Retention and Disallowance of Set-Off under MVAT (Indirect Tax Refresher Course)

Transcription

1 Retention and Disallowance of Set-Off under MVAT (Indirect Tax Refresher Course) CA NEERAJ MENON - PARTNER MZSK & ASSOCIATES Mumbai Pune New Delhi Aurangabad Hyderabad Gurgaon Pune Office Level 3, Riverside Business Bay, Wellesly Road, Near RTO, Pune , INDIA

2 Topics

3 General Rules of MVAT

4 General Rules of MVAT General Rule: Set Off is available on all purchases (Trading, Expenses & Capital Assets) made from a dealer registered under MVAT Act who issues TAX INVOICE in a prescribed format showing VAT separately. However, there are few exceptions to this General Rule: Rule 52A: Reduction of Set Off Rule 53: Reduction of Set Off Rule 54: Non-Admissibility of Set Off

5 Practical Issues: Rule 52 A

6 Mega Unit: Scenario 1: Below is a pictorial presentation of the case under consideration: MEGA UNIT 1 Sales are effected by a Mega unit located in Maharashtra to its customers situated in Maharashtra. CUSTOMER 2 3 WITHIN MAHARASHTRA Customers sells the goods within Maharashtra. OUTSIDE MAHARASHTRA Customer sells the goods outside Maharashtra In this scenario, both the Mega Unit as well as the Customers used to claim setoff of tax paid on purchases.

7 Rule 52 A: After insertion of this Rule (w.e.f 17 March 2011), a dealer purchasing goods from Mega Unit holding valid Identification Certificate under the Act shall claim the input tax credit towards the goods purchased from Mega unit: Sr. No. Particulars Input tax Credit 1 Goods sold outside Maharashtra 2 Goods sold within Maharashtra Only to the extent of Taxes paid / payable under CST Act. The taxes paid on the purchases of said goods

8 Mega Unit: Approval Procedure 2009 Manufacturer applies for Mega Unit Project. At the same time promises to fulfill the criteria, as required under Packaged Scheme of Incentives Actual production got started Now in the year 2014, the applicant has met with criteria, so set, and then applies for the Eligibility Certificate and gets Identification Certificate with effect from 2012 i.e. the year of production. 2015

9 Practical Issue: Mega Unit: Scenario 1: How does the dealers claim setoff of goods purchased from Mega Unit for the period commencing 2012 considering provisions of rule 52A of Maharashtra Value Added Rules, 2005?

10 Practical Issues: Rule 53(6)

11 Rule 53 (6): Claim of setoff in case of Hotels In case of dealers, whose total receipts on account of sale are less than 50% of total gross receipts then set off is restricted to corresponding purchases, which are sold within 6 months from the date of purchase. In case of hotels and clubs not being covered under composition scheme as notified by State Government under Section 42 vide notification No. VAT-1505/CR/Taxation-1, dated 1/06/2005, in addition to set off on goods sold above, the set off will be available on capital assets and consumables pertaining to kitchen and service of foods and drinks. What happens in a case of a Hotel hit by provisions of Rule 53(6) and opting to pay by way of Composition Scheme?

12 Practical Issues: Rule 54 (g) & (h)

13 Rule 54 (g) & (h): Rule 54(g) prohibits set off pertaining to purchases effected by Employer by way of Works Contract resulting in immovable property other than Plant & Machinery. Rule 54(h) states that set-off relating to purchases of any goods effected by a dealer used in erection of immoveable property other than plant machinery shall be inadmissible.

14 Practical Issues: Rule 53(3)

15 Rule 53(3): Rule 53(3) provides for reduction of set-off by 4% in case of taxable goods sent to any other State in India as branch transfer/consignment transfer For the purpose of calculating purchase price under the corresponding Rule 53 (3), method has been prescribed as the ratio of : Value of good dispatched incl Excise / Sale price of other goods

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