SYNOPSIS OF CHANGES IN NEW VAT AUDIT REPORT IN FORM NO C. B. THAKAR B.Com., LLB, F.C.A. Advocate

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1 SYNOPSIS OF CHANGES IN NEW VAT AUDIT REPORT IN FORM NO Introduction C. B. THAKAR B.Com., LLB, F.C.A. Advocate To replace department assessment by way of outsourced assessment, VAT Audit has been provided under MVAT Act,2002. It is about five years we are having experience of VAT Audit. Therefore, improvements in Form 704, as felt necessary from the feed-back received, are carried out from time to time. Though improvements may be welcome it is necessary to keep in mind that it creates new controversies. The further phenomenon found these days is that the form is amended without following official proceedings laid down in the Acts/Rules. The implication of the same are required to be kept in mind, if in future any issue arises out of the same. as under. Subject to above, the changes made in form can be briefly noted The new version of E-704 is put on website on It is upgraded from to However, this new form/amendments are not notified as required under Rule 17A of MVAT Rules, Introduction to Changes A) ADDITIONS IN FORM 704 LETTER OF SUBMISSION ANNEXURE G ANNEXURE J-5 ANNEXURE J-6 B) MODIFICATIONS IN FORM 704 IN PART I IN PART II IN SCHEDULES I TO V ANNEXURE A TO D IN ANNEXURE E IN ANNEXURE F IN ANNEXURE J-1, J-2, J-3 AND J-4 1

2 NO MODIFICATION IN SCHEDULE VI AND ANNX. K TIN & PERIOD WILL DISPLAY AUTOMATICALLY ON All THE PARTS OF AUDIT REPORT. 3. GIST OF IMPORATNT CHANGES 3. 1 Letter of Submission is added Mainly Dealer s Acceptance/Dissenting views with reasons have been asked in respect of specified 8 Categories. It is to be filed physically only and it doesn t get uploaded Impact 1) If accepted by dealer then in case of payment, dealer should make the payment. If not accepted than he has to give the reason and depending upon the facts and circumstances of the case, further action may be taken by Department. Auditor responsibility in respect of such letter. 3.2 PART I a) The version has been upgraded and now is provided in place of Version. b) This part is modified and following changes are made. 1) Sr. Nos. 2(B)(a) & (b)( Row Nos. 37 to 44) Schedule and Annexure as applicable to be ticked, To Read it in totality and not in isolation 2) Table No. 2 Row No. 95 has been inserted. Excess credit carried forward to next tax period. No change is made in Table 3 i.e. it is pertaining to CST. To see implications. 3) Part 1 Table 5 Heading Of table has been changed. Effect of change on refund to be seen. 4) Additional details regarding Registration number of Auditor s firm has to be given. ( Prop. As well as Partnership Firm) 2

3 Some Issues Periodicity of Returns Filing of TDS Return in Part 2 Renumbering and Realignment Land line Number of the dealer is also asked now. Activity Code: Minimum five digits activity code is to be written instead of four digits. 3.4 Schedule I to V More Rows are added for providing Tax Rate wise break up Row is provided for adjustment of VAT Refund to next Tax period. 3.5 Annexure A to J All Annexures are modified and following changes are made- Annexures have to be filled in in descending order (value wise). However it is now stated that in respect of some Annexure the Descending order may be removed. In case of Annexure J 1 to J -4, if incorrect TIN no. is entered in any of these annexure then these annexure disclose the incorrect TIN in Red immediately. To see how to mitigate difficulty in case TIN is correct but not responded as correct on website. a) Annexure A & B Annexures are modified and following changes are made. a) Column pertaining to date of filing of return is removed b) Interest on late payment of tax will be calculated automatically. c) Take care of entering Due date, in case last day is bank holiday. b) Annexure E Annexure is modified and following changes are made 3

4 i) Section 1 Quantity has to be provided in case of petroleum products in liters. Actually it is applicable for Motor Spirit and not for Petroleum product. ii) Section 2 Description of Rule 54 (a) to (k) has been provided iii) Section 4 Description of Rule 53 has been provided (Sub clause wise set off calculation has to be submitted) iv) Section 6 Amount of Total Set-off Available to the dealer has to be calculated as under: Gross input Tax Less: Set Off (ITC) Not Admissible Less: Reduction in Setoff (ITC) = Balance available Setoff (ITC). Auditor should put some amount may be 0, against no setoff available in Rule 54. c) Annexure F Annexure is modified and following modifications have been made- 1) New Ratio is Added - Out of Maharashtra Purchases which are capitalized It is only information asked for? To find out logic behind this requirement, if any. 2) One Column - Column of Method of computation & Observations, if any is deleted. To see impact. 3) One Ratio is Changed - Ratio of interstate stock transfer to Net Local Sales has been asked in place of ratio of Net local sales to interstate stock transfer. 4) New Information have been asked for In all, 15 types of new information have been asked for A) In respect of opening and closing stock ( Sr. Nos. 1 to 10) B) Gross amount of sale of Fixed Assets (Sr. No. 11) C) Gross Receipts as defined in MVAT Rule 53(6) (Sr. No. 12) D) Turnover of Sales as per Profit & Loss (Sr. No. 13) E) Turnover of Purchases as per Profit & Loss (Sr. No.14) F) Total of Non sales income. (Sr. No. 15) Some Issues a) Meaning of Non Sales income (Ratio no. 3) 4

