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CONTENT Sr. No. Topics Covered 1 Section – I Introduction to Value Added Tax. 2 Section – II Value Added Tax in Maharashtra. A. Introduction. B. Registration under Value Added Tax. C. Explaining Value Added Tax. D. Calculating Tax Liability. E. Filing of Return and Paying Tax. F. Records and Accounts. G. Business Audit. H. Appeals. I. 3 4 5 Tax Payer Service. J. Recovery, Offences and Penalties. Section – III Appendix. Section – IV Conclusion. Section – V Bibliography. Page No. 1 – 12 13 14 – 16 17 – 21 22 – 27 28 – 36 37 – 44 45 – 48 49 – 51 52 – 56 57 – 61 62 – 66 67 – 69 70 71
Value Added Tax in Maharashtra WHAT IS VALUE ADDED TAX?
Value Added Tax is a broad-based commodity tax that is levied at multiple stages of production. The concept is akin to excise duty paid by the manufacturer who, in turn, claims a credit on input taxes paid. Excise duty is on manufacture, while VAT is on sale and both work in the same manner, according to the white paper on VAT released by finance minister Chidambaram. The document was drawn up after all states, barring UP, were prepared to implement VAT from April. It is usually intended to be a tax on consumption, hence the provision of a mechanism enabling producers to offset the tax they have paid on their inputs against that charged on their sales of goods and services. Under VAT revenue is collected throughout the production process without distorting any production decisions.
WHY VAT IS PREFERRED OVER SALES TAX?
While theoretically the amount of revenue collected through VAT is equivalent to sales tax collections at a similar rate, in practice VAT is likely to generate more revenue for government than sales tax since it is administered on various stages on the production – distribution chain. With sales tax, if final sales are not covered by the tax system e.g. due to difficulty of covering all the retailers, particular commodities may not yield any tax. However, with VAT some revenue would have been collected through taxation of earlier transactions, even if final retailers evade the tax net. There is also in-built pressure for compliance and auditing under VAT since it will be in the interest of all who pay taxes to ensure that their eligibility for tax credits can be demonstrated. VAT is also a fairer tax than sales tax as it minimizes or eliminates the problem of tax cascading, which often occurs with sales tax. These are facilitated by the fact that VAT operates through a credit system so that tax is only applied on value added at each stage in the production – distribution chain. At each intermediate stage credit will be given for taxes paid on purchases to set against taxes due on sales. Only -2-
Value Added Tax in Maharashtra
at consumption stage where there are no further transactions will there be no tax credits. Lack of input credit facility in sales tax often results in tax on inputs becoming a cost to businesses which are often passed on to consumers. Sales tax is often applied again to the sales tax element of the cost, thus there is a problem of tax on tax. This is not the case with VAT, which makes it a neutral tax as it provides the least disturbance to patterns of production and the generation and use of income. In addition, the audit trail that exists under the VAT system makes it a more effective tax in administration terms than sales tax as it helps with the verification of VAT amounts declared as due. This is made possible by the fact that one person’s output is another’s input. As with sales tax imports are treated the same way as local goods while exports are zero- rated to avoid anti-export bias. Notwithstanding the advantages mentioned above, it is worth noting that VAT is a considerably complex tax to administer compared with sales tax. It may be difficult to apply to small companies due to difficulties of record keeping and its coverage in agriculture and the services sector may be limited. To cover the high administration costs, VAT rates of 10-20 per cent are generally recommended. The equity impact of the relatively high rates have been a cause for concern as it is possible that the poor spend relatively high proportions of their incomes on goods subject to VAT. Thus the concept of zero VAT rate on some items has been introduced.
Under the CST Act.75%.75%. the dealer pays tax on the sale or purchase of goods. The VAT regime will do away with such concessions as it would provide the full credit on the tax that has been paid earlier.5%. However. the sale value is Rs. To illustrate the whole procedure of VAT. At the last stage. The tax that is to be paid at every point is 15%. Dealer’s get a credit for second change in sale? i.5%.Value Added Tax in Maharashtra DIFFERENCE BETWEEN VAT AND CST Under the CST Act. The input tax is 15%. At the third change of sale.75% -15% = 3. the tax burden is shared equally by the last dealer. either the first or the last dealer. -4- . Then. At the second change of sale. the net VAT would be 12.5%. The Input Tax is 18. 18.e. the tax burden would be shared by all the dealers from first to last. the tax paid is 18. The dealer will get a credit for first change in sale of 2.100. the burden of the full tax bond is borne by only one dealer. under the VAT system.e. The subsequent dealer pays tax on the portion of the value added upon such goods. 2.75% would be the net VAT. first. Under the VAT system. Therefore. 15% -12. Under the CST Act.75%. 3. Under the CST law.120 and the tax thereon is 15%. The tax on this is 12. such tax would be passed upon the final consumers. the retailers are not subject to tax except for the retail tax.5% will be the net rate.i. the tax is levied at a single point. the tax is collected at one stage of purchase or sale of goods.5%-. This means that VAT is paid in the last point tax under the sale tax regime. Under VAT law.150 and the tax on this is 18.75%. Therefore. general and specific exemptions are granted on certain goods while VAT does not permit such exemptions. the value of goods is Rs. concessional rates are provided on certain taxes. Thus. Therefore. Therefore. the sale value is Rs. an example is as follows: At the first point of sale.
in general. Moreover. WHAT’LL BE THE TAX BURDEN? The overall tax burden will be rationalized as it’ll be shared by all dealers.Value Added Tax in Maharashtra WHO GAINS? State and Central governments gain in terms of revenue. VAT has in-built incentives for tax compliance — only by collecting taxes and remitting them to the government can a seller claim the offset that is due to him on his purchases. This transparency and in-built incentive for compliance would increase revenues. Industry and trade gain from transparency and reduced need to interact with the tax personnel. VAT would be a boon that reduces the cost of the product to the consumer and boosts competitiveness. VAT would be major blow for tax evaders. VAT will replace the existing system of inspection by a system of built-in self-assessment by traders and manufacturers. It will also be simpler and offer easy computation and easy compliance. Dealers with turnovers less than Rs 5 lakh may register voluntarily. Everyone has an incentive to buy only from registered dealers — purchases from others will not provide the benefit of credit for the taxes paid at the time of purchase. will fall. WHO PAYS? All dealers registered under VAT and all dealers with an annual turnover of more than Rs 5 lakh will have to register. VAT will prevent cascading effect through input rebate and help avoid distortions in trade and economy by ensuring uniform tax rates. For those who have been complying with taxes. and prices. both manufacturers who evade excise duty payments and traders who evade sales-tax. -5- . The tax structure will become simple and more transparent and tax compliance will improve significantly.
Credit will be given within the same month for entire VAT paid within the state on purchase of inputs and goods. capital goods and declared goods would attract 4% VAT. If the tax credit exceeds the tax collected during a month on sale within the state. over 550 items will be covered under the new tax regime. Special emphasis is often placed on its effect on equity. In fact. -6- . Three items — sugar. including drugs and medicines. About 270 items. all agricultural and industrial inputs. tobacco — under additional excise duties will not be under VAT regime for one year but existing arrangement would continue. it was decided that states would have option to either levy 4% or totally exempt food grains from VAT but it would be reviewed after one year. textile. WHICH GOODS WILL BE TAXABLE UNDER VAT? All goods except those specifically exempt. the excess credit will be carried forward to the next month. prices and economic growth. following opposition from some states. of which 46 natural and unprocessed local products would be exempt from VAT.Value Added Tax in Maharashtra HOW TO PAY? VAT will be paid along with monthly returns. OTHER CONSIDERATIONS It is imperative that policy makers in considering adoption of VAT should be interested in the economy wide impact of this tax. But. Credit thus accumulated over any month will be utilized to deduct from the tax collected by the dealer during that month. This is particularly important because of the potential effects on consumption of certain commodities that have a direct or indirect effect on labour productivity.
In cases where there was an effect it was a one time effect that simply shifted the trend line of the consumer price index (CPI). However there is no evidence to suggest that this is true. following the premise that welfare is demonstrated by the level of consumption rather than income. consumption is used as the denominator the impact of VAT would be proportional. This emanates from the fact that consumption as a share of income falls as income rises. ♦ VAT exemptions may also be granted on goods and services that are consumed mostly by the poor. countries are often concerned that it would cause an inflationary spiral. A survey of OECD countries that introduced VAT indicated that VAT had little or no effect on prices. Hence a uniform VAT rate falls heavily on the poor than the rich. To guard against any unforeseen price effects the authorities may consider a tighter monetary policy stance at the introduction of VAT.Value Added Tax in Maharashtra VAT EFFECT ON INFLATION In considering the introduction of VAT. This criticism is valid when VAT payments are expressed as a proportion of current income. In order to address the regressivity of VAT the following measures can be taken: ♦ The VAT itself can be used to differentiate taxation of consumer items that are consumed primarily by the poor such that they pay less or at zero rate or to tax luxury goods at a higher than standard rate. A proportional burden would also be demonstrated if lifetime income rather than current income is used. DISTRIBUTION EFFECTS OF VAT Value added tax is widely criticized as being regressive with respect to income that is its burden falls heavily on the poor than on the rich. A lifetime income concept considers the fact that many income recipients are only temporarily at lower income brackets as their earnings increase. -7- . However if.
