Amendment in MVAT Act Vide Maharashtra Tax Laws

[Submitted by CA. Sachin Kumar,
Mumbai]

November 20, 2006

AMENDMENT IN MVAT ACT VIDE (MAHARASHTRA TAX LAWS (LEVT, AMENDMENT & VALIDATION) ACT 2006 W.E.F.20.06.06

·          In section 2 clauses 3(a) inserted to define 'Brand name'. Accordingly when used in schedule, it means, any name or mark (viz. symbol, label, monogram, signature) or any word or writing, whether registered or not, to indicate a connection between the product in course of trade and some person, with or without indicating the identity of the person.

·          Sec 42(3) which provided for payment of vat & 8% in case of work contracts, amended to provide separate rate in case of construction contracts (i.e. 5%) and 8 % in case of any other work contract, in both cases, after deducting from the total contract value total amount due to the sub - contractors. And for the purpose value of sub contracts means value of goods + tax paid on the same by the sub contractors or where tax is paid by way of composition by the sub contractor then the amount on which the tax is so paid.

·          Sec 51 dealing with the refund process and time amended. Now provisional refund concept deleted. However provision of bank guarantee kept.

·          Sec 86(5) substituted to permit dealers to maintain records of bills / cash memos in such electronic form as the commissioner may approve. This provision thus seeks to exempt dealers from keeping duplicate of counterfoils of bills / memos and from signing that.

MVAT RULES AMENDED AS UNDER vide notification STR-1506/CR-38/TAXATION-1 DTD. 08.09.06

·          In RULE 8, sub rule '12' added - provides for providing PAN at the time of making application for registration.

·          In RULE 10 sub rule '2' ADDED where by registering authority shall issue to every registered dealer a hologram in respect of each place of business to be affixed & prominently displayed at the entrance of the place of business

·          Clause 8(1)(c) deleted. Accordingly just because an organization becomes liable to pay CST, it won't become liable to get itself registered.

·          Proviso to sub section 2 of MVAT ACT provides that so long as the prescribed turnover limit is not reached, tax is not payable by the dealer. Section 8 of the act provides for the liability of the dealer to pay tax in case of   succession in the manner stated in sec 44(1)(a)(succession of an individual by legal representative or other in case of formers death - liability of deceased remains) & (b)(liability of a deceased dealer in case of discontinued business - liability of deceased remains) & 44(4)(transfer of business whole or part or change of ownership - dealer as well as successor remains liable in respect of VAT liability at the date of transfer)and also makes an exception to the proviso to sec 2 by stating that the proviso won't apply to the case of succession accordingly in case of succession even if upto the date of succession the turnover does not cross the  prescribed limit tax will be payable. Earlier, upon such succession , in terms of section 3(8), application was required to be made within 30 days of the succession for both the succession under 44(1) as well as 44(4). In terms of the amendment now, for succession under 44(1) period for application increased from 30 to 60 days.

·          Clause 8(1)(e) also deleted accordingly for change to a different local area now no need of obtaining fresh registration.

·          Clause 9(1) (C) providing for the date, registration will be effective in case a registration is in terms of 8(1)(c ), deleted consequent upon deletion of 8(1)(c ).

·          Clause 9(1)(d) changed by changing the period within which to make application in case of succession under 44(1), so made upon change in section 3(8).

·          Clause 9(1) (e) deleted consequent to deletion of 8(1) (e).

·          Additional copies of hologram will be issued by the registering authority in respect of all places of business same as the additional copy of registration certificate is issued.

·          Sub Rules 11(1),11(3) & 11(4) amended by deletion of word change of business to a different local area. So made consequent to deletion of 8(1) (e).

·          Earlier in terms of rule 19 a consolidated return was required to be filed. Now rule 19 amended to provide an option to file separate return in respect of any business place or business constituent. Applications to obtain permission to be made to the Jt. Commissioner sales tax headquarter II, MAHARASHTRA STATE MUMBAI.

·          Accordingly clause (c) added to the  sub rule rule 17(2)  to provide that the separate return will be filed with the govt. treasury (where any tax etc is payable) or with the registering authority appropriate (in a case where no tax etc is payable) to the place of business of place where that constituent of business is being carried.

