Works Contract. T O T Dealer. V A T Dealer. Govt. & L A. Actual Deduction. Standard Non Govt. & LA. Deduction. Builders

Transcription

1 APVAT ACT CST ACT PRACTICAL ASPECTS AC GANGAIAH CHARTERED ACCOUNTANT 1

2 Contents Particulars Slide No TYPES OF TRANSACTIONS 3-5 Presentation ti Scope 6 Types of INPUT 7-8 Dimensions to be considered 9 Methods of ADJUSTING INPUT TAX SPECIAL ECONOMIC ZONE SALES TAX DEFERMENT 20 Accountant s Role in claiming Input Tax A Practical Approach ADVANCE RULING FACILITY and CST CST Act Increase rate of ft tax of fd Declared goods 30 Thanks 31 2

3 Concept of Sale Sale Value Added Tax 4(1) & (3) Every Dealer registered or liable to be registered Pay tax on the sale of goods In the State of Andhra Pradesh At the rates specified in the schedules Subject to Input Tax Credit U/s. 13 Interstate Sale (CST Sale) Interstate Sale or export or import Occasioning movement of goods from or to outside State Deemed Sale Casual Dealer 4(6) Every casual dealer on sales in the State Pay tax at the rate specified in the respective schedules Tax on Works Contracts 4(7) Every dealer executing works contract shall pay tax as per section 4(7) and rule 17 Six options are available Basing on the contractor Basing on the contractee Not on pure labour contracts

4 Charge to Tax - 2.8% Works Contract V A T Dealer e T O T Dealer Deduction Composition Actual Deduction Govt. & L A Standard Deduction Non Govt. & LA Builders

5 Charge to Tax Right to use Goods 4(8) Commercial Name - Lease Every VAT dealer who transfers the right to use goods On the total amount realized or realizable Tax payable as per the respective schedules Dispute Deemed Sale Vrs Service ITC available on purchase and user can take ITC on VAT on above items Right to use Goods -Film Producers 4(8A) of 2009, Dt: ) 4(8A) (Act No: 4 The Film producer can opt for payment of tax under composition As per the rules prescribed Once the producer pays the tax the exhibitor and others are nor required to pay tax Charge on Hotels 4(9) Hotel having star status more than 3 Or annual total turnover more than 1.5 Crores 14.5% on taxable turnover ITC is available For others No ITC available Entry tax in respect of goods quashed by HC and not in respect of vehicles.

6 Presentation Scope What is In? Dimensions i that t need to be considered for Input Tax Purchase of goods on Tax Invoice other than goods listed in Schedule VI Used for business activities Not listed in negative list as specified in Rule 20 APGST paid on the goods on Claim of ITC Notional ITC as specified at present on purchase of pre owned vehicles and anticipated on SIM and Rechargeable Coupons What is Out? No distinction i i between capital goods and tradable goods Eligible to claim ITC in respect of transactions considered as deemed purchase such as lease, works contract AR 65/2007 dt Suninfraa Impact of use of common Input for taxable and exempted sales Impact of specific goods for specific sales Impact of Purchase of goods from Unregistered dealers Accounting standards Vs Purchase Tax treatments of purchase 6

7 Types of Inputs Claim Of ITC Purchase of Inputs Intra, inter State and Imports The purchase may be Intra State Purchase, Inter State Purchase and Import Purchase h includes deemed d purchase No distinction between capital or tradable purchase ITC available for Intra State Purchase only - ITC not available in the case of inter state dispatch otherwise than CST Sale as its Purchase from Unregistered dealers taxable in respect of usage in exempted goods Claim of ITC nature of transactions Exempted transactions 2(14)- aggregate sale prices of Non-taxable transactions Including Branch Transfers and Consignment transfer Exempted sales and branch transfers are to be valued at fair market values Fair market Value 2(15) value - ordinarily fetch in open market on the date of the transactions. Proportion system to be followed for common inputs used in taxable sales and exempted turnover and rules prescribed to be followed Sales 95% or more entire ITC can be claimed sales <5% -No ITC 7