The effects of exemption may be as at prior to the final sale. results in the use of presumptive methods of determining the tax liability. which leads to more difficulties in monitoring the compliance. These include: ♦ The fact that sometimes it is almost impossible to differentiate between higher quality expensive products – e. consumed by the rich and ordinary products consumed by the poor. ♦ significantly increased costs of tax compliance for small firms. such as other tax and spending instruments of government. Exemptions refer to situations where output is not taxed but taxes paid on inputs are not recoverable. -8- . follows: ♦ falling of revenues – exemptions break the VAT chain. This could be in the form of lower basic income tax rates on the poor or some pro-poor expenditures of government. The use of multiple rates of VAT has however been widely discouraged for various reasons. it results in a loss of revenue since value added at the final stage escapes tax. The higher compliance cost resultant from differentiation of VAT rates may also be regressive with respect to income since smaller firms with lower income tend to bear proportionately more of the burden than do larger firms. outside the VAT system. which are usually This unable to keep separate records/accounts for sales of differently taxed items. food. ♦ Increased costs of VAT administration as a differentiated rate structure brings with it problems of delineating products and interpreting the rules on which rate to use.Value Added Tax in Maharashtra ♦ Equity concerns may also be addressed through other ways. If exemptions are granted The rationale behind exemptions is to reduce negative distributional effects of tax through the effect on incomes.g. Thus any concessions extended may tend to benefit the rich much more than the poor.
Value Added Tax in Maharashtra ♦ Un-recovered taxation of some intermediate goods may lead to producers substituting away from such inputs thus distorting the input choices of the said producers. tax avoidance by vertical integration. it is important that care is taken when introducing exemptions in order to avoid distortions in the production process as well as to minimize revenue loss resulting from such distortions. ♦ Exemptions tend to feed on each other giving rise to a phenomenon called This arises from the fact that each exemption gives rise to “exemption creep”. For example creating an exemption to reduce the tax burden on a particular commodity or goods may lead to increased pressure for exemption or zero rating of inputs used for the production of such a commodity. distribution effects are perhaps better addressed by other forms of tax and government expenditure policies which can often be better targeted at these aims. Given the fact that the primary purpose of VAT is to raise government revenue in an efficient manner and with as little distortions of economic activity as possible. pressures on further exemption. -9- . ♦ Exemptions may create incentives to “self supply” i.e. Based on the above.
This rate must not be less than 10%. Tax on petrol. Income tax reduces the net rate of return as both the amount saved as well as the return on that saving are subject to tax. This will ensure By doing this that there will be level playing fields to avoid the trade diversion in connection with the different states. particularly in neighboring states . Uniform Rates in the VAT system. The taxable commodities are listed in the respective schedule with the rates. VAT proposes to keep these rates uniform in all the states so the goods sold or purchased across the country would suffer the same tax rate.Value Added Tax in Maharashtra VAT EFFECT ON ECONOMIC GROWTH Economic growth can be facilitated through investment by both government and the private sector. diesel or aviation turbine fuel are proposed to be kept out from the VAT system as they would be continued to be taxed. Discretion has been given to the states when it comes to finalizing the RNR along with the restrictions. In this regard VAT may be said to be a superior tax in promoting economic growth than income tax. Savings by both parties are required in order to finance investment in a non-inflationary manner. There would be no fall in such remaining goods. 10-12% on goods called Revenue Neutral Rates (RNR). as presently applicable by the CST Act. Rate of Tax VAT proposes to impose two types of rate of tax mainly: a. Two special rates will be imposed-.10 - . Although VAT reduces the absolute return on saving it does not reduce the net rate of return on saving. Compared to other broadly based taxes such as income tax VAT is neutral with respect to choices on whether to consume now or save for future consumption. FEATURES OF VAT 1.1% on silver or gold and 20% on liquor. by increasing their costs. c. 4% on declared goods or the goods commonly used. b. its effects on investment can be said to be neutral. certain commodities are exempted from tax. 2. Since VAT does not influence investment decisions on firms.
4. This was done as it creates discrepancy in investment decision. Under the new VAT system. previously paid on the sale of goods. the tax would be fair and equitable to all. Adjustment of the tax paid on the goods purchased from the tax payable on the goods of sale All the tax. Collection of tax by seller/dealer at each stage. paid on purchase outside India. . VAT is not cascading or additive though the tax on the goods sold is collected at each stage. The seller/dealer would collect the tax on the full price of the goods sold and shows separately in the sell invoice issued by him 6. In case of the branch transfer or consignment of sale outside the state. 5. No concession to new industries Tax Concessions to new industries is done away with in the new VAT system. payable on the sale. whether within the state or in the course of interstate. the tax.Value Added Tax in Maharashtra 3. would be adjusted against the tax.11 - . would be refunded. it is not cascading or additive because the net effect would be as follows: . sold in the last state or at retail stage. In case of export.the tax. It will be like levying tax on goods. paid on the goods purchased within the state. no refund would be provided. would be fully adjusted.
10%. and not on based on tax-minimization. CST would not have the provisions on refund or carry over upon such goods except in case of export goods or goods. Consequently. Similarly.Value Added Tax in Maharashtra WHAT’S THE BIGGEST ADVANTAGE? The biggest benefit of VAT is that it could unite India into a large common market. under the present VAT system. Following are the some more advantage of VAT: 1. VAT would not have such restrictions. . they can zoom down the highways to their destinations.12 - . Further such adjustment of the purchased goods would depend on the amount of tax that is payable. 2%. the tax paid on the manufactured goods would be adjusted against the tax payable on the manufactured goods. there are 8 types of tax rates. 4%. 8%. VAT is free from such conditions. Simplification Under the CST Act. Adjustment of tax paid on purchased goods Under the present system. no refund would be admissible. there would only be 2 types of taxes 4% on declared goods and 10-12% on RNR. It also helps to determine the relevant stage of the tax. This will translate to better business policy. tax would be levied at each stage of the goods of sale or purchase. 12%. 2. This will eliminate any disputes that relate to rates of tax and classification of goods as this is the most usual cause of litigation. Companies can start optimizing purely on logistics of their operations. on interstate sale on tax-paid goods. the question of which stage of tax it falls under becomes another reason for litigation. 20% and 25%. Under the VAT system. Reduced transit times and lower inventory levels will boost corporate earnings. This is necessary as the CST Act stipulates that the tax levies at the first stage or the last stage differ. 3. However. manufactured out of the country or sale to registered dealer. Lorries need not wait at check-points for days. Such adjustment is conditional as such goods must either be manufactured or sold.1%.
relating to filing of returns. Transparency The tax that is levied at the first stage on the goods or sale or purchase is not transparent. non-filing of returns. would make the tax department more efficient and responsive. Computerization the VAT proposes computerization which would focus on the tax evaders by generating Exception Report. Fair and Equitable VAT introduces the uniform tax rates across the state so that unfair advantages cannot be taken while levying the tax. no processing or scrutiny of returns would be required as it would free the tax compliant dealers from all the harassment which is so much a part of assessment. which the goods have suffered. payment of tax. furnishing declaration and assessment are simplified under the VAT system so as to minimize any interface between the tax payer and the tax collector.Value Added Tax in Maharashtra 4. 5.13 - . For example. 7. is not known at the subsequent stage. the amount of tax would be known at each and every stage of goods of sale or purchase. Minimize the Discretion the VAT system proposes to minimize the discretion with the assessing officer so that every person is treated alike. Procedure of simplification Procedures. late filing of returns. The management information system. . Such system would be free from all these harassment 8. 6. This is because the amount of tax. In the VAT system. there would be no discretion involved in the imposition of penalty. late payment of tax or non payment of tax or in case of tax evasion. In a large number of cases. which would form a part of integral computerization.
In the year 1946. 1959 introduced in 1959 underwent many changes thereafter and in July 1981. The Bombay Sales Tax Act. compliance and equity and therefore. VAT being a multi point tax. It promotes transparency.e. first point tax was introduced wherein goods were classified into three main schedules. . 2005 to usher in the progressive value added tax system in place of the old sales tax system. intermediate products and finished goods. 2002 came into force w. envisages an increase in the number of dealers and is based on the concept of self-assessment and self-compliance. inevitable that the Sales Tax Department transforms itself into a dealer friendly. focused and dynamic department to cater to the ever increasing expectations of both the Government and the Trade & Industry. VAT is a progressive and transparent system of taxation which eliminates the cascading impact of multiple taxation through a multipoint taxation and set-off principle. Sales Tax Department has taken up the challenge to transform their selves and be available for assisting the dealers in complying with the provisions of the law. They are in the process of installing a state-wide networked IT system to computerise entire tax administration and hope to provide online service to the dealers in due course. 1st April.f. It is therefore. is both dealer friendly and consumer friendly. broadly covering tax free goods. a general sales tax was introduced levying sales tax at the last stage of sale of goods.14 - . The BST Act was repealed and Maharashtra Value Added Tax Act. They are also realigning their organisational structure to meet the challenges of the new system and stakeholders' expectations.Value Added Tax in Maharashtra VALUE ADDED TAX IN MAHARASHTRA Quick Flash Back Sales tax was first introduced in India in the then Bombay Province as early as March 1938 where a tax was imposed on sale of tobacco within certain urban and suburban areas.