·          Now that revised return is permissible, where any amount is payable as per the revised return, dealer will first pay the amount to the treasury and attach self attested copy to the return and file that with the treasury.

·          Sub rule 17(4) amended by prescribing diff. time period for filing return as under

o         In case of a retailer (opted for composition) - 6 monthly return to be filed within 21 in place of 25 days.

o         In other cases 6 monthly returns was permissible if liability not exceeded 12000 the limit raised to 36000 and period reduced to 21 days from earlier 25 days. 6 monthly return for those whose refund amount does not exceed rs. 36000 (newly added).

o         For liability category of Rs.1 lakh monthly return within 21 days was there. To this those added whose refund amount does not exceed Rs. 1 lakh.

o         For all others quarterly return filing period reduced from 25 to 21 days. Thus return filing time made uniform for all categories.

o         Explanation of tax liability & refund entitlement provided accordingly this is to be calculated taking into account liability in respect of all business/ constituents and further including liability under CST also and after adjusting refund or set- off available in respect of all businesses under CST as well as MVAT act.

·          Now returns to include gross receipt and not just sales turnover, so rule 20 amended accordingly to provide to that effect.

·          In term of rule 40 WCT was to be paid within 10 days of expiry of the month during which the same is deducted. Now that period increased to 21.

·          Earlier in terms of 40(1)(c) in respect of all wct deducted and remitted, statement was required to be sent in duplicate to the registering authority having jurisdiction over the registered contractor and in case of unregistered contractor to the authority designated for non - resident dealers and in respect of contractors outside Mumbai to the respective jt. Commissioner having jurisdiction of the place of contractor (within 21 days). Now this cumbersome provision deleted.

·          Rule 40(3) prescribing the period within which to obtain WCT no. , now deleted.

·          Every payment of tax,interest, penalty etc to be accompanied by challan no. 210 and every TDS on wct to be accompanied by RETURN - CUM -CHALLAN in form no. 405

·          Clause 52(1)(a) amended to clarify that set - off will be available  in respect of such purchases of goods as are debited to P/L or Trading Account.

·          Rule 53(3) (amendment effective from 01.04.05) provides for reduction of set-off by 4% in case of branch transfer. Explanation added to provide that in case of transfer of items which are subject to 1% tax (i.e. covered by schedule B) reduction would be by 1%. And in case of items falling under entry 29 of schedule C (i.e. drugs & formulations etc) it explains that if transfer is in 'as it is' form without doing anything then purchase price for reduction will be the ACTUAL PURCHASE PRICE as per books of account and not the MRP. Also a proviso added to provide that if the goods dispatched are brought back within the state whether in the same form or after processing, the reduction of set - off would not apply meaning thereby that the reduction of set -off will be reversed.

·          53(4) amended to provide for reduction of set - off amount in case of work contractor. Accordingly in cases where he, under composition, will pay 8% of contract value, set off amount will be multiplied by fraction 16/25 i.e. will be 64%. And in case where the % is 5% (i.e. in respect of construction contracts - period starting on or after 21^st june 2006) set off amount will be reduced by 4% of the purchase price on which set - off amount is calculated. However his reduction. Further amendment also included the phrase 'other than the set-off pertaining to purchases of capital assets and set-off pertaining to goods in which property is not transferred' after the words 'corresponding amount of set -off'.

·          53(6) which earlier provided for 100% reduction of set - off of vat paid in respect of purchases which did not correspond to goods sold, in a case where receipts on account of sales are less than 50% of total receipts. Now it makes it unfavorable further by stating that no set - off will be available in respect of  purchases, of which corresponding goods are not sold within 6 months of purchase. Also set - off of vat in respect of purchase of packing materials pertaining to such goods only will be available. It also clearly states that in case of clubs etc set - off will be available only in respect of purchase of capital goods & consumables pertaining to kitchens & services of food & drink.

