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7/24/2019 Taxation SEM 4 MCOM
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CHAPTER I
INTRODUCTION TO VALUE ADDED TAX
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
hidambaram. The document was drawn up after all states, barring !", were prepared toimplement VAT from April. #t 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. !nder VAT revenue is collected
throughout the production process without distorting any production decisions.
WHY VAT IS PREFERRED OVER SALES TAX?
$hile theoretically the amount of revenue collected through VAT is e%uivalent 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. $ith 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.
'owever, 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 minimi(es 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. )nly at consumption stage where there are no
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further transactions will there be no tax credits. +ack 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. ales 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.
#n 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 persons output is anothers input. As with
sales tax imports are treated the same way as local goods while exports are (ero- rated to
avoid anti-export bias.
otwithstanding the advantages mentioned above, it is worth noting that VAT is aconsiderably complex tax to administer compared with sales tax. #t 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 */-
0/ per cent are generally recommended. The e%uity 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 sub1ect to VAT. Thus the concept of (ero VAT rate on some items has
been introduced.
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DIFFERENCE BETWEEN VAT AND CST
!nder the T Act, the tax is collected at one stage of purchase or sale of goods. Therefore,
the burden of the full tax bond is borne by only one dealer, either the first or the last dealer.
'owever, under the VAT system, the tax burden would be shared by all the dealers from first
to last. Then, such tax would be passed upon the final consumers.
!nder the T Act, the tax is levied at a single point. !nder the VAT system, the retailers are
not sub1ect to tax except for the retail tax.
!nder the T Act, general and specific exemptions are granted on certain goods while VAT
does not permit such exemptions. !nder the T law, concessional rates are provided on
certain taxes. The VAT regime will do away with such concessions as it would provide the
full credit on the tax that has been paid earlier.
!nder VAT law, first, the dealer pays tax on the sale or purchase of goods. The subse%uent
dealer pays tax on the portion of the value added upon such goods. Thus, the tax burden is
shared e%ually by the last dealer. To illustrate the whole procedure of VAT, an example is as
follows2
At the first point of sale, the value of goods is 3s.*//. The tax on this is *0.45. Therefore,
the net VAT would be *0.45. At the second change of sale, the sale value is 3s.*0/ and the
tax thereon is *45. The tax that is to be paid at every point is *45. The input tax is *45. The
dealer will get a credit for first change in sale of 0.45-- i.e. *45 -*0.45. Therefore, 0.45
will be the net rate. At the third change of sale, the sale value is 3s.*4/ and the tax on this is
*6.745. At the last stage, the tax paid is *6.745. The #nput Tax is *6.745. 8ealers get a
credit for second change in sale9 i.e. *6.745 -*45 : ;.745. Therefore, ;.745 would be the
net VAT. This means that VAT is paid in the last point tax under the sale tax regime.
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WHO GAINS?
tate and entral 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. 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. This transparency and in-built incentive for compliance
would increase revenues. #ndustry and trade gain from transparency and reduced need to
interact with the tax personnel. =or those who have been complying with taxes, VAT would
be a boon that reduces the cost of the product to the consumer and boosts competitiveness.
VAT would be ma1or blow for tax evaders, both manufacturers who evade excise duty
payments and traders who evade sales-tax.
WHATLL BE THE TAX BURDEN?
The overall tax burden will be rationali(ed as itll be shared by all dealers, and prices, in
general, will fall. >oreover, VAT will replace the existing system of inspection by a system
of built-in self-assessment by traders and manufacturers. The tax structure will become
simple and more transparent and tax compliance will improve significantly. #t will also be
simpler and offer easy computation and easy compliance. VAT will prevent cascading effect
through input rebate and help avoid distortions in trade and economy by ensuring uniform tax
rates.
WHO PAYS?
All dealers registered under VAT and all dealers with an annual turnover of more than 3s 4
lakh will have to register. 8ealers with turnovers less than 3s 4 lakh may register voluntarily.
HOW TO PAY?
VAT will be paid along with monthly returns. redit will be given within the same month for
entire VAT paid within the state on purchase of inputs and goods. redit thus accumulated
over any month will be utili(ed to deduct from the tax collected by the dealer during that
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month. #f the tax credit exceeds the tax collected during a month on sale within the state, the
excess credit will be carried forward to the next month.
WHICH GOODS WILL BE TAXABLE UNDER VAT?