8 Methods of use of inputs In Manufacturing Use in the manufacture (i) As raw material, consumable, assemblies and packing material (ii) As capital goods used for manufacture (iii) Deemed purchase services utilized (iv) Goods used in connection with business activities Tradable Sales As part of stock kept for sale whole sale or retail sales in Local or Inter State Sales including exports Stocks purchased for dispatch to other areas other AP not eligible for ITC Purchase of goods on behalf of resident principle no ITC ITC in excess of 5% for exempted transactions branch and consignment transfer outside the State 8

9 Dimensions to be considered Intra State Purchase Purchase of Inputs On Tax Invoice Used in the business activates in taxable transactions - CCT s Ref.No: /A.R.Com / 83 / Dated NFCL Goods received in the concerned month Not in restrictive list Sales Tax Credit in respect of goods as on Notional ITC Used in Business Process Used in Business activates ITC claim of expansion against ongoing activities iti need not be compared to item to item of sale Exempted Sale Vs Taxable Sales Exempted goods Exempted transaction To be valued at Fair Market Price Not in restricted list U/Rule 20 The list enclosed if the items sold later without claiming ITC resale is not taxable last lines of Rule 20 (2) 9

10 Rule 20 of AP VAT Rules All automobiles including tyres and tubes, spare parts and accessories Fuels used for automobiles or for captive power plants; Air conditioning units other than used in plant and laboratory, restaurants or eating establishments, For personal consumption. Any goods purchased for free gifts otherwise than by way of business practice. Any goods to employees including any residential accommodation. crude oil used for conversion Natural gas, naptha and coal any input used in construction earth moving equipment such as bulldozers, JCB s, and poclain etc., and parts and accessories generators and parts and accessories thereof used for captive generation rice purchased by Food Corporation of India from VAT dealers or farmers or farmers clubs or associations of farmers in the State. rice purchased by Andhra Pradesh State Civil Supplies Corporation Ltd., from the Depots of Food Corporation of India, in Andhra Pradesh or from any other VAT dealer in the State. refrigerators, coolers and deep freezers purchased by Soft Drink Manufacturers not for use in their manufacturing premises. any goods purchased and used as inputs in job work PDS Kerosene purchased by wholesale dealers for the purpose of supplying to Fair Price Shops. Furnace Oil, LSHS and other similar fuels, used in the furnaces and boilers of the factories or manufacturing or processing units. Restriction of ITC for computation of VAT 10

11 MAXWORTH PLYWOODS Pvt. Ltd Vs State of Andhra Pradesh 51 APSTJ 147 Both in the order of assessment, and in the counter affidavit, the 1 st respondent admits that there is no specific rule providing for the manner in which he had assessed the petitioner to tax. Under Article 265 of the Constitution of India no tax can be levied or collected except by authority of law and in the absence of a procedure, similar to the one adopted by him, being prescribed by law it is not open to the assessing authority to contend that a particular mode should be adopted, or that the procedure adopted by the assessee is not rational.

12 Notional ITC Without TAX Invoice 20(3a) Pre owned Cars (i) Purchase of pre owned cars from Non-VAT dealer (ii) Sold later (iii) Notional Input allowed on purchase price Output Tax should not be less than the ITC (iv) if less, ITC be restricted to Output Tax If Repairs Undertaken Sale Value less spares Parts should less than Purchase Price ITC on spares allowed cost repairs in excess of Purchase price and spares will be taxed at rate prevailing. A.R.Com/ 64/200 dt in the case of Jasper Industries Private Limited Government Memo No / CT.II (1) / Dt:3/8/2009 Proposes notional ITC for the seller of SIM and Rechargeable Coupons directs CCT to take appropriate action. CCT to propose necessary modifications in enactment and Rules Dispute pending before HC Advance Ruling Rejected - AR No.11/2007 dt Sri Vasudeva Enterprises - STAT remanded d TA No. 285/2010 dated 1 st Dec 2010

