REVENUE FROM VAT IN PUNJAB AND HARYANA

Transcription

1 112 CHAPTER-IV REVENUE FROM VAT IN PUNJAB AND HARYANA In the states of Haryana and Punjab, value added tax came into force w.e.f and respectively. In both these states, the Assessing Authorities have been empowered to assess the cases as per provisions contained in their respective VAT Act/ Rules. In both the states under the VAT Act, tax is charged at each stage of sale on the value added to the goods. In practice, the dealer selling the goods collects tax on the full price at which he sells the goods whether to a consumer or to a dealer. At the end of the tax period, he reduces from the tax so collected by him, the tax which has been charged from him at the time of purchase. Net tax payable by a taxable person for a tax period is tax charged or chargeable in respect of sale or purchase of goods minus VAT paid or payable on the purchase of taxable goods including I.T.C. carried forward from previous tax period. System of Assessment and Collection of VAT tax under the Punjab and Haryana VAT Act/Rules Registration No person other than a casual trader, who is liable to pay tax under the Act can carry on business unless he is registered under the Act. A person whose gross turnover exceeds taxable quantum is required to pay VAT on taxable turnover.

2 113 Taxable quantum under the VAT Act is as under: For registration as TAXABLE PERSON Any person who imports taxable goods for Re. 1/- sale or use in manufacture A person who receives goods on Re. 1/- consignment/ branch transfer basis A person liable to pay purchase tax Re. 1/- A manufacturer Rs. One Lac A person who is running a hotel/ Rs. Five Lac restaurant A person who is running a bakery Rs. Ten Lac In relation to voluntary registration Rs. Five Lac In relation to any other person Rs. Fifty Lac There is a similarity for registration under the Punjab VAT Act and Haryana VAT Act in the case of importer and exporter (i.e., Re. 1/-) but other than importer and exporter taxable quantum for the dealer under the Haryana VAT Act is Rs. 5 lac. Filling of Returns and Payment of Tax Under Punjab VAT Act/Rules, a taxable person/ registered person is required to file quarterly self-assessed return within 30 days of each quarter along with the proof of payment of tax paid in the Government Treasury, whereas under Haryana VAT Act/Rules it is last day of the month. In addition to quarterly returns, in Punjab every taxable person is required to file an annual statement along with annual accounts by 20 th November, whereas in Haryana every taxable person is required to file an annual statement along with annual accounts by 30 th November.

3 114 There is no provision of revised returns under the Punjab VAT Act, but in case of error it can be rectified while furnishing the next returns. On the other hand, there is a provision of filing revised returns under the Haryana VAT Act. Assessment of Tax Under Punjab VAT Act the designated officer (E.T.O.) is required to scrutinize every return filed by the taxable person/ registered person. If it is found that a less tax has been paid than the tax actually payable, an intimation is sent to the person specifying the sum payable and such intimation shall be deemed to be a notice of demand. If the person does not comply with the notice, the designated officer is required to refer the matter within a period of fifteen days for audit. There is no limit of gross turnover for the purpose of assessment in Punjab VAT Act/Rules, whereas in Haryana VAT Act/Rules there is a limit of gross turnover for the purpose of assessment. The assessment involving up to Rs. 50 lac can be framed by Assistant Excise and Taxation Officer (A.E.T.O.). The assessment involving more than Rs. 50 lac can be framed by E.T.O. under the Haryana VAT Act/Rules. The post of A.E.T.O. does not exist in Punjab. Audit The audit under the Punjab VAT Act/Rules is selective under the direction of Excise and Taxation Commissioner (E.T.C.) Punjab or by the audit wing, whereas in Haryana the audit is mandatory. It is conducted in the cases where gross turnover exceeds Rs. 5 crore in a year or I.T.C. claimed exceeds Rs. 10 lac or refund claimed in a year Rs. 3 lac in general and Rs. 25 lac due to exports / interstate sales.