It provides the potential for a stronger manufacturing base and more competitive export pricing.Introduction Background Maharashtra is one of the 21 States which have introduced the Value Added Tax (VAT) system of taxation from 1st April 2005. primarily that of double taxation. as well as operating procedures. In addition to offering the possibility of a set-off of tax paid on purchases. The design of Maharashtra State VAT is generally guided by the best international practices with regard to legal framework. It has an improved control. mechanism resulting in better compliance. and as a result it offers a better financial system scope for error. Single point sales tax had a number of disadvantages. VAT has other advantages for both business and government. self-assessment system with more trust put on dealers. The consensus has been arrived at through the discussions in the Empowered Committee of State Finance Ministers on implementation of State level VAT. the Sales Tax Department has moved to a globally recognized sales taxation system that has been adopted by more than 130 countries. Another key factor in preparation of the design of State level VAT is the national consensus on certain issues. It is invoice based. It is primarily a self-policing. With the introduction of VAT. . VAT replaced the single point sales tax. • • • • • It eliminates cascading impact of double taxation and promotes economic efficiency.Value Added Tax in Maharashtra Part1 . VAT is a modern and progressive taxation system that avoids double taxation. On 1st April 2005.15 with less .
the tax liability has to be determined with reference to the option exercised by the dealer for discharging tax liability. The rate of tax applicable to the goods sold under various classes of sales is uniform. The meaning of 'sale' for VAT purposes A transaction of sale can be a: • • • • normal sale of goods.16 - . Being so. tax base and promotes equity. However. the Act provides for an optional method for discharging tax liability by way of composition. deemed sale of goods used I supplied in the course of execution of works contract. Businesses engaged in. VAT in Maharashtra is levied under a legislation known as the Maharashtra Value Added Tax Act (MVAT Act). such as newspapers. deemed sale of goods given on lease. VAT is levied on sale of goods including intangible goods. sale of goods under hire-purchase system. . money. actionable claims. in respect of normal sales of goods and deemed sales of goods under works contract and specified deemed sale of goods given on lease. shares and securities and lottery tickets.Value Added Tax in Maharashtra • It widens the. the buying and selling of goods within the scope of the VAT law are referred to as dealers. supported by Maharashtra Value Added Tax Rules (MVAT Rules). The meaning of “goods” for VAT purposes “Goods” means every kind of moveable property including goods of incorporeal and intangible nature but there are some exclusion.
1t applies to al1 businesses. manufacturers.Value Added Tax in Maharashtra Businesses covered by VAT The VAT system embraces all businesses in the production and supply chain. . distributors. including importers. works contractors and lessors. wholesalers. from manufacture through to retail. retailers.17 - . VAT is collected at each stage in the chain when value is added to goods. exporters.
5. However. be competitive.Value Added Tax in Maharashtra Part 2 .Registration under VAT Rules for registration If a dealer’s annual turnover exceeds the below mentioned threshold. Benefits of being a registered dealer As a registered dealer.000 100 100 Fees payable on registration If the dealer’s turnover is less than the above threshold. claim set-off of tax (input tax credit) paid on purchases. Issue tax invoices and.00. . Category Annual Turnover of Sales Importer Others 1. then it must register with the local office of the Sales Tax Department.000 Turnover of sales or purchase of taxable goods not less than 10.000 10. All Figures in Rs. then they are not liable to collect and pay VAT.000/ -. they are entitled to: • • • collect VAT on the sales.18 - .000 5. if a dealer wishes to avail the benefits of being a registered dealer.00. then they may apply for voluntary registration by paying a fee of Rs.
or a copy of the certificate and hologram. from the date shown on the certificate of registration. then he will be liable to account for VAT from the date shown on the certificate of registration. having crossed the threshold. it is an offence to be engaged in business as a dealer without a certificate of registration Certificate of registration A dealer should prominently display the certificate and hologram. at each place where they carry can on their business..Value Added Tax in Maharashtra Effective date of registration The effective date of registration. their liability to account for VAT starts from the date they cross the threshold. . then they will be liable to pay tax on sales from the date they took over the business. upon their request. then Sales Tax Office will provide them. will depend on the date they first become liable to pay VAT. one copy of the certificate of registration and hologram for each additional place of business. Further. then he can charge VAT on his sales only after they are registered. that is. If a dealer has more than one place of business. This date will be determined as follows: a) New businesses: If a dealer is not registered because their annual turnover is less than the threshold.e. the date front which a dealer may charge VAT on sales.19 - . b) Existing businesses: If a dealer took over an existing business that is registered for VAT. i. c) Voluntary registration: If a dealer is registered on a voluntary basis. d) Late registration: If a dealer’s turnover has exceeded the appropriate threshold but they have applied late for registration.
an application made against dealer’s business for insolvency or liquidation. then they may obtain a duplicate copy of the certificate of hologram from their sales tax office. it must done within 60 days of the change. • • • • • • • • • • • • • Where the amendment involves a: change in the name of the business. the communication to the Registering Authority concerned should be made within sixty days of the change or occurrence of the event. change in the constitution of the business without dissolution of the firm. change in the Karta of a Hindu Undivided Family. change in the place of business. change in the guardianship of a ward. The certificate of registration and hologram is personal to the dealer to whom it is issued and is non-transferable. A dealer will not need to make a fresh application for registration. formation of a partnership with regard to the business. there are any amendments to the details they can be reported while applying for registration. addition of new place of business.20 - . However. inform us in writing. opening or closing of a bank account.Value Added Tax in Maharashtra If a dealer loses his / her certificate of registration or hologram. Changes to business circumstances If. or it is accidentally destroyed or defaced. an application made by a dealer for insolvency or liquidation of their business. change in the trustees of a Trust. . conversion of Private limited Company to a Public limited Company. following dealer register.
they must return the Certificate of Registration The cancellation of their certificate does not affect their liability to pay any tax. A dealer must inform the Sales Tax Department within 30 days of the event. If a dealer: • • discontinue the business.gov. For cancellation of registration a dealer should submit form 103 which is available with the local sales tax office. they may be allowed the registration to continue.vat. their turnover falls below the threshold. In case of disposal or sale of business.Value Added Tax in Maharashtra Cancellation of registration A dealer will be liable to pay VAT while their registration is effective. However. interest or penalties in respect of any period prior to the date of cancellation of their registration. he may choose to apply for cancellation of his registration. It can also be downloaded from the website www. their successor will need to apply for a fresh registration certificate.21 - . he should continue to collect and pay VAT in the normal way until his registration is formally cancelled. If however. .maharashtra. Alternatively. dispose of or sell or transfer the business.in If the Sales Tax Department cancels the dealer’s registration.
Value Added Tax in Maharashtra The obligations of a registered dealer Following are the registration. . issue tax invoice / bill or cash memorandum to all customers. maintain adequate records and retain them for a period of five years from the end of the tax year to which they relate. which dealer’s are obliged to: • display prominently their certificate of registration and hologram in their place of business. extend co-operation to the officers of the Sales Tax Department at dealer’s business premises and provide all assistance to them to discharge their duties.22 - . collect VAT on all sales at appropriate rates. and a copy of the certificate and hologram in each of the other places where they carry on their business. complete and self consistent returns and pay the amount of tax due on or before the due dates. • • • • • • inform their sales tax office of any changes in the details previously reported to the sales tax office. calculate the tax due and submit correct.
Value Added Tax in Maharashtra Part 3 - Explaining VAT
How VAT works When a dealer sell goods, the sale price is made up of two elements; the selling price of the goods and the tax on the sale. The tax is payable to the State Government. The tax payable on sales is to be calculated on the selling price. The tax paid on purchases supported by a, valid tax invoice is generally available as set-off (input, tax credit) while discharging the tax liability on sales. Example The following example shows how the VAT works through the chain from manufacturer to retailer. Company A buys iron ore and other consumables and manufactures stainless steel utensils; Partnership firm B buys the utensils in bulk from Company A and polishes them; shopkeeper C buys some of the utensils and purchases packing, material from vendor D, packages them and sells the packed utensils for the public.
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Value Added Tax in Maharashtra
(The sale and purchase figures shown in the example are excluding tax) Particulars Company A Cost of iron are and consumables Sales of unpolished stainless steel utensils Value added Company A is liable to pay VAT on Rs.1,50,000/- @ 4% Less Set Off Net VAT amount to pay with the Return (Note: Tax invoice issued by Company A will show sale price as Rs.1,50,000/- tax as Rs.6,000/-. Therefore, the total invoice value will be Rs.1,56,000/-) Partnership B Purchases unpolished stainless steel utensils. Sales polished stainless steel utensils Value added Partnership B is liable to pay V AT on Rs.1,80,000 at 4% But can claim set off of tax paid on purchases Net VAT amount to pay with the Return 1,50,000 1,80,000 30,000 7,200 (6,000) 1200 Amount (Rs.) 50,000 1,50,000 1,00,000 6000 (2000) 4000 VAT @ 4% (Rs.) 2000
Shopkeeper C Purchases polished stainless steel utensils 1,80,000 Packing material 5,000 Total Purchases 1,85,000 Sales 2,25,000 Value added 40,000 Shopkeeper C is liable to pay V AT on Rs.2,25,000 @ 4% 9,000 Set off of tax paid on purchases (Rs.7,200 + Rs.200 of 7,400 packing material) Net VAT amount to pay with the Return Vendor D Tax paid costs Sales Value Added Vendor D is liable to pay VAT on Rs.5,000 @ 4% Nil 5,000 5,000 200 1,600
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Value Added Tax in Maharashtra
The VAT due on the value added through the chain, i.e., 4% on Rs.2,25,000 is : The State Government received the tax in stages. The payments of tax were as follows: Particulars Suppliers of Company A Company A Partnership B Shopkeeper C Vendor D Total Amount (Rs.) 2,000 4,000 1,200 1,600 200 9,000 9,000
Thus, through a chain of tax on sale price and set off on purchase price, the cascading impact of tax is totally eliminated.