All goods except those specifically exempt. #n fact, over 44/ items will be covered under the
new tax regime, of which ?@ natural and unprocessed local products would be exempt from
VAT. About 07/ items, including drugs and medicines, all agricultural and industrial inputs,
capital goods and declared goods would attract ?5 VAT. ut, following opposition from
some states, it was decided that states would have option to either levy ?5 or totally exempt
food grains from VAT but it would be reviewed after one year. Three items < sugar, textile,
tobacco < under additional excise duties will not be under VAT regime for one year but
existing arrangement would continue.
OTHER CONSIDERATIONS
#t is imperative that policy makers in considering adoption of VAT should be interested in the
economy wide impact of this tax. pecial emphasis is often placed on its effect on e%uity,
prices and economic growth. This is particularly important because of the potential effects on
consumption of certain commodities that have a direct or indirect effect on labour
productivity.
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VAT EFFECT ON INFLATION
#n considering the introduction of VAT, countries are often concerned that it would cause an
inflationary spiral. 'owever there is no evidence to suggest that this is true. A survey of
)E8 countries that introduced VAT indicated that VAT had little or no effect on prices. #n
cases where there was an effect it was a one time effect that simply shifted the trend line of
the consumer price index B"#C. To guard against any unforeseen price effects the authorities
may consider a tighter monetary policy stance at the introduction of VAT.
DISTRIBUTION EFFECTS OF VAT
Value added tax is widely critici(ed as being regressive with respect to income that is its
burden falls heavily on the poor than on the rich. This emanates from the fact that
consumption as a share of income falls as income rises. 'ence a uniform VAT rate falls
heavily on the poor than the rich. This criticism is valid when VAT payments are expressed
as a proportion of current income. 'owever if, 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. A proportional burden would also
be demonstrated if lifetime income rather than current income is used. A lifetime income
concept considers the fact that many income recipients are only temporarily at lower income
brackets as their earnings increase. #n order to address the regressivity of VAT the following
measures can be taken2
D 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 (ero rate or to tax luxury goods
at a higher than standard rate.
D VAT exemptions may also be granted on goods and services that are consumed mostly
by the poor.
D E%uity concerns may also be addressed through other ways, outside the VAT system,
such as other tax and spending instruments of government. This could be in the form of
lower basic income tax rates on the poor or some pro-poor expenditures of government. The
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use of multiple rates of VAT has however been widely discouraged for various reasons.
These include2
D The fact that sometimes it is almost impossible to differentiate between higher
%uality expensive products & e.g. food, consumed by the rich and ordinary products
consumed by the poor. Thus any concessions extended may tend to benefit the rich much
more than the poor.
D #ncreased 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.
D significantly increased costs of tax compliance for small firms, which are usually
unable to keep separate recordsaccounts for sales of differently taxed items. This resultsin the use of presumptive methods of determining the tax liability, which leads to
more difficulties in monitoring the compliance. 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.
Exemptions refer to situations where output is not taxed but taxes paid on inputs are not
recoverable. The rationale behind exemptions is to reduce negative distributional effects of
tax through the effect on incomes. The effects of exemption may be as follows2
D falling of revenues & exemptions break the VAT chain. #f exemptions are granted at
prior to the final sale, it results in a loss of revenue since value added at the final stage
escapes tax.
D !n-recovered taxation of some intermediate goods may lead to producers substituting
away from such inputs thus distorting the input choices of the said producers.
D Exemptions may create incentives to Fself supplyG i.e. tax avoidance by vertical
integration.
D Exemptions tend to feed on each other giving rise to a phenomenon called Fexemption
creepG. This arises from the fact that each exemption gives rise to pressures on further
exemption. =or example creating an exemption to reduce the tax burden on a particular
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commodity or goods may lead to increased pressure for exemption or (ero rating of inputs
used for the production of such a commodity.
ased on the above, it is important that care is taken when introducing exemptions in order to
avoid distortions in the production process as well as to minimi(e revenue loss resulting from
such distortions.
Hiven 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, distribution effects are
perhaps better addressed by other forms of tax and government expenditure policies which
can often be better targeted at these aims.
VAT EFFECT ON ECONOMIC GROWTH
Economic growth can be facilitated through investment by both government and the private
sector. avings by both parties are re%uired in order to finance investment in a non-
inflationary manner. ompared 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. Although VAT reduces the absolute return on saving it does not reduce the netrate of return on saving. #ncome tax reduces the net rate of return as both the amount saved as
well as the return on that saving are sub1ect to tax. #n this regard VAT may be said to be a
superior tax in promoting economic growth than income tax. ince VAT does not influence
investment decisions on firms, by increasing their costs, its effects on investment can be said
to be neutral.