·          Earlier purchases of Office equipment, Furniture & fixture, electrical installation etc were under rule 54(i) (non admissibility clause). Now 54 (i) revamped along with others to exclude furniture's etc from non admissibility clause and to put it under 53 by way of insertion of sub rule 53(7A). Accordingly in respect of such purchases of office equipments & furniture / fixtures etc (except in case of those engaged in the business of transferring the right to use these goods) as against non admissibility, set - off (AS REDUCED BY 4%) will be available.Pl. note that while electrical installation removed from non admissibility clause the same not included under 53(7A). By implication thus, a view may be taken that whole amount of VAT paid in respect of electrical installation would be available for set - off.

·          54(f) in respect of intangible assets did not apply earlier, to exim scrips, special import licence, duty free advance licence. Now by amendment excluded from the list of exceptions. Accordingly no set - off available on these intangible assets.

·          54(g) amended to indirectly clarify that set - off of vat on purchases effected by way of work contract, of immovable properties which are plant & machinery will be available.

·          54(h) amended to allow set - off of vat in respect of purchases to be used in erection of P&M being immovable in the nature.

·          54(i) revamped by removing office equipments etc from here. And (j) & (k) also added after 54(i).

·          55(i) (a) liberalized to allow set - off in respect of purchases made before the date of obtaining registration under VAT. However condition is that the goods must not have been used, consumed, or sold prior to the registration.

·          Erstwhile 55(3) substituted by reframed 55(3)(a) & (3)(b). Accordingly tax paid and tds total amount under VAT in any year, can be used in paying total tax payable not only under MVAT & CST but also under MAHRASHTRA TAX ON ENTRY OF GOODS INTO LOCAL AREA. Further any excess can be carried forward to subsequent years to be adjusted towards tax liability under these acts.

·          55(7) inserted to provide that in case of succession of any business by any person either on account of death or of transfer, disposal or change of ownership etc, excess amount available at the time of such succession for adjustment can be taken credit of by the successor of the business. This sub rule inserted w.e.f 01.04.05.

·          Rule 58 ,dealing with determination of sale price in respect of transfer of property involved in execution of a work contract, amended as follows:

o         Sub rule 1 amended to provide that rate will be applied after first deducting from the total contract price, the contract price on which tax is paid by sub contractor plus the quantum of price separately charged by the contractor.

o         Sub rule 1(a) replaced - now charges in respect of labor & service done in respect of any work contract , irrespective of whether that is prior to or  subsequent to the transfer of property , will be deducted

o         In Table 14 In the list of cases of work contracts where lump sum deduction % is specified, AMC (annual maintenance contracts) added with the specified rate being 40%. So inserted w.e.f. 01.04.06.For any other work contract rate kept at 25%.

·          Rule 61 dealing with bank guarantee in case of refund application, amended to reduce Bank Guarantee validity period from 37 months to 36 months.

·          Rule 73 amended to increase application fee in respect of mandatory registration from 100 to Rs. 500.

·          No fee to obtain permission for filing separate return. Entry 23 in Rule 73

·          Rule 77(2A) inserted to provide that in case of resale of goods whose first sale is exempt form tax under notification no.1505 - CR 122/Taxation - 1/dated 01.04.05 reseller's invoice shall in addition to the general declaration u/r 77(1) shall also contain declaration to this effect.

·          Rule 78 & 79 dealing with eligibility certificate and package scheme of incentive, also amended. Also 80 & 81 amended.

·          Rule 88 amended to to provide that interest in respect of excess refund will be 1.25 % for every month or part there of.

·          As per the provisions of Section 61 of the Maharashtra Value Added Tax Act, 2002 read with rules 65 and 66 of the Maharashtra Value Added Tax Rule, 2005, dealers belonging to a specified class are required to file an Audit Report verified by the Accountant viz. Chartered Accountant.   The last date of filing of this Audit Report in respect of the financial year 2005-06, is 30th November, 2006.  There are a number of requests from different quarters to suitably extend the last date of filing of the said Form 704 as this is the first year of submitting the Form.  Their request is considered favorably and the last date for filing Form 704 in respect of the year 2005-06 is hereby extended to 31st January 2007.

·          The section further provides that if any discrepancies are shown/ found in the Audit Report regarding the relevant underlying returns already filed by the dealer, then a revised return is to be filed.  In such cases, the last date for filing of this revised return by the concerned dealer is also hereby extended to 28th February 2007.  No legal action will be taken against the dealers who abide by the above mentioned revised deadlines.

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