4 115 Refund A person is required to make an application for refund of an amount of tax, penalty or interest to the designated officer. If the designated officer is satisfied that claim is admissible, he will sanction the refund. Under Punjab VAT Act/Rules if the amount does not exceed Rs. 1 lac the designated officer can sanction the refund. However, if the amount of refund exceeds Rs. 1 lac, the designated officer is requested to submit the case along with his recommendations to the A.E.T.C. of the district for orders, who shall record the orders of sanctioning the refund. On the other hand, the powers to issue refunds under Haryana VAT Act/Rules have been divided under four authorities differently. An E.T.O./A.E.T.O. is allowed to sanction refund up to Rs. 50,000, District Incharge is allowed to sanction refund up to Rs. 5 lac, Range In Charge is allowed to sanction refund up to Rs. 10 lac, Commissioner is allowed to sanction refund up to any amount. Time to Issue Refunds Under the Punjab VAT Act/ Rules the amount of refund is refunded within 60 days from the receipt of application. Where the amount required to be refunded is not refunded within 60 days from the receipt of application, a simple interest at the rate of half per cent per month on the said amount shall be payable to such person from the date, immediately following the expiry of the period of 60 days to the date of refund. Whereas under the Haryana VAT Act/ Rules, the amount of refund is refunded

5 116 within 30 days from the receipt of application. In case of failure the department will be liable to issue refund along with interest as per law but E.T.C. is empowered to hold the refund up to any period without the payment of interest. Penalty for Goods in Transit The penalty for the ingenuine documents is 30% of the value of the goods and 50% of the value of the goods for not reporting at the ICC is imposable under the Punjab VAT Act/Rules, whereas the penalty under the Haryana VAT Act/Rules is three times of the tax or maximum up to 30% of the value of the goods. Penalty for Suppression of Tax Under the Punjab VAT Act/Rules penalty for suppression of tax is 200% of the tax suppressed, whereas it is 300% of the tax suppressed under the Haryana VAT Act/Rules which is very high. Penalty for Offences not Described Anywhere in the Act Penalty which is not described anywhere in the Act for certain offences like not keeping the account books at the business premises or not showing compliance to the notices issued by the Authority. The penalty extending to Rs. 1,000 to Rs. 10,000 can be imposed under the Punjab VAT Act/Rules, whereas for the same offences the penalty of Rs to Rs. 2,000 can be imposed under the Haryana VAT Act/Rules which is much less as compared to Punjab VAT Act/Rules.

6 Comparative Study of Growth Rate of Revenue from VAT/Sales Tax in Punjab and Haryana Net revenue generated from VAT/Sales Tax by the states of Punjab and Haryana during the period to is presented in Table 4.1. TABLE 4.1 Revenue Generated from VAT/Sales Tax in Punjab and Haryana States during the Period to (Rs. in crore) YEAR Punjab Haryana Compound Growth Rate during the Period to Source: Statistical Abstracts of Punjab and Haryana, Various issues. 117 In Punjab, State's income from VAT / Sales Tax had increased from Rs crore in the year to Rs crore in During the eight years period from to in Punjab the growth rate of revenue from VAT/Sales Tax was per cent, whereas in the case of Haryana, it increased from Rs crore to Rs

7 crore during the same period exhibiting a growth rate of per cent. It is clear from the above analysis that the growth in revenue in Haryana state is higher in comparison to Punjab state. A comparative study of revenue of these two states has been undertaken to know the reasons for higher growth in Haryana state in comparison to Punjab state. It is evident from table 4.2 that the growth of revenue from Central Sales Tax in Haryana has been higher as compared to Punjab. Table 4.2 Revenue from Central Sales Tax in Punjab and Haryana Year Income from CST in Punjab (Rs. in crore) Income from CST in Haryana Growth Rate Source: Survey Report Mahatma Gandhi State Institute of Public Administration, Punjab The higher growth of CST in Haryana has been due to rapid industrialization which contributed more revenue as Central Sales Tax on inter-state sales. 118

8 119 The other major factor for higher growth of revenue in Haryana is revenue generated by its Excise and Taxation Department during assessments framed specially during the period to The data regarding revenue generated from assessments under VAT in the states of Haryana and Punjab during the said period is presented in Table 4.3. Table 4.3 Revenue from Assessments under VAT in Punjab and Haryana (Rs. in crore) Year Preassessment Voluntary Payment by Dealers Punjab After Assessment Revenue Generated by the Department Preassessment Voluntary Payment by Dealers Haryana After Assessment Revenue Generated by the Department Total Source: Survey Report Mahatma Gandhi State Institute of Public Administration, Punjab. It is clear from the above table that the revenue earned after assessment in Haryana state was about ten times of the revenue generated by the Punjab state during the period to This has been due to greater number of assessment cases finalized in the state of Haryana as compared to Punjab. Haryana state fixed criteria for the scrutiny of VAT/CST cases from the year wherein all dealers with turnover of more than Rs. 6 crore in a year and another 12 categories of