13 Sales Tax Credit Goods as on To be claimed in 6 Goods held as on Purchased in year Paid APGST on the stock Claim in VAT 118 Certificate in VAT 119 Applicable to all goods in A.P. Installments from August 2005 Proportion of tax taxable goods vs exempted goods applied by department STAT approved

14 EXEMPTION OF SALE TO UNITS IN SPECIAL ECONOMIC ZONE LOCAL SALE TO THE UNITS IN ECONOMIC ZONE LOCAL SALE TO DEVELOPER, CO-DEVELOPER, CONTRACTOR OTHER THAN MOTOR VEHICLES NO PROCEDURE SPECIFIED FOR PURCHASE OF PLANT, MACHINERY AND EQUIPMENT BY SEZ IN LOCAL VAT ACT Advance Ruling in Shapoorji Pallonji & Co., Ltd, - A.R.Com/ 59/2007. Dated Ref:- CCT s.ref.no: PMT /P&L/ A.R.Com /2005, Dated by obtaining confirmation from the unit, copy of the certificate issued by the competent authority of SEZ to prove that the unit is registered in SEZ, CST PURCHASE (INCLUDING INTERSTATE WORKS CONTRACT) SUBJECT TO PRODUCTION OF FORM I AND REGISTRATION IN CST CERTIFICATE

15 CONSTRUCTION OF SEZ - WORKS CONTRACT C -Definition Article (A) of Constitution Section 2 (28) AP VAT - Sale- Explanation VI -goods are supplied or used in the execution of a works contract Section 2 (45) - the building construction, manufacture, processing, fabrication, erection, installation, laying, fitting out, improvement, modification, repair or commissioning of any movable or immovable property Advance Rulings in A.R.Com/ 45/2008 Dated in Ref:- CCT s.ref.no: PMT/P&L/A.R.Com/2005, Dated in the case of M/s Architectural Aluminium Systems any works contract or other sales exempt

16 PURCHASE OF MATERIAL DURING DEVELOPING SEZ WORKS CONTRACT SALE TO DEVELOPER (WORKS CONTRACT, LEASE OF THE EQUIPMENT DEEMED SALE) IS EXEMPT PURCHASE OF MATERIAL BY DEVELOPER CO-DEVELOPER CONTRACT IS EXEMPT PURCHASE OF MATERIAL UN REGISTERED DEALER BY CO-DEVELOPER/ CONTRACTOR EXEMPT NO FORM / PROCEDURE IS PRESCRIBED Evidence required SALE OF UNIT EXISTS HENCE Section 4(4) has no application CST Purchase exempt against Form I

17 CST PURCHASE OF MATERIAL BETTER TO PURCHASE To specified in CST THE MATERIAL IN THE Registration Certificate NAME OF DEVELOPER PURCHASER OF MATERIAL TO BE ACCOUNTED AND AS PER THE LANGUAGE TO BE GIVEN TO THE OF LETTER OF DEVELOPMENT CONTRACTOR FOR INCORPORATION COMMISSIONERATE FORM THE SERVICES OF I CAN BE GIVEN BY CO- INCORPORATION IS NOT DEVELOPER / LIABLE SERVICE TAX IS CONTRACTOR EXEMPT FORM I IS ISSUED TO THE DEVELOPER

18 TDS PROVISIONS APPLICABLE TDS PROVISIONS APPLICABLE TO WORKS CONTRACT APPLIES NO EXEMPTION IS GIVEN TDS PROVISIONS OF SECTION 194C IN RESPECT OF PAYMENT TO CONTRACTOR - APPLICABLE OTHER TDS PROVISIONS IN RESPECT OF ACTIVITIES DURING CONSTRUCTION APPLICABLE Advance Ruling in A.R.Com/ 104 /2007. Dated: in Ref:- CCT s.ref.no: PMT/P&L/A.R.Com/2005, Dated in the case of Soundarya Decorators Private Limited and in A.R.Com/ 1/2009 Dt in the case of M/s Dura Line India Pvt. Ltd specified applicability of TDS in VAT.