5 b) Meaning of Non-sales receipt / Non-sale income, c) Meaning of Gross Receipts, Gross Turnover of sales. (Gross Receipt as per Rule 53(6) and other wise. d) Turnover of sales and purchases as per P/L A/c. (What treatment to be given to excise amount, tax amount, scrap sales amount etc.) e) What treatment to be given to income received on account of interest, Subsidy, branch transfer etc.? d) Annexure G: This annexure is newly inserted in modified form This annexure is asking details of declaration forms or certificates received. Details about form under CST Act like Form C, F, H etc. to be mentioned. Total 999 rows are provided. Details of forms are to be mentioned in descending order (value wise) Issues: 1) What is the impact of differential amount between gross sales amount and amount for which declaration has been received? 2) Gross amount as per Invoice Which are the components to be included e.g. CST, freight charges, installation etc. whether to be included? Impact of Goods Return. If intention to reconciliation with Schedule VI then it is very tedious job. To find out the exact value of sales invoices less goods return and ultimately to reconcile with GTO of sales in Schedule VI will be time consuming. e) Annexure J (1) Customer Wise VAT Sales Details Annexure is modified and following new rows are added. a) Row No.1000 replaced with Remaining local transaction total where tax is collected separately not covered above b) Row No added for Local Sales to non TIN holders 5

6 c) Row No.1002 is added for Gross local sales where tax is not collected. d) Terms Net Taxable amount, Gross Amount & Other Local Taxable Sales have been deleted. e) Issues 1) Gross sales vis a- vis Gross sales and net taxable sales. 2) About various types of sales made by various dealers e.g. PSI Sales, Composition Dealers sales, Impact of Rule 57(1) etc. f) Annexure J (2) Supplier wise VAT purchases Annexure is modified and following new rows are added. a) Row No.1000 replaced with Remaining local transaction total where tax is paid separately not covered above b) Row No.1001 added for Local Purchase from non TIN holders c) Row No.1002 added for Gross local Purchases where tax is not paid separately d) Note is provided and defining the terms Net taxable amount and Gross amount g) Annexure J (3) Customer wise Debit Note or Credit Note Annexure is modified and following new rows are added. a) Row No. 500 replaced with Remaining local transaction total of Debit/ Credit Notes where tax is collected separately (not covered above) b) Row No. 501 inserted for Debit/ Credit Note in case of local sale to Non TIN holders c) Row No.502 inserted for Gross local sales of Debit/ Credit notes where tax is not collected separately d) To be careful on this point (502). Tax element should be shown separately. h) Annexure J (4) Supplier wise Debit Notes or Credit Notes Annexure is modified and following new rows are added. 6

7 a) Row No. 500 replaced with remaining local transactions total of Debit/ Credit Notes where tax is collected separately by supplier (not covered above) b) Row No. 501 inserted for Debit/ Credit Note in case of local purchases to Non TIN holders c) Row No. 502 inserted for Gross local purchase of Debit/ Credit notes where tax is not collected separately i) Annexure J (5) Customer wise transactions of Direct Export and High Seas Sales under CST Act, This Annexure has been newly inserted and following details are asked - --Customer Name --TIN of Customer (if Any) --Transaction type, Export or High Seas Sales --Gross Total --Major Commodity j) Annexure J (6): Supplier wise Transactions under CST Act This Annexure has been newly inserted and following details are asked - --Customer Name --TIN of Customer (if any) --Transaction type, OMS purchase, Direct Import, High Seas purchase, Purchase U/s. 6(2) & Branch transfer --Any other cost of purchase. --Gross Total k) Instructions - Following new instructions have been added Instructions Nos. 19, 24, 25 and 39 have been added. 7

8 l) Validation buttons In all parts, Schedules & Annexure Press for Validation key is kept at the bottom rather than at top. 4. Conclusion: The department has improved the form by: --Removing some of the ambiguities in the audit report --Drafting a good looking format (as compared to earlier format) --Asking specific information what they expect in audit report --Collecting details in Annexure J which will help us in case of refunds or so called speedy refunds. However, it has created certain ambiguities mainly in reporting of sales/purchases and ratio. We hope that in future version of the form will be confusion free. 8