9 120 assesses were included in the scrutiny list. But no such criteria for scrutiny of VAT cases has been fixed in Punjab state. This could be the reason contributing towards meagre revenue realization after assessment in the state of Punjab. With these provisions in the VAT rules, larger number of assessments are being finalized in Haryana and substantial revenue is being generated from these assessments. The data pertaining to such assessments in both the states under study is presented in Table 4.4. Table 4.4 Assessments framed in the States of Punjab and Haryana Year No. of Assessments Framed Punjab State Additional Demand (Rs. in crore) No. of Assessments Framed Haryana State Additional Demand (Rs. in crore) ,58, ,86, , ,59, , ,75, Source: Survey Report Mahatma Gandhi State Institute of Public Administration, Punjab Substantial revenue of Rs crore was generated from assessments under Haryana VAT Act during the period to in Haryana state, whereas in Punjab a revenue of Rs crore only was generated from assessments during the same period (Table 4.3). In Haryana revenue from additional increased during post-vat period from Rs crore in to Rs crore in Whereas in Punjab it decreased from Rs crore in

10 to Rs crore in and again increased to Rs crore in the year In Haryana, revenue from additional demand increased during the post-vat period mainly because powers of the assessing authorities to frame the assessments were not restricted. Revenue from additional demand has increased substantially during the post-vat period in both Haryana and Punjab which shows that assessment work has assumed greater importance after the implementation of VAT Act. Refunds The data showing the position of refunds allowed to the traders by the Excise and Taxation departments in the states of Punjab and Haryana during the period to is highlighted in Table 4.5. Table 4.5 Refunds Allowed to the Traders by the Excise & Taxation Departments in Punjab and Haryana (Rs. in crore) Year Refunds Allowed in Punjab State Refunds Allowed in Haryana State Source: Survey Report Mahatma Gandhi State Institute of Public Administration, Punjab 121 Although Haryana earned higher growth of revenue as compared to Punjab, yet there was substantial increase in the amount of refunds allowed in Punjab state during the years and The amount of these refunds is greater in

11 122 the case of Punjab than Haryana during the period. There was also substantial increase in the amount of refunds allowed in Punjab state during and in comparison to the refunds allowed in The substantial and sudden increase of refunds in the years and demands an investigation to find out the cases of irregular refund of Input Tax credit or inadmissible refunds. SALES TAX/VAT REVENUE FROM DIFFERENT GROUPS OF COMMODITIES An attempt has been made to examine the growth of sales tax/vat revenue from different groups of commodities, categorized according to their elasticity. For this purpose, the item-wise NSS consumption expenditure data of 60 th Round (2004) has been used. Demand elasticity for different commodities has been worked out from the NSS consumption expenditure data and categorized into four groups, viz. commodities with elasticity <1, >1 & <2, 2 and unclassified. It may be mentioned here that the item-wise data of sales tax/vat corresponded, more or less, to the items listed in NSS consumption expenditure survey. However, where such correspondence was not found the appropriate proxies were used. 5 The sales tax/vat items which were not mentioned in NSS consumption expenditure survey have been categorized as unclassified. 6 5 Appendix Appendix 4.2 & 4.3

12 123 It may be noted that the total sales tax/vat collection did not tally with the total of commodity-wise sales tax collection. This was obvious because of the omission of some commodities. Therefore, in order to estimate the item-wise sales tax/vat, the percentage shares of actual sales tax collections from different commodities were used. SALES TAX/VAT REVENUE FROM DIFFERENT GROUPS OF COMMODITIES IN PUNJAB The growth rate of sales tax/vat from different groups of commodities in Punjab is shown in Table 4.6. If we consider the growth rate for the first period ( to ), the highest growth rate of per cent has been observed in respect of commodities with elasticity >1 and <2 followed by those having growth rate of per cent with elasticity 2. In the second period ( to ) the highest growth rate of per cent has been observed in respect of commodities having elasticity >1 and <2 followed by those registering growth rate of per cent with elasticity <1. The highest overall growth rate of per cent has been observed in respect of commodities having elasticity >1 and <2 followed by those showing growth rate of percent with elasticity 2.