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diesel etc Other than items specified in schedules A.Value Added Tax in Maharashtra Since set-off of tax on purchases is given only on purchases from registered dealers where tax is collected separately. Please refer to the schedules for details) . petrol.5% Illustrative Items Vegetables. in this case. who is not a registered dealer. the tax is finally borne by the ultimate consumer. The goods are grouped into five schedules as under: Schedul e A B C D E Rate of tax 0% 1% 4% 20% and above 12. (The list is illustrative and not exhaustive.5%. Rates of value added tax There are two main rates of VAT 4% and 12. dealer’s purchases from unregistered dealers. B. notified industrial inputs. eggs. inter-state purchases and purchases from registered dealers without separate tax collection are not entitled to set-off. C & D. milk.26 - . notified information technology products and a few essential items Liquor. imports. bread Precious metals and precious stones and their jewellery Raw materials. people who buy utensils from the shopkeeper C. In practice.
clubs and caterers. shamiana. to consumers. whereas. hotel (excluding hotels having gradation of 'Four Star’ and above). so what is the difference? Tax free goods do not attract tax at any stage of sale or in any type of transaction. a simpler and optional method of accounting for VAT has been introduced. eating houses.Value Added Tax in Maharashtra Difference between tax free goods and exempt sales It is sometimes confusing to have goods that are tax free and sales that are exempt.. It may be noted that composition scheme is not meant to be a tax concession scheme but only a simplification of tax calculation and payment system. For such dealers. pandal.. boarding establishments. Tax payable by dealers opting for composition in lieu of VAT The following classes of dealers are eligible for option to pay tax under composition: • • Resellers selling at retail.27 - . i. Composition schemes Certain dealers may find it difficult to keep detailed records for claiming set-off. viz. export sales which are exempt from tax. . Dealers in second-hand passenger motor vehicles and Works contractors Dealers engaged in the business of providing mandap.e. Restaurants. refreshment rooms. Both result in no VAT being charged. This method is the composition scheme. exempted sales are certain types of transactions. • • • • Bakers.
he can do so only at the beginning of the next financial year.Value Added Tax in Maharashtra Accordingly. if the dealer has opted for payment of tax liability under composition. Moreover. such an option can be exercised by the contractor on contract to contract basis. the tax liability has to be determined in terms of the guidelines given in the relevant Notification in this regard. If dealer wishes to switch. the Notification explains the methodology for computation of turnover liable to tax and the rate of composition payable. over to normal VAT. Apart from the terms and conditions governing each of the composition schemes. the contractor can choose to discharge tax liability under composition option. In respect of works contract. a new dealer can opt for composition at the time of registration. . However.28 - . A dealer can opt for the composition option at the beginning of the financial year and has to continue to be a composition dealer at least till the end of that financial year.
of the sale of goods. as the case may be. Similarly. first determine his turnover of sales and turnover of purchases. the turnover of purchases is the total of the amounts paid or payable (excluding VAT charged separately) in respect of the purchase of goods less (the amounts repaid to dealer in respect of goods they return. or the purchase price. the tax and the price. of any goods is varied and either a credit note or a debit note is issued. order to calculate how much tax a dealer has to pay. he must. then the credit note or the debit note. Calculating turnover of sales and purchases The turnover of sales is the total of the amounts received or receivable (excluding VAT charged separately) in respect. less the amount refunded to a purchaser in respect of goods returned. within six months of the date of purchase. should • • show separately. Credit notes and debit notes. within six months of the date of the sale.Calculating tax liability In.Value Added Tax in Maharashtra Part 4 .29 - . If the sale price. . be accounted for in the period in which the appropriate entries are made in their books of accounts. The second stage is to ascertain the amount of tax due for payment.
The supply of food in a restaurant also includes an element of service. any profit element that relates to the supply of labour and services. Dealer’s administrative costs relating to labour and services and any other similar expenses. gas and electricity. so that they may deduct it from the total contract price. Works contracts VAT applies only to the sale of goods. the • • • • • • • costs of labour and service charges. . Supply of services is not liable to VAT. a house. goods and services are provided in a transaction and cannot be separated.g. and any architect's fees. hiring charges for machinery and tools. water. Some other examples of works contracts are photography. The rules provide a formula to enable them to calculate their turnover of sales for meals (food and beverages) which they provide. cost of consumables. Works contracts are deemed sales where both. repairs & maintenance etc. A works contract may involve the creation of immoveable property. To calculate the amount a dealer should include it in their turnover of sales. then they must include in their turnover. But the full amount charged is the sale price for the purposes of calculating turnover and tax. e. the price of the goods they auction for their principal Hotels There are special rules for hotels and other establishments that provide boarding and lodging for an inclusive amount. a factory or a bridge. such as. charges for planning and designing.30 - .Value Added Tax in Maharashtra Special cases Auctioneers If dealer is an auctioneer. amount paid to sub-contractors.
transactions that take place outside Maharashtra are not within the scope of MVAT Act.Value Added Tax in Maharashtra Alternatively. in lieu of the deductions as above. exports and interstate transactions. the date of the sale is deemed to be the date of the delivery of goods.31 - . If the dealer finds that it is too complicated to calculate the deductions. To calculate the tax due. . From the total sales one should deduct • • • • the total of exports and inter-State sales. These transactions are covered by the CST Act. Sales and purchases not liable to tax under VAT The VAT law specifically excludes from value added tax all imports. Point of levy in certain cases Hire purchase Where there is a hire purchase agreement or an agreement for sale by installments. Similarly. then they may opt for a composition scheme for any works contract. If the hire-purchase agreement specifies the interest component then in calculating the sales price. This is despite the fact that legal ownership of the goods only passes to the buyer after payment of the final installment. a dealer may choose to discharge the liability arising on works contracts by referring to the table prescribed in the rules. and branch / consignment transfers to locations in Maharashtra as well as other States. dealer should disregard the interest component included in the agreement. dealer should start allocating their turnover of sales in the return period (net of the above deductions) to the rates of tax they have been charged. Calculating the amount of VAT due on sales Dealer should also make some adjustments to the total turnover of sales to arrive at the amount on which tax is due. the total of sales of goods that are tax free. the tax collected.
inter-State purchases.Value Added Tax in Maharashtra They should also ensure that the correct tax rates are applied. The resulting figure represents purchases against tax invoices from registered dealers. and local purchased from unregistered dealers. At this stage VAT is charged on total purchases. purchases of tax free goods. direct purchases from exempted units under the Package Scheme of Incentives. 1999 and also to manufacturers of tax-free sugar or fabrics covered by Entry A 45 and where such goods are sold in the course of export falling under section 5 of the CST Act. They must now deduct the total value of • • • • • • • imports from out of India. Then a dealer must calculate the value of those items and deduct tax @ 4% of the corresponding purchase price from the amount otherwise available for set off. .32 - . or o for the manufacture of any tax-free goods. The information should be readily available from their records. the full set off of the VAT paid on purchases is not available. 1956). however. Dealer must. Calculating the amount of set off due (VAT paid on purchases) This is the next stage of tax calculation. (Not applicable to PSI dealers other than the New Package Scheme of Incentives for Tourism Projects. make some adjustments to this amount for. this goods should be sold. local purchases from registered dealers not supported by tax invoice. in certain cases. but they may not have paid VAT on all their purchases. consignment transfers. used o as fuel. Calculating the turnover of purchases Records will provide the total figure. This gives the total of sales tax due. Adjustments to tax available for set off • If dealer’s purchases include goods. or o as packaging for tax-free goods.
a dealer should reduce set-off otherwise entitled by an amount equal to 4% of the purchase price. furniture or fixtures which have been treated as capital assets. • In respect of office equipment. there is a special formula for calculating the amount of the adjustment. • If a dealer is the retailer of liquor vendor and its actual sale prices are less than the Maximum Retail Price. and the tax invoices they have received. Effectively this means that. deduct tax @ 4% (1 % in respect of goods covered by Schedule B) of the corresponding purchase price from the amount otherwise available for set off.33 - . • Where a dealer’s sales are less than 50 % of their gross receipts. if the goods are stock transferred by way of branch / consignment transfer to a place outside the State. All this information should be available from their records. they must also deduct 36% of the amount from the set off otherwise available (4% of purchase price in respect of construction contracts for which they have been opted for payment of composition @ 5% on total contract value). Dealer must also make further adjustments as follows: • If they have been used any goods (other than capital assets) as part of a works contract for which they have been opted for payment composition @ 8% on the total contract value.Value Added Tax in Maharashtra Similarly. then they can claim set off only on those purchases of goods or packing materials effected in that year where the corresponding goods are sold within six months of the date of purchase or consigned within the said period to another State by way of stock transfers. . if a dealer sells at 75% of the MRP then they can claim set off only to the extent of 75% of the tax paid. including tax invoices and bills or cash memorandum they have issued. • A dealer can not claim any set off for the tax paid on any purchases that remain unsold on the date when business discontinues.
