rate Remarks Sugar & fabrics A-45 Tax free Where additional duties of excise is levied in view of amendment carried out by the Central budget, this entry would remain till the effective day of this amending act Dhoop including loban and ral Pre-fabricated domestic biogas unit A-55 Tax free Ral is included in this budget. A-56A Tax free CA Rajat B. Talati - Mumbai 6

7 Amendment to schedule entries contd Particulars Schedule entry Amended rate Remarks Cotton yarn C-4(a) 5% Declared goods increased from 4 to 5%. ATF C-8 5% -- Do -- Coal C-22 5% -- Do -- Cotton C-25 5% -- Do -- Crude oil C-27 5% -- Do -- Hides & skin C-45 5% -- Do -- Iron & steel C-55 5% -- Do -- CA Rajat B. Talati - Mumbai 7

8 Amendment to schedule entries contd Particulars Schedule entry Proposed rate Remarks Jute C-57 5% -- Do -- Oil seeds C-68 5% -- Do -- Fabrics & sugar C-101(a) 5% This will be only in respect of fabrics and sugar covered by the specific excise tariff entries as given in sec.14 of the CST Act. CA Rajat B. Talati - Mumbai 8

9 Amendment to schedule entries contd Particulars Schedule entry amended rate Remarks Dry fruit excluding cashew karnels and nuts C-108 5% Currants and Raisins A-59 Tax free This continues to be tax free Soft drink aerated and carbonated nonalcoholic beverages D-13 20% hike from 12.5% to 20% CA Rajat B. Talati - Mumbai 9

10 Amendment to schedule entries as per Notification dt w.e.f Particulars Wheat, rice, pulses, flour, atta etc. Papad, solapuri etc. towel, chaddar Schedule entry Rate Remarks A-9A Tax free Exemption is extended till March A-51 Tax free -do- Tea including instant tea C-108(1)(b) 5% Concessional rate is extended till March ATF D-11 5% -do- CA Rajat B. Talati - Mumbai 10

11 Rate of tax Classification of goods W/c Referential legislation Excise v/s VAT & customs User test Transfer of property rate of tax CA Rajat B. Talati - Mumbai 11

12 Refer Liquor new taxation system w.e.f Maharashtra Act No.XV/2011 dt Notification no.vat-1511/cr-57/taxation-1 dt Amendment to Rules dt Trade Circular 8T of 2011 dt & 10T of 2011 dt CA Rajat B. Talati - Mumbai 12

13 Liquor new taxation system w.e.f Rate of tax on sale of Wine (no amendments) Other IMFL & imported liquor, Beer & country liquor 50% Exemption in excess of 25/125 of MRP therefore tax not to exceed 25% of MRP No set off on purchases after CA Rajat B. Talati - Mumbai 13

14 Taxation of Liquor Purchases Effective from A. Manufacturer after License holder in PLL, BR-L & CL-I Scheduled subject to limit of MRP x (25/125) Can collect tax separately Set off on inputs available. B. Wholesaler (WS) License in FL-1, CL-II Exempt from tax if purchased from RD on payment of VAT at earlier stage. If WS imports liquor from OMS at scheduled subject to limit of MRP x (25/125) No set off on liquor purchased from RD CA Rajat B. Talati - Mumbai 14

15 Taxation of Liquor Purchases Effective from C. Retailer & Country Bar after License in FL-II, FL-BR-II, CL/FL/TOD-III & CL-III Exempt from tax if purchased from RD on payment of VAT at earlier stage. D. Hotels, Bars, Restaurants & Clubs (3 Star Hotels & below) License in FL-III or FL-IV or E 5% on the actual SP of liquor, which is purchased from RD (after ) No set off on purchases CA Rajat B. Talati - Mumbai 15

16 Taxation of Liquor Purchases after Effective from E. Hotels, Bars, Restaurants & clubs (4 star hotels & below) 20% on the actual SP of liquor, which is purchased from RD (after ) No set off if imported liquor from OMS 20% of SP + [Schedule subject to limit of MRP x ( 25/125) CA Rajat B. Talati - Mumbai 16