FEATURES OF VAT
*. 3ate of Tax VAT proposes to impose two types of rate of tax mainly2
a. ?5 on declared goods or the goods commonly used.
b. */-*05 on goods called 3evenue eutral 3ates B33C. There would be no
fall in such remaining goods.
c. Two special rates will be imposed-- *5 on silver or gold and 0/5 on li%uor.
Tax on petrol, diesel or aviation turbine fuel are proposed to be kept out from
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the VAT system as they would be continued to be taxed, as presently
applicable by the T Act.
0. !niform 3ates in the VAT system, certain commodities are exempted from tax. 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. 8iscretion has been given to the states when it
comes to finali(ing the 33 along with the restrictions. This rate must not be less
than */5. This will ensure y doing this that there will be level playing fields to
avoid the trade diversion in connection with the different states, particularly in
neighboring states
;. o concession to new industries Tax oncessions to new industries is done away with
in the new VAT system. This was done as it creates discrepancy in investment
decision. !nder the new VAT system, the tax would be fair and e%uitable to all.?. Ad1ustment of the tax paid on the goods purchased from the tax payable on the goods
of sale All the tax, paid on the goods purchased within the state, would be ad1usted
against the tax, payable on the sale, whether within the state or in the course of
interstate. #n case of export, the tax, paid on purchase outside #ndia, would be
refunded. #n case of the branch transfer or consignment of sale outside the state, no
refund would be provided.
4. ollection of tax by sellerdealer at each stage. The sellerdealer would collect the tax
on the full price of the goods sold and shows separately in the sell invoice issued by
him
@. VAT is not cascading or additive though the tax on the goods sold is collected at each
stage, it is not cascading or additive because the net effect would be as follows2 - the
tax, previously paid on the sale of goods, would be fully ad1usted. #t will be like
levying tax on goods, sold in the last state or at retail stage.
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WHATS THE BIGGEST ADVANTAGE?
The biggest benefit of VAT is that it could unite #ndia into a large common market. This will
translate to better business policy. ompanies can start optimi(ing purely on logistics of their
operations, and not on based on tax-minimi(ation. +orries need not wait at check-points for
daysJ they can (oom down the highways to their destinations. 3educed transit times and
lower inventory levels will boost corporate earnings. =ollowing are the some more advantage
of VAT2 -
*. Simplific!i"#!nder the T Act, there are 6 types of tax rates- *5, 05, ?5, 65,
*/5, *05, 0/5 and 045. 'owever, under the present VAT system, there would only
be 0 types of taxes ?5 on declared goods and */-*05 on 33. This will eliminate
any disputes that relate to rates of tax and classification of goods as this is the most
usual cause of litigation. #t also helps to determine the relevant stage of the tax. This is
necessary as the T Act stipulates that the tax levies at the first stage or the last stage
differ. onse%uently, the %uestion of which stage of tax it falls under becomes another
reason for litigation. !nder the VAT system, tax would be levied at each stage of the
goods of sale or purchase.
0. A$%&'!m(#! "f !) pi$ "# p&*c+'($ ,""$'!nder the present system, the tax paid
on the manufactured goods would be ad1usted against the tax payable on the
manufactured goods. uch ad1ustment is conditional as such goods must either bemanufactured or sold. VAT is free from such conditions.
;. F&*!+(* '&c+ $%&'!m(#!of the purchased goods would depend on the amount of tax
that is payable. VAT would not have such restrictions. T would not have the
provisions on refund or carry over upon such goods except in case of export goods or
goods, manufactured out of the country or sale to registered dealer. imilarly, on
interstate sale on tax-paid goods, no refund would be admissible.
?. T*#'p*(#c-The tax that is levied at the first stage on the goods or sale or purchase
is not transparent. This is because the amount of tax, which the goods have suffered,
is not known at the subse%uent stage. #n the VAT system, the amount of tax would be
known at each and every stage of goods of sale or purchase.
4. Fi* #$ E.&i!/l(VAT introduces the uniform tax rates across the state so that
unfair advantages cannot be taken while levying the tax.
@. P*"c($&*( "f 'implific!i"#"rocedures, relating to filing of returns, payment of tax,
furnishing declaration and assessment are simplified under the VAT system so as to
minimi(e any interface between the tax payer and the tax collector.