crude oil.34 - . goods of incorporeal or intangible character other than those specified. motor spirits. The amount of net tax payable is the total of sales tax collected on sales less the set-off available. Outputs are tax-free goods while inputs carry tax. Conditions for claiming set off A dealer can claim set off only for VAT paid on purchase if they have a valid tax invoice for that transaction and they had maintain account of purchases showing the specified details. Manufactured goods or trading goods are transferred to branches outside the State or are sent on consignment transfers. . Outputs are CST sales which are taxable at the concessional rate of CST. such as • • • • • Inputs are taxable at higher rate as compared with the rate of tax on output.Value Added Tax in Maharashtra Set off not available There are various items on which set-off is not available such as. then dealer’s return would reflect a balance refundable to the dealer. Tax payable The amount of set-off admissible can be adjusted against tax payable. Outputs are export sales. building material used for construction etc. Refund cases If the amount of set-off admissible during the period is more than the amount of tax payable. passenger motor vehicles. The amount of set-off can be more than the tax payable for a variety of reasons.
excess credit can be on account of: • • • unutilised portion of tax deducted at source or refund payment order or ad-hoc payment made is more than tax payable. For the purpose of granting refund. Normally. Full amount of excess credit can be claimed as refund due for the return period. The application has to be filed with the Refund Branch. The Refund Branch may ask for Bank Guarantee and any relevant information for checking correctness of refund claimed.35 incentives under the . Whatever may be the reason for credit in excess of tax due and payable during a tax period. a) specified class of dealers and b) other dealers Refund to specified class of dealers Specified classes of dealers are : • • • Exporters exporting out of the country or dealers selling to an exporter against form H. dealers are eligible to claim refund of such excess credit. These units have to be certified by the Commissioner of Sales Tax. A unit set-up in SEZ or STP or EHTP or a 100% EOU unit. Specified class of dealers and the dealers who have made a sale in the course of interState trade or commerce and in the return he has shown any amount to be refundable are eligible to claim refund in each of the returns filed by them.Value Added Tax in Maharashtra Apart from part of the admissible set-off which can remain unutilized. refund would be granted within one month from the receipt of Bank Guarantee or within three months from the date of receipt of refund application in Form . dealers have been classified under two categories viz. The dealer eligible to claim refund has to file refund application in Form 501. An Entitlement Certificate holder availing of the benefit of Package Scheme of Incentives (PSI).
Value Added Tax in Maharashtra 501. whichever is later. Normally. Normally. The application has to be filed with the Refund Section. They are required to carry forward excess credit to the next return within the same financial year and claim refund of excess credit in the return for the period ending March. During the course of the audit. The dealer claiming refund in March return has to make refund application in Form 501. Some tips for getting timely refund . Simple interest at the rate of 6% per year would be payable for the period from the due date to the date of refund. the date of receipt of the additional information. However. the audit team will check dealer’s eligibility to claim refund and the correctness of the amount of refund claimed by them. refunds made against Bank Guarantee would be taken up for audit after the refund has been granted. Refund to other dealers Other dealers are not eligible to get refund in each of the return filed. dealer is eligible for interest for delayed payment. or as the case may be. The audit may be taken up before granting the refund or after the refund is granted. refund would be granted within six months to the new dealer’s at the end of the year succeeding the said year. Audit of refund claims The refund granted to dealer would be subject to audit by the Refund Audit Section. if granting of refund is delayed beyond the above mentioned periods. However. refund would be granted within six months of the end of the year to which the return relates. Interest on delayed refund No interest is payable on the refund due to a dealer as per returns filed by a dealer.36 - .
The return filed by the dealer’s should be correct. .37 - . then the refund would not be granted for the monthly return. Refund application in Form 501 is filed with the Refunds branch in time. The amount of refund due to them should be computed correctly. but they file a monthly return. In order to be eligible for refund. they would have to file a quarterly return.Value Added Tax in Maharashtra Dealer’s claim of refund would be processed faster if: • • • • • • • • They had filed the return with the Returns branch as per the prescribed time schedule. They should have promptly furnished Bank Guarantee and other details when called for. They should keep ready all the documents and records for audit. They should file the return for a period for which they are required to file. Thus. if they are required to file a quarterly return. They should have claimed refund as per the appropriate periodicity. complete and self-consistent.
The returns have to be filed in the prescribed form and by the specified dates. Return forms The return forms prescribed are as follows.Filing a return and paying the tax VAT is a self-assessment system and dealer’s are expected to make self assessment for a given tax period and declare their VAT liability by filing returns. Form No. then they should first pay such amount in Government Treasury and file the return in the local office of Sales Tax Department along with a self attested copy of the chalan. filing of returns along-with payment of tax on or before the due date at the notified bank would be considered as sufficient compliance. 221 To Be Used By All VAT dealers other than dealers executing works contract. However. leasing and dealers opting for composition only for part of 224 the activity of the business. If no payment is due or a refund is claimed as per the return. they are also required to pay the tax due as per the return filed. return form is return-cum-chalan. As such. where any amount of tax including interest or penalty is due as per a fresh or revised return. Further. VA T dealers who are also in the business of executing works contracts. All composition dealers whose entire turnover is under composition (excluding works contractors opting for composition and dealers 223 opting for composition only for part of the activity of the business). PSI 222 dealers and notified Oil Companies. composition dealers (including dealers opting for composition only for part of the activity of the business).Value Added Tax in Maharashtra Part 5 . PSI dealers holding Entitlement Certificate (Transactions by PSI . In Maharashtra. they are also required to file the return in the local office of the Sales Tax Department.38 - . dealers engaged in leasing business.
frading and composition only for part of the activity of the 225 business to be included in a separate return in Form 223). leasing and composition only for part of the activity of the business to be included in a separate return in Form 223). Newly registered dealers should file quarterly returns until the end of the year in which they first register.39 - . Further. A dealer can refer to the instructions given in the form before filling the return. branch transfers received.Value Added Tax in Maharashtra dealers relating to the business of execution of works contracts. Notified Oil Companies (Transactions by OIL Companies relating to the business of execution of works contracts. leasing. purchases. branch transfers made etc. Please ensure that the return for a tax period covers all the transactions of sales. All package scheme dealers should file quarterly returns. please do not leave it blank but mention" not applicable". they must ensure that all the columns of the return are duly filled in and are clearly legible. . The return filed by them must be correct. Time schedule for filing returns Periodicity of filing returns is as follows: • • • Retailers who have opted for composition should file six-monthly returns. complete and self-consistent. If a particular column is not relevant.
The Sales Tax Office will check the return to ensure that there are no obvious errors in consistencies or contradictions in calculations. At the same time. and self-consistent in every respect.(Rs1crore) should file monthly returns. o All other dealers should file quarterly returns. dealers will be sent a 'show cause' notice. If this check reveals discrepancies. then the dealer’s will be advised and invited to submit a fresh return.10.1lakh) or whose entitlement for refund was less than Rs. Then they should file their fresh return within 30 days of the notice. The department will issue this defect notice within four months of receiving their return.10lakh) or whose entitlement for refund was more than Rs.Value Added Tax in Maharashtra • All other dealers should file returns as given below :o Dealers whose tax liability in the previous year was less than Rs.10lakh) should file six-monthly returns.(Rs.40 - .OO.00. complete. as the department issues the defect notice.1.(Rs. Filing and payment dates for return-cum-chalan are as follows: Return Frequency Monthly Quarterly Six Monthly Filing / Payment date 21 days from the end of the return period 21 days from the end of the return period 21 days from the end of the return period Scrutiny of returns filed The return filed by the dealer should be correct.l.10.000. o Dealers whose tax liability in the previous year was more.00. it will be deemed not to have filed the return within the time allowed. and will so liable to a penalty charge.00. If they fail to do so.000. than Rs. .OOOj.OOOj. explaining that a penalty may be imposed.OO.(Rs.
complete and selfconsistent Each of the returns filed by them is checked to confirm that the same is correct. • • • • • Short. a defect notice is issued by the Returns Branch pointing out the error or the omission. Fresh return rectifying the defects has to be filed within the time limit specified in the defect notice. complete and self-consistent and should also pay differential tax due. On receipt of the notice. a unilateral (ex-parte) assessment order would be passed. if any.Value Added Tax in Maharashtra Offences relating to filing of returns and payment of tax The following are the offences liable for interest / penalty / prosecution etc. complete and self-consistent.payment / non.41 - . In case the return is defective. Failure to comply with the notice would be construed as non-filing of return and consequently. which is not correct. it is required to file fresh return which is correct. The return filed by them in response to defect notice is termed as Fresh Return and the dealer should indicate so on the return in the space provided for the same.payment of tax due Failure to file returns Delay in filing returns Knowingly furnishing false returns Filing of incorrect or incomplete or inconsistent returns Consequences for filing a return. .