17 Closing stock held on Except manufacturers others to file stock statement by 31 st May 2011 (extended upto ) No set off on stock if closing stock is not furnished by prescribed date Whole seller (FL-I & CL-II) & Retailer (FL- II, FL-CL-TOD-III) Scheduled rate subject to limit of MRP x (25/125) CA Rajat B. Talati - Mumbai 17

18 Closing stock held on Bars & restaurants & clubs (3 star hotel & below) (FL-III, FL-IV or E) or country liquor bar 5% of SP + schedule rate subject to limit of MRP x (25/125) Bars & restaurants (4 star hotel & above) 20% of SP + schedule rate subject to limit of MRP x (25/125) CA Rajat B. Talati - Mumbai 18

19 Liquor sale out of stk as on Calculation of VAT working for Sales made out of purchase of liquor held in stock as on 30/04/11 MRP 1000 Mfg 600 WH 625 stk 675 retail 1000 resturant - 4* & above 2500 resturant - 3* & below 1500 CA Rajat B. Talati - Mumbai 19

20 Liquor sale out of stk as on VAT working for Sales made out of purchase of liquor held in stock as on 30/04/11 Categories Rate Of Tax sp vat 25/125 Whichever is Lower specified Rate 25 or 5% net collectable A B From A & B Wholseller 50% Stokist 50% retailer 50% resturant -4*& above 50% resturant -3* & below 50% CA Rajat B. Talati - Mumbai 20

21 Liquor sale out of stk as on VAT working for Sales made out of purchase of liquor held in stock as on 30/04/11 Inv set off *** net burden of tax (Note 1) 825 sub to submission of stk statement sub to submission of stk statement sub to submission of stk statement sub to submission of stk statement sub to submission of stk statement 475 Note 1: Since the setoff for purchases held in stock as on 30/04/11 is already considered by wholesaler. To avail this ITC, compulsorily dealer is required to submit the Closing Stock Statement to Sales Tax Dept on or before 30 june,2011.otherwise Set off will be Reversed CA Rajat B. Talati - Mumbai 21

22 Liquor sales of purchases made after New scheme of taxation of IMFL, Imported liquor, Beer & Country liquor Not applicable to wine MRP 1000 Mfg 600 WH 625 stk 675 retail 1000 resturant - 4* & above 2500 resturant - 3* & below 1500 CA Rajat B. Talati - Mumbai 22

23 Liquor sales of purchases made after If goods Purchased From RD on or after 01/05/2011. Categories Rate Of Tax sp vat 25/125 net collectable Manufacturer in Mah 50% Wholseller NIL NA 0 Stokist NIL NA 0 retailer NIL NA 0 resturant - 4* & above 20% NA 500 resturant - 3* & below 5% NA 75 CA Rajat B. Talati - Mumbai 23

24 Liquor sales of purchases made after If goods Purchased From RD on or after 01/05/2011. Inv set off net burden of tax to mention MRP on inv 825 Not Avlb Not Avlb Not Avlb Not Avlb Not Avlb. 75 CA Rajat B. Talati - Mumbai 24

25 Liquor sales of purchases made after if Purchased from OMS/ Imported Goods by the seller himself Categories Rate Of Tax sp vat 25/125 Net Collection Wholseller 50% Stokist 50% resturant - 4* & above note 1 below 20% resturant - 3* & below note 1 below 5% note 1 : MRP of each brand to be proportionately applied on peg-wise sale of liquor CA Rajat B. Talati - Mumbai 25

26 Liquor sales of purchases made after Inv Set Off net burden of tax % vat to SP others in chain till retailer exempt others in chain till retailer exempt CA Rajat B. Talati - Mumbai 26

27 Practical difficulties Is this scheme constitutional? Billing by restaurants & bar Account keeping Auditors to take additional care in attestation such entities. Special treatment to sales by CSD CA Rajat B. Talati - Mumbai 27

28 CA Rajat B. Talati - Mumbai 28