19 CLAIM OF INPUT TAX CREDIT - NO WORKS CONTRACT IS A DEEMED PURCHASE. THERE IS NO DISTINCTION BETWEEN PURCHASE AND DEEMED PURCHASE IN ARTICLE 366 (29A) OF CONSTITUTION OF INDIA DEEMED PURCHASE FOR PURPOSE OF THE BUSINESS AND HENCE THE SAME CAN BE CLAIMED AS INPUT TAX CREDIT BROUGHT TO EXEMPTED GOODS SCHEDULE I NO ITC A.R.Com/ 59/2007. Dated Ref: Ref:- CCT s s.ref.no: RefNo: PMT/P&L/A.R.Com/2005, Dated Shapoorji Pallonji & Co., Ltd -Under clause (d) of Section 13 (5), no input tax is allowable on exempt sales. Allowable in Excise from treating sale as export in excise In some states, sale to SEZ treated as zero rated sale ITC eligible in such states

20 Claim ITC Vs Sales Tax Deferment Normal procedure e Tax to be paid = Output tax Input taxes of all the products of tax period One calendar Month. No restriction to claim ITC against any Output Tax in normal Circumstances Rule 67(3) specifies es Output tax Input Tax Department specifying the output taxandinputtaxof and deferment business or unit should be taken in isolation and deferment to be claimed Rejected by HC in Principle

21 Documentation Process - ITC Input Tax Credit cannot be done in isolation to the business processes A structured approach in claiming ITC must be used ITC in respect of usage in business activities. Accountants should Keep tax paid on local purchases, Out Put Tax collected and compute the VAT Payable Poor engagement of other departments may lead to time delays & errors Local Purchase of goods from Registered Dealer On Tax Invoice as specified in VAT Act Received by the dealer and accounted in the books Out Tax on purchase specified in the Invoice Compute the ITC separately for specific goods common goods Take ITC in respect of all purchases in month Add Tax on Purchase from Unregistered dealers reduce the ITC for exempted transactions Reduce from output tax payable. 21

22 An Example Accounting Documents Purchase Requisiti on Ordering Receipti ng Invoice Processi ng Accounti ng Payment Departments Various teams Procurement, Administration, HR, Marketing Respective teams Respective teams, Finance & Accounts Finance & Accounts Finance & Accounts Accounting Significance Standing instructions to vendors Accrual for orders made but supplies not received Advances Vendor contracts & agreements Accrual for supplies received but invoices not received Inventory valuation Customs, Excise, ST compliances Current liabilities With-holding taxes & other tax treatments Sub-ledgers matching with GL Prepaid expenses Bank balances Payment of Output Tax Input Tax = VAT properly Reconciliation & confirmation Fixed Assets & Depreciation Recoverable items - ITC Balances in accounts are the outcome of business processes 22

23 An Example Accounting Documents Sales Sales order Receipti ng Invoice Processi ng Accounti ng Payment Departments Various teams Procurement, Administration, HR, Marketing Respective teams Respective teams, Finance & Accounts Finance & Accounts Finance & Accounts Accounting Significance Standing instructions to Bulk Purchaser and followup with other purchaser Accrual for orders made but supplies not received Advances Vendor contracts & agreements Accrual for supplies sent but invoices to issued inventory valuation Customs, Excise, ST compliances Current liabilities With-holding taxes & other tax treatments VAT received Sub-ledgers matching with GL Prepaid expenses Bank balances Payment of Output Tax Input Tax = VAT properly Reconciliation & confirmation Fixed Assets & Depreciation Recoverable items out put Balances in accounts are the outcome of business Tax processes 23