Revised return Subsequent to filing the return. However. In case the return filed by them is a revised return. Paying the tax due All the dealer’s or the person must file their return and should pay the tax due. For this purpose they should file application in Form 304 and submit to Returns Branch. then they can file a revised return before expiry of eight months from the end of the financial year to which the return relates or before a notice for assessment is served. then they are committing an offence and. The bank will give them an acknowledgement of the receipt of their return and payment. Such return should be accompanied by payment of tax and interest. then can ask to their local sales tax office. in a bank that is authorized to accept the return. in addition to any tax and interest that may be due. If there is any doubt that where to file the return and pay the tax due. . If they are required to file a revised return.Value Added Tax in Maharashtra Failure to file a return If dealer’s fails to file a return within the time allowed. a unilateral assessment without giving them a notice will be made. if any. This unilateral assessment order is non-appealable. they can get this assessment order cancelled only by filing the return and paying the tax and interest due as per the return. whichever is earlier. then they should pay the balance amount which is due now.42 - . and the tax due exceeds the amount which they had paid when submitted earlier form. then they should indicate it on the return form in the space provided for the same. which is liable to a penalty. in case dealer notices any error or omission. As no return has been filed by them.
The first return is due for the quarter ending on 31st December (covering..Value Added Tax in Maharashtra The various types of returns and their description have been summarised as under: Type Of Return Original Fresh Revised Description The return filed by the dealer originally along with the payment in the bank. then the date of effect registration is 10th December i.e. Example 2 If turnover exceeds the threshold on 1st November. Filing of returns in special cases The first return for the newly registered dealer is for the period up to the end of the quarter containing the date of its registration. and the registration is granted on l0th December. which is granted on 30th November and the date of effect is 1st November. But dealer apply late for registration i. Example 1 The turnover exceeds the threshold on 1st November. . Then they should apply for registration. on 10th December.e. The first return is for the quarter ended 31st December covering the period 1st. the period 10th December to 31st December). . Date of application. April to 31st December. and the second return is for the quarter ending following 31st March. The return filed by the dealer after the department issues a defect notice.43 - . The return filed by them to correct any error or omission.
then dealer must file: • • a quarterly return.Value Added Tax in Maharashtra Filing of return in case of cancellation of registration Dealer’s registration may be cancelled if they discontinue. before 15th December. that is. for the remainder of that financial year. The return should be filed within one month. for the period from the first day of the quarter in which the event occurs to the date the Certificate of Entitlement ceases. When the validity of the Certificate of Entitlement ends.44 - . in form 224. Example If dealer’s file the returns quarterly and their. Dealer under the Package Scheme of Incentives If dealer’s hold a Certificate of Entitlement granting an exemption from payment of tax or deferment of payment of tax. file a quarterly return. then their final return will be for. the period and frequency of the returns will be determined on the basis of the tax liability or entitlement for refund of the preceding financial year. in Form 224. and a quarterly return. last return was for the quarter ending 30th September. For succeeding years. . They must continue to file quarterly return till the Certificate of Entitlement remains valid. in form 221 or 222 or 223 as the case may be. They may also choose to cancel their registration if their turnover falls below the threshold limit. transfer or sell the business. it should be for the unit which is eligible for the incentives. the period 1st October to 15th November. If a dealer closes the business on 15th November.
if any. . complete and self-consistent returns are filed at all the locations in the State.Value Added Tax in Maharashtra Filing multiple returns Dealers are required to file a single return at its principal place of business for all its businesses or places of business. However. the notified person who has engaged the works contractor is obliged to deduct tax at the specified rate from the amount payable to the works contractor. then they must apply for Form 211 for permission to file multiple returns. excluding the amount of tax. separately charged or service tax levied by the contractor. If they desire to file separate returns for separate places / divisions. Tax deduction at source by an employer in a works contract The works contractor is obliged to pay the tax on the works contracts executed by him. The employer is required to deposit this tax and issue a certificate of tax deduction at source in the prescribed format based on which the works contractor is allowed to take the credit of the same while discharging his tax liability.45 - .e.. The tax amount so deducted and paid to the Government treasury IS considered as a payment made on behalf of the works contractor. the employer i. Dealer should ensure that correct.
sales and deliveries of goods. registers and documents relating to their stocks of goods.Records and accounts Keeping records Proper records are an essential part of effective management and control of their business. This will also help them to correctly quantify their tax liability or refunds. Dealers are required by law to keep a true and accurate account of the transactions effected by them. at their place of business. Nature of records Normally. this department will not expect them to keep any special records for VAT purposes. If they wish to keep them at a different location they may do so. interstate sales & exports. informing dealers about what records they must keep. interstate purchase & imports. However. They should keep all their accounts. o local purchases.46 - . then they will issue a notice. as the case may be. the records that they do keep should have sufficient details to enable them to correctly calculate the amount of VAT due for payment and file their return. distinguish between o local sales. purchases. but only if they have the permission of the Commissioner of Sales Tax.Value Added Tax in Maharashtra Part 6 . . If Sales Tax Office happens to find that their records are not properly maintained. A dealer should maintain the following records: • • to identify the nature and value of goods purchased and sold.
o local purchases from registered dealer with VAT shown separately. the quantity and price of the goods sold. However. • • • • record payments for the purchases and sale of goods in cash book / bank book. or a bill or cash memorandum. dealers name. they should issue a tax invoice when they sell goods to another registered dealer and charge VAT. For sales made to consumers and unregistered dealers. VAT charged on sales. include a summary of VAT paid separately on purchases. . o purchases from URD.Value Added Tax in Maharashtra • indicate value of o sale and purchase of tax free goods. if a dealer is a composition dealer other than a works contractor. serial number of the invoice. be supported by invoices for all goods purchased. description of the goods. and bills or cash memoranda. the name. The tax invoice must contain: • • • • • • • the words 'Tax invoice'. and copies of invoices. rate and the amount of the tax charged and indicated separately. address and the registration number of the purchaser. VAT paid to the State treasury and VAT refundable / refunded to the dealers. they must issue a tax invoice. date of issue. o sales exempted from tax.47 - . issued for goods sold. contain adequate proof that goods have been exported or imported. address and registration number (TIN). printed in bold letters at the top or at a prominent place. they must issue a bill or cash memorandum only and not a tax invoice. o rate-wise purchases & sales. Tax invoices and memoranda of sales or purchases As a registered dealer. Failure to issue a tax invoice or a bill or cash memorandum may result in a penalty.
prescribed declaration' regarding validity of the registration and payment of tax. it must contain: • • • • • • • • words 'Bill / cash memorandum'. serial number of the bill / cash memorandum. if a dealer is 'a composition dealer (other then works contractor) then the words Composition Dealer at the top of the bill / cash memorandum. If a dealer issues a bill or cash memorandum. date of issue. address and registration number (TIN). And it must also be signed either by dealer or by someone who is authorized by the dealer. purchases. description of the goods.Value Added Tax in Maharashtra • prescribed declaration regarding validity of the registration and payment of tax. Retention of records A dealer must keep all their records including tax invoices / bill / cash memorandum. sales. dealers name. the records pertaining to that period should be retained till the proceedings reach finality. . the quantity and price of the goods sold. printed in bold letters at the top or at a prominent place. in case any legal proceedings are pending. relating to their stock of goods.48 - . the name and address of the purchaser. However. And it must also be signed either by dealer or by someone who is authorized by the dealer. deliveries and payments made or received for the purchase or sale of goods for a minimum of five years from the end of the year to which they relate.
they may require dealer to produce all their books of accounts.49 - . Production and inspection of accounts and documents If the concerned sales tax authorities have reason to believe that there may have been attempts to evade the payment of tax. If a dealer fails to comply with such a requirement. it may commit an offence and will be liable to a penalty.40lakhs. The Chartered Accountant's audit report. or if they hold a license for the manufacture or sale of liquor. then they may be liable to a penalty. to be made on Form 704 and it must be submitted within 8 months from the end of the financial year. . then they must have their books of accounts audited by a practicing chartered accountant.Value Added Tax in Maharashtra Independent audit of accounts by a Chartered Accountant If dealers’ annual turnover of sales exceeds Rs. If they fail to submit the audit report to the Sales Tax Department within the prescribed time.
.Value Added Tax in Maharashtra Part 7 . The returns filed by the dealers will be examined for discrepancies. The selection of audit cases will be by exception rather than as a rule. cross check of transactions and initiate corrective actions. Selection for audit The main purpose of an audit is to ensure tax compliance. complete and self consistent returns will normally not be selected for audit.50 - . The aim of Business audit is to encourage the highest possible level of voluntary compliance in a system of self-assessment. A dealer who consistently and regularly complies with the VAT law and files correct. on the basis of certain criteria. This audit is independent from the audit by a Chartered Accountant. if necessary. cases selected for audit will include those dealers – • • • who file its returns late in whose case they have reason to believe that the return may not be correct or a detailed scrutiny is necessary chosen randomly.Business Audit Business Audit is a new function of the Sales Tax Department. Business Audit is however. This will be conducted by the Sales tax officials ordinarily at the dealer's place of business. Generally. some dealers will be selected for audit. Based on such examination and pre-determined criteria. It aims to ensure optimum revenue collection and voluntary compliance. not an activity of enforcement for search and seizure at dealers' business premises. Objectives of Business Audit The objective of a Business audit is to close any possible gap between the tax declared by' a dealer and the tax legally due.