13 Table 4.6 Growth of Sales Tax / VAT Revenue from Different Groups of Commodities in Punjab (Rs. in crore) Year Commodities with Elasticity <1 >1 & < (46.96) (46.83) (46.97) (45.46) (46.96) (46.96) (46.25) (46.76) (46.61) (45.27) (27.66) (28.31) (28.32) (28.37) (28.41) (28.49) (28.52) (28.67) (28.68) (28.65) (20.99) (21.00) (21.20) (21.36) (21.44) (21.50) (21.52) (21.52) (21.47) (20.92) Unclassified Goods (4.39) (3.85) (3.51) (4.81) (3.19) (3.04) (3.73) (3.05) (3.24) (5.15) Total Sales Tax /VAT Growth Rate (46.79) (46.82) (46.75) (46.96) (46.84) (46.98) (29.00) (29.00) (29.15) (29.03) (29.11) (29.20) (21.48) (21.47) (21.51) (21.52) (21.52) (21.53) (2.73) (2.72) (2.59) (2.49) (2.53) (2.29) Growth Rate Overall Growth Rate Note: The figures given in parentheses denote percentage shares of sales tax/vat for different groups of commodities. 124

14 125 SALES TAX/VAT REVENUE FROM DIFFERENT GROUPS OF COMMODITIES IN HARYANA The data showing growth of sales tax/vat from different groups of commodities in Haryana is presented in Table 4.7. However, number of commodities classified in Haryana are less as compared to Punjab. If we consider the growth rate for the first period ( to ) the highest growth rate of per cent has been observed in respect of commodities with elasticity <1 followed by those having growth rate of per cent with elasticity 2. The growth rate in respect of commodities with elasticity 2 is justified but it does not seem to be desirable in respect of less elastic goods. In the second period ( to ), the highest growth rate of per cent has been observed in respect of unclassified commodities followed by those registering growth rate of per cent with elasticity 2 and per cent having elasticity >1 and <2. It is clear from the table that the highest overall growth rate per cent has been observed in respect of unclassified commodities followed by those having growth rate of per cent those with elasticity 2. The higher growth rate of unclassified goods in Haryana can be attributed to the reasons that there has been tremendous industrial growth in the state; and after the implementation of VAT, the state government collected lumpsum tax from various industries as it decided not to make further classification of commodities.

15 Table 4.7 Growth of Sales Tax / VAT Revenue from Different Groups of Commodities in Haryana (Rs. in crore) Year (51.02) (55.67) (57.37) (58.71) (56.86) (55.58) (58.98) (59.00) (57.67) (55.84) Commodities with Elasticity <1 >1 & < (21.78) (21.84) (21.87) (22.03) (21.54) (21.40) (21.88) (21.93) (21.99) (22.06) (8.27) (8.31) (8.33) (8.48) (8.46) (8.46) (8.49) (8.46) (8.49) (8.68) Unclassified Goods (18.93) (14.18) (12.43) (10.78) (13.14) (14.56) (10.64) (10.61) (11.86) (13.43) Total Sales Tax /VAT Growth Rate (56.27) (57.22) (56.75) (53.41) (50.47) (48.44) (22.12) (22.16) (22.31) (22.31) (22.44) (22.64) (8.80) (9.01) (9.04) (9.04) (9.06) (9.09) (12.81) (11.61) (11.90) (15.24) (18.03) (19.83) Growth Rate Overall Growth Rate Note: The figures given in parentheses are percentage shares of sales tax/vat for different groups of commodities. 126

16 127 Tables 4.6 and 4.7 also reveal the percentage share of different groups of commodities in total sales tax/vat collections. As shown in Table 4.6, during the first period, the maximum contribution to sales tax/vat revenue in Punjab is made by the commodities with elasticity <1 between 45 per cent and 47 per cent followed by commodities with elasticity >1 & <2 with share between 27 per cent and 29 per cent. Commodities with elasticity 2 have contributed between 20 per cent and 22 per cent. However, during the second period, percentage share of commodities with elasticity <1 and 2 remains the same except few variations but the percentage share of commodities with elasticity >1 & <2 has shown an upward movement. As is clear from Table 4.7, during the first period, maximum contribution to sales tax/vat revenue in Haryana is made by the commodities with elasticity <1, i.e., between 51 per cent and 59 per cent followed by commodities with elasticity >1 & <2 with share between 21 per cent and 23 per cent. Commodities with elasticity 2 have contributed between 8 per cent and 9 per cent. However, during the second period, there have been very less fluctuations in percentage share of commodities with elasticity >1 & <2, and 2 but the percentage share of commodities with elasticity <1 has shown a slightly downward inclination. As already stated above contribution made by less elastic commodities in sales tax/vat collection is not justified. It may be noted that these percentages may not make much sense if it is realized that the number of commodities in

17 128 different groups may be different, thereby affecting the percentages materially. However, over the period, the changes in their percentage shares may be meaningful. Another finding emerging from the above analysis is that the existing provisions in the VAT Act/Rules of Punjab need to be reviewed to see whether additional revenue can be generated by making the desired amendments as have been incorporated by the state of Haryana in the VAT Act/Rules keeping in view the massive revenue generated in Haryana during the process of assessments.