24 Computation of VAT Aggregate Output taxes of all transactions in tax period calendar month Less Input taxes to be claimed during tax Period Net VAT payable Non-composition Works Contract ITC can be claimed. ITC claim even for lease transactions Hotels 3 STAR above and total turnover with 1.5 Crores taxable turnover may be less than 1.5 Crores -can claim ITC - Taxable able turnover taxed at 14.5% - ITC available ITC can be claimed for entire organization i filing single returns - A.R.Com/12/ Dated in the case of Heritage Foods (I) Ltd supported by HC Judgment in Maxworth If any credit left over in preceding tax period Any TDS certificate in the case of Works Contract or any other transaction to be specified

25 Purchase of Inputs Accounting Treatment Accounting Standard 2 specifies the cost up to place of location excluding the taxes to be claimed or deducting other post purchase deductions or purchase returns or any incentives given Section 145A IT Act includes taxes for Valuation and post purchase expenditure Purchase Price - S. 2(25) Valuable consideration paid or payable up to delivery Does not include post purchase expenditure Reconciliation required if to be submitted to AO 25

26 Taxable Sales Local and CST An Example Practical Approach Exempt ed Transac tions - Exports Taxable Sales and Zero Rated sale Output tax of All sales Receipti ng Eligible ITC VAT Payable In Total turnover Local turnover+ CST sales + Exports = eligible for total ITC Particulars of purchases made and ITC on the purchase Filing Return with Payment Exempted turnover branch transfer, consignment transfer, gifts and lost in accident (insurance may come) Total Out Put Tax ITC for (sales + for branch or consignment transactions in excess of 4%+ notional ITC ) = VAT TDS excess Set off of earlier month available. Payment of VAT Amount eligible for deferment Proper records for ITC and Computation of VAT 26

27 Disputes Likely Service Vrs Sale Software, Lease and works contract - Software Classification of goods electronic or otherwise Composite contract of sale or service Issue coming under purview of both acts Broadcasting entertainment Cable TV Service lease of rights to broadcast Revised return after 6 months Imposing penalty Advance Ruling available Interstate transactions pre determined sales sales in one state not acceptable to other state t CST Appellate Tribunal Exports for want of clear cut documents. Advance Ruling not available

28 ADVANCE RULING BY Authority for Clarifications and Advance Rulings s.67 & r.66 CCT to constitute authority 3 Members not below Joint Commissioners Can give ruling on any matter concerned with the implementation of VAT Act Not in respect of other enactment administered by CT Department Have specific power to review Binding on the officials other than CCT CCT can refer any matter to the Authority or send the matter for review The ruling appellable to STAT Assessment made on the basis of Advance Ruling Appellabe to STAT not to First Appellate Authority The issue sought to be not pending on any authority or court No proceedings of the act might have been started To filed in Form 570 Institution fee of Rs.1000/- in favour of CCT or Challan specifying other fee. Applicant or CCT can file review petition with other matters or other material or with the case laws or appeal to STAT.

29 Appeal to Central Sales Tax Appellate Tribunal s.6a of CST Act Presently in New Delhi Presently administered by (Authority for Advance Authority for Advance Ruling under IT Act) Rulings Under IT Act. In the case of Intra or Inter Other States can be made State Transactions only parties to the appeal or After STAT judgment both other States can implead by Revenue and appellant themselves If two issues one to HC Decision for the State in and another to CST which sale taken place and Appellate Tribunal with direct other State to refund dispensing petition for the taxes collected original i order SLP may be filed No format prescribed General Petition type backed by affidavit

30 Central Sales Tax Increasing rate of tax of declared goods In clause (a) of Section 15 of Central Sales Tax Act, 1956, for the words four percent, the words five percent have been substituted. Therefore now Section 15(a) would read as: Every sales tax law of a State shall, insofar as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely (a) the tax payable under that t law in respect of any sale or purchase of such goods inside the State shall not exceed [five] per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage Thus, the ceiling limit of taxation on declared goods has been raised from 4% to 5%. No Necessity to change at the time of thinking GST Repealing Article 366 (29A) Request to define service and redefine goods in Article 366

31 Questions, Suggestions THANK YOU 31