. The audit officer will inspect the books of accounts and supporting documents. The audit may result in additional tax demand or a refund. At that time dealer should make available any information or documents that he may require to enable him to carry out the audit effectively and speedily. then Sales Tax Office will inform them and then fix a suitable date. However. audit officer can request for copies. The audit officer may like to understand dealer’s business process and examine their stocks of goods.Value Added Tax in Maharashtra The Business Audit Process If any of the dealers business is selected for an audit. The audit officer cannot remove any books of accounts or documents from their premises. then the auditor may discuss the matter with the dealer and will give guidance to them to prevent recurrence and will also explain them about what action should be followed.51 - . Results of the audit If the audit shows that the returns filed do not reflect the true picture of the dealers business. He may also like to interview the person or its employees for this.
then they should file a revised return along-with the payment of tax. if the department suspects any tax evasion. Such investigation will be carried out by a duly authorized investigation officer (not audit officer). They may follow the timelines as prescribed for completion of assessments under the MVAT Act and MVAT Rules. However. Normally. then they may proceed to assess their case and issue an assessment order unless they are able to provide evidence and convince the audit officer not to assess them for additional demand. Time limit for audit There is no time limit prescribed for conducting Business Audit. Investigation Normally. If the dealer accepts the additional demand shown. it may conduct investigation of the business including search and seizure operations at any time without giving notice. they may also impose a penalty. they may carry out an audit within two years of filing the return. the Sales Tax Department will make Business Audit visits by appointment.Value Added Tax in Maharashtra Additional tax demand If any additional tax is due. if the dealer disagrees with the findings of the auditor. The assessment order will also include interest due from the date they should have paid the tax to the date of the assessment. . In addition. They should pay the dues as per the assessment order or they may prefer an appeal against this order.52 - . However. the auditor will issue a notice explaining the additional demand.
dealer’s appeal will be. in the first instance. The Tribunal The Tribunal consists of equal number of judicial and technical members. However. where the Commissioner. senior ex-officers of the Sales Tax Department. Also. its appeal is directly to the Tribunal.53 - . (The order will show the designation of the officer. They can also file an appeal against any other order passed in their case. then they may make a second appeal to the Tribunal. they can not appeal against an unilateral assessment order passed as a consequence of non filing of returns. .Value Added Tax in Maharashtra Part 8 . or a Joint or Additional Commissioner issues the order. The latter are ordinarily. to the departmental appellate authority. Appeals cannot be filed against certain interlocutory proceedings or orders.) If the dealer is not satisfied with the decision of the departmental appellate authority. There are two appeal bodies. They may also appeal against an order for the charging of interest or the imposition of a penalty.Appeals A dealer may appeal against an assessment order if they do not agree with the amount assessed. the first is the departmental appeal officers and the second is the Maharashtra Sales Tax Tribunal ('Tribunal'). Appeal bodies Normally.
100/-. then they may apply.maharashtra.in A dealer must make sure that the form is fully and correctly completed. subject to a maximum of Rs. If again they fail to do so. If there are any mistakes or omissions.Value Added Tax in Maharashtra Filing an appeal Dealer’s appeal must be made. They can get a copy of the form from the local sales tax office or can download it from the Sales Tax Department website www. The appellate authority will take appropriate decision.54 - . . then they will be advised and given an opportunity to correct them. Dealer must make their said application on Form 311 which can be simultaneously filed along-with the appeal. dealer must pay a fee through a challan in Form 210.vat. then they may apply for stay an order to the extent of any amount to be paid by the appellant pending disposal of their appeal. the fee is one tenth of a percent (0. within 60 days of the date of service of the order against which they are appealing. In all other cases. using Form 310.1000/-.1%) of the amount in dispute. Before making an appeal. Appeal rejected If the dealer’s appeal is rejected on the ground of non-attendance. the fee is Rs.gov. then their appeal will be rejected. it again within 30 days for the restoration of the appeal citing sufficient reasons. Application to stay the order In case dealers prefer as an appeal against an order of demand. If the amount involved in their appeal is one lakh rupees or more.
And they must pay the appropriate fee through a challan in Form 210. After considering their arguments and evidence. After examining their arguments and evidence. dealer and legal adviser if any together . then the appellate authority will give them a minimum of 10 days' notice of the date. Dealer may present their case and evidence before the Tribunal through their legal representative. then they may file a second appeal within 60 days to be heard by the Tribunal Appeal to Tribunal Dealer should file their appeal to the Tribunal in Form 310. If the dealer is not satisfied with the appeal officer's decision.will be given an opportunity to explain their reasons for making the appeal and to support their case by producing evidence. The hearing may be adjourned or postponed upon the dealer’s request if deemed fit by the appellate authority. The Appeal hearing At the appeal hearing.55 - .Value Added Tax in Maharashtra Appeal accepted If dealer’s appeal is admitted. . the appeal officer will confirm or modify the order under appeal. taking care to ensure that they provide all the information relevant to their appeal as required by the form. the Tribunal will pass appropriate order confirming or modifying the order under appeal or remanding the case for fresh order to the lower authority with appropriate directions. The proceedings before the Tribunal will be similar to those outlined above. place and time of the appeal hearing (unless they request an earlier hearing).
But they must demonstrate that.Value Added Tax in Maharashtra In addition. there are two important differences: 1. having become aware that their appeal was late. an appeal can be filed before the High Court. Late appeals A late appeal may be admitted provided that they have a good reason for not making the appeal within the time allowed.56 - . then they will be liable to such costs as the Tribunal may award. especially on points of facts. Appeal to the High Court Dealer may appeal to the High Court within 120 days of receiving the order from the Tribunal. The decision of the Tribunal is final. However. If the dealer fails to attend the hearing by the Tribunal. then they had made the appeal without further delay. subject only to an appeal to the High Court if the case involves a substantial question of law. The Tribunal has the discretionary power to award costs. 2. or the department. A statement setting out in detail the point(s) of law to be decided must accompany the appeal memo. such filing of an appeal to the high court shall not affect their liability for payment of tax / claim of refund as per the order of the Tribunal. If the dealer. . are not satisfied with the decision of the Tribunal and believe that the disagreement involves a substantial question of law.
57 - . if the dealer is a senior citizen aged 75 years and over. However.Value Added Tax in Maharashtra Priority hearings for senior citizens Appeals are normally heard keeping in view the two criteria of the age of the appeal and the stakes involved. . then they may apply (using Form 313) for priority to be given to the hearing of their appeal.
The purpose of the advisory visit is to ensure that the dealer understand how to maintain books of accounts. The advisory visit team will also verify the details submitted by the dealer at the time of registration. . Advisory visits In case of a newly registered dealer. Dealer can also use this opportunity to get their queries. Dealer’s valued suggestions / input will help the Sales Tax Office to improve their system and will serve the dealer better. The Sales Tax Department will then contact them to arrange a visit to the dealer’s place of business at a convenient time.Tax Payer Services Sales Tax Office expects from the dealer to comply with the law and fulfill their obligations to pay their taxes correctly. Sales Tax Office will provide certain services and facilities to help the dealer in this regard. Dealers are expected to make available the necessary information and documents at the time of the visit. claim set-off. Some of the important ones are listed below. the Sales Tax Department is trying to ensure that the dealer do not incur any penalties or interest by failing to comply with the legal requirements of being a registered dealer. doubts clarified.58 - . an advisory visit will follow shortly after the dealer receives their new VAT Registration Certificate. By providing such information. and timely.Value Added Tax in Maharashtra Part 9 . The Sales Tax Department would appreciate the dealer’s feedback on the usefulness of the advisory visit. file their return and pay their tax correctly.
Each Central Repository issues various statutory forms prescribed under the CST Act.00 1. However.gov. The Dealer has to submit an application in the prescribed format for supply of statutory forms along with the 'Statement of Requirement' which is available in every Sales Tax Office or can be downloaded from the Sales Tax Office website www.maharashtra.Value Added Tax in Maharashtra Central Repository for Issuance of Statutory Forms A Central Repository has been set up in every Sales Tax Office having Registration branch. However. .59 - .00 3.00 1.) The statutory forms will be issued on a quarterly basis only after the transactions of the said quarter are completed.vat.in Dealers will be issued the requisite number of forms on payment of the following fees by way of court fee stamps only: SR. Form I will be issued to the SEZ units from the office of the Commissioner of SEZ. 1 2 3 4 5 Type of Form C F H E-I E-II 3.No. form F will be issued on a monthly basis.00 3. to the dealers registered within the jurisdiction of the concerned registration office.00 Fee per form (Rs.
the price on which tax is payable. whether set off can be claimed in a particular transaction. However. also dealer may apply to the commissioner for determination of the particular question. then they may appeal to the Tribunal against the order. whether a particular transaction is a sale. .60 - . if the Sales Tax Department has commenced assessment proceedings or if the case is pending in appeal. If the dealer disagrees with the commissioner's ruling. dealer can not apply for determination of disputed. TINXSYS can be used by any dealer to verify authenticity of his counter part dealer in any other State.Value Added Tax in Maharashtra TINXSYS Tax Information Exchange System (TINXSYS) is a centralized exchange of all CST dealers spread across various States and Union territories of India. An illustrative list of such questions is given below: • • • • • whether a person is liable to be registered as dealer. Determination of disputed questions If the dealer wants to find out the correct interpretation on certain issues related to the taxation matter. what is the rate of tax on a particular commodity. The TINXSYS will also help the States in cross checking the interstate transactions on a real time basis. Dealer will be given an opportunity to present their case before the Commissioner makes an order. question. The pilot phase of TINXSYS has commenced and the Maharashtra Sales Tax Department is an active partner in the system.
Value Added Tax in Maharashtra Tax clearance certificates If dealer wishes to apply for a tax clearance certificate.61 - . Dealer can actively participate and can provide their valuable feedback / suggestions during these meetings. The website has been divided into five sections as under: What's new? Dealer will get all the latest notifications / circulars that are issued by the Sales Tax Department in this section. periods for which Sales Tax Office have made al1 assessment. The Website (www.maharashtra. Service Cell The service cell meetings are held at the Head Quarters in Mumbai once in every quarter.vat. Dealer should apply for a certificate using Form 414. Sales Tax Office will issue the certificate based on the dealer’s record.in) Sales Tax Office has developed a Website for serving all the dealers or person in a more efficient and faster way.gov. status of any pending proceedings. . and any amounts of tax outstanding and due for payment. Sales Tax Office will provide the same within 15 days of their request. It will show the • • • • • periods for which dealer have filed returns. periods for which dealer has not filed a return.
This section also contains the information as required by the Right to Information Act. also includes the notifications and Circulars issued under the MV AT Acts as well as earlier Acts. Dealer can also obtain various declaration forms as prescribed under the Central Sales Tax Act. through online requisition of these forms. Knowledge Center This section is a repository of the MVAT Act & MVAT Rules and.Value Added Tax in Maharashtra General Information This section. Tax Payer Services This section contains the soft copies (downloadable format) of the forms that have been prescribed.62 - . contains general information on the Sales Tax Department such as statistical information with regard to the. tax collection location of all their offices in the State. The web links menu of this section connects dealers to the relevant important websites including the websites of other States Sales Tax Department. Communication Centre This section facilitates the communication process wherein dealer can post their queries. Dealer may also be able to post their valuable feedback / suggestions. Dealer can find out their Tax Identification Number (TIN) and also TIN of other dealers by using various search criterion. .
Recovery.63 - . interest is payable in addition to the tax due. there is a system designed to recover unpaid tax and to deter dealers from trying to avoid paying tax. In order to operate effectively. . And so. The self-assessment return requires the dealer to pay the tax due at the time of submission of the return. But there will be occasions when a dealer does not pay the tax that is due. Offences and Penalties Recovery of unpaid tax VAT is a self-assessed tax. interest or penalties remain unpaid. If necessary. If this dealer does not pay the tax that he has declared. officials of the Sales Tax Department may call for the records from the defaulting dealer to examine and obtain the necessary details. Attachment proceedings The department may also recover the amounts due by attaching the defaulting dealer's moveable or immoveable property under the provisions of Maharashtra Land Revenue Code. or if only pays a part of the tax due. Attachment of Bank Account Where any tax. the self-assessment system relies on the expectation that every dealer will deal with his tax matters promptly and honestly. the department may issue an attachment notice to the dealer's bank and to his debtors.Value Added Tax in Maharashtra Part 10 .
it will initiate prosecution proceedings through police. The VAT law outlines a number of offences and the financial and other consequences that follow. vouchers or any other certificate or declaration) which the dealer knows or has reason to believe is false. cash memoranda. keeps false account of the value of goods bought or sold. In addition.64 - .Value Added Tax in Maharashtra If the department is still unable to recover the amounts of tax. He may be liable for criminal proceedings including imposition of fine . interest will be charged on any tax paid late at the rate of 15% per year. files a false return. Offences The principal offences. each of which has been referred to in the text of this guide. are as follows: If a person • • • • • poses as a registered dealer when they not registered. registers or documents or provides false information. issues any document (including bills. interest and penalties plus any costs incurred in the attachment proceedings. produces false accounts.
the dealer may be prosecuted and a fine may also be imposed. If the dealer: • • transfers any assets of his business with the intention of not paying tax. provides to Sales Tax Department the PAN allotted to the business.65 - . when required. In these circumstances. Financial penalties or fines There are various financial penalties.Value Added Tax in Maharashtra In addition. produce his accounts for inspection. declares the name of the manager. when required issues a tax invoice. dealer is committing an offence and if he fails to • • • • • • • • • register when his turnover exceeds the. get his accounts audited. or fails to respond to a notice requiring him to provide statistical information. when required to do so by the Sales Tax authorities because the existing records are inadequate. keeps proper accounts. Dealer will be liable to a fine and may also face prosecution. provides information about changes to his business. bill or cash memorandum. each depending on the nature of the offence: . There are two other events that may also give rise to a penalty. threshold. files a return.
000/.000/-.100/- . registers or documents.000/.000/-.Value Added Tax in Maharashtra Tax related Some offences attract a maximum penalty in proportion to the amount of tax due. false tax invoices.000/-. not exceeding Rs.2. but this is without prejudice to any other penalties that may be imposed.66 - . the penalty will be reduced to Rs1.100/-. complete and self-consistent. after the issue of summons. bill or cash memorandum.1. If dealer files the return late but before any penalty proceedings have started.plus a continuing daily penalty of Rs. the Tribunal or the Sales Tax authorities may impose a fine.2. whichever is higher. the penalty is Rs1. If the dealer avoids paying the correct amount of tax as a result of issuing bogus. Non Tax Related Penalties If the dealer fails to file a return.5. Most other offences attract a penalty of Rs. issues or produces a documents. If the dealer’s return is not correct. that results in a person or dealer not paying the correct amount of tax The penalty is an amount equal to the tax due.although there is also a provision for some offences to attract a penalty of Rs. the dealer fails to attend any proceedings or to produce books of account. including tax invoice. If. within the time allowed. the penalty is Rs. If the dealer: • • conceals or misclassifies any transaction or provides inaccurate information or claims a set off in excess of the amount due or.000/-. the maximum penalty is an amount equal to half of the tax under assessed or Rs.
Value Added Tax in Maharashtra Payment of Penalty or Fine As a result of proceedings. Dealer should make the payment using Form 210 through the bank where he normally files his return. Sales Tax Authority may issue a demand notice containing details of tax. investigation. that are imposed. The dealer should pay the amount due within 30 days of the date of the order. such as audit. if any..67 - . assessment etc. interest and penalties. .
68 - . PSI dealers and 5 222 notified Oil Companies. 2002 Return-cum-chalan for all VAT dealers other than dealers executing works contract. Form Subject Application for Registration under the MV AT Act. leasing. Chalan in respect of payment made otherwise than with return by a dealer under the MVAT Act. (Transactions by OIL Companies relating to the business of execution of works contracts. Number 1 101 2 103 3 210 4 221 Certificate.Value Added Tax in Maharashtra Appendix 1 List of important forms referred to in the Guide Sr. Return-cum-chalan for all composition dealers whose entire turnover is under composition (excluding works contractors opting for composition and dealers opting for composition only 6 223 for part of the activity of the business). Return-cum-chalan for VAT dealers who are also in the business of executing works contracts. dealers engaged in leasing business. leasing and composition only for part of the . leasing and dealers opting for composition only for part of the activity of the 7 224 business. Return-cum-chalan for PSI dealers holding Entitlement No. 2002. (Transactions by PSI dealers relating to the business of execution of works contracts. Return-cum-chalan for Notified Oil Companies. composition dealers (including dealers opting for composition only for part of the activity of the business). trading and composition only for part of the activity of the business to be 8 225 included in a separate return in Form 223). Application for cancellation of Registration Certificate.
10 11 12 13 14 310 311 414 501 704 2002. Application for cancellation of assessment order under section (1) of section 23 of the Maharashtra Value Added Tax Act.69 - . 2002.Value Added Tax in Maharashtra activity of the business. Application for grant of stay against order of assessment. penalty. Application for refund under sub-section (1) of section 51 of the Maharashtra Value Added Tax Act. . Appeal against an order of assessment. Audit report under section 61 of the Maharashtra Value Added Tax Act. interest. interest or fine Application for tax clearance certificate. penalty or fine. to be inc1uded in a separate return in 9 304 Form 223). 2002.
Value Added Tax in Maharashtra List of Sales Tax Offices in the State of Maharashtra There are total 40 Sales Tax Office located all over the Maharashtra. Wardha. and many more… . Solapur. Kolhapur (Division). Pune (Division). Ratnagiri. Raigad (Division). Out which some of them are in: Mumbai (Head Quarters). Satara. Bandra. Nagpur (Division). Thane (Division). Akola. Aurangabad (Division). Amaravati (Division). Nalasopara. Palghar.70 - . Ahmednagar. Kalyan. Nasik (Division). Sangli.
Value Added Tax in Maharashtra Conclusion .71 - .
tax4india.gov.com 3.com 4.google. www. www. 2.maharashtra.in .72 - . Value Added Tax – By Sales Tax Department. www.Value Added Tax in Maharashtra Bibliography 1.vat.