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7. Mi#imi0( !+( Di'c*(!i"#the VAT system proposes to minimi(e the discretion with
the assessing officer so that every person is treated alike. =or example, there would be
no discretion involved in the imposition of penalty, late filing of returns, non-filing of
returns, late payment of tax or non payment of tax or in case of tax evasion. uch
system would be free from all these harassment
6. C"mp&!(*i0!i"# the VAT proposes computeri(ation which would focus on the tax
evaders by generating Exception 3eport. #n a large number of cases, no processing or
scrutiny of returns would be re%uired as it would free the tax compliant dealers from
all the harassment which is so much a part of assessment. The management
information system, which would form a part of integral computeri(ation, would
make the tax department more efficient and responsive.
**
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CHAPTER II
VALUE ADDED TAX IN MAHARASHTRA
1&ic2 Fl'+ Bc2
ales tax was first introduced in #ndia in the then ombay "rovince as early as >arch *I;6
where a tax was imposed on sale of tobacco within certain urban and suburban areas. #n the
year *I?@, a general sales tax was introduced levying sales tax at the last stage of sale of
goods.
The ombay ales Tax Act, *I4I introduced in *I4I underwent many changes thereafter and
in Kuly *I6*, first point tax was introduced wherein goods were classified into three main
schedules, broadly covering tax free goods, intermediate products and finished goods. The
T Act was repealed and >aharashtra Value Added Tax Act, 0//0 came into force w.e.f. *st
April, 0//4 to usher in the progressive value added tax system in place of the old sales tax
system.
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. #t promotes
transparency, compliance and e%uity and therefore, is both dealer friendly and consumer
friendly.
VAT being a multi point tax, envisages an increase in the number of dealers and is based on
the concept of self-assessment and self-compliance. #t is therefore, inevitable that the ales
Tax 8epartment transforms itself into a dealer friendly, focused and dynamic department to
cater to the ever increasing expectations of both the Hovernment and the Trade L #ndustry.
ales Tax 8epartment 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 #T system to computerise entire tax administration and
hope to provide online service to the dealers in due course. They are also realigning their
organisational structure to meet the challenges of the new system and stakeholdersM
expectations.
*0
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P*!3 4 I#!*"$&c!i"#
Bc2,*"$
>aharashtra is one of the 0* tates which have introduced the Value Added Tax BVATC
system of taxation from *st April 0//4. $ith the introduction of VAT, the ales Tax
8epartment has moved to a globally recogni(ed sales taxation system that has been adopted
by more than *;/ countries.
The design of >aharashtra tate VAT is generally guided by the best international practices
with regard to legal framework, as well as operating procedures. Another key factor in
preparation of the design of tate level VAT is the national consensus on certain issues. The
consensus has been arrived at through the discussions in the Empowered ommittee of tate
=inance >inisters on implementation of tate level VAT.
)n *st April 0//4, VAT replaced the single point sales tax. ingle point sales tax had a
number of disadvantages, primarily that of double taxation. VAT is a modern and progressive
taxation system that avoids double taxation. #n addition to offering the possibility of a set-off
of tax paid on purchases, VAT has other advantages for both business and government.
#t eliminates cascading impact of double taxation and promotes economic efficiency.
#t is primarily a self-policing, self-assessment system with more trust put on dealers.
#t provides the potential for a stronger manufacturing base and more competitive
export pricing.
#t is invoice based, and as a result it offers a better financial system with less scope for
error.
#t has an improved control, mechanism resulting in better compliance.
#t widens the, tax base and promotes e%uity.
VAT in >aharashtra is levied under a legislation known as the >aharashtra Value Added Tax
Act B>VAT ActC, supported by >aharashtra Value Added Tax 3ules B>VAT 3ulesC. VAT is
levied on sale of goods including intangible goods.
T+( m(#i#, "f 5,""$'6 f"* VAT p&*p"'('
*;
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FHoodsG means every kind of moveable property including goods of incorporeal and
intangible nature but there are some exclusion, such as newspapers, actionable claims,
money, shares and securities and lottery tickets.
usinesses engaged in. the buying and selling of goods within the scope of the VAT law are
referred to as dealers.
T+( m(#i#, "f 7'l(7 f"* VAT p&*p"'('
A transaction of sale can be a2
normal sale of goodsJ
sale of goods under hire-purchase systemJ
deemed sale of goods used # supplied in the course of execution of works contractJ
deemed sale of goods given on lease.
The rate of tax applicable to the goods sold under various classes of sales is uniform.
'owever, in respect of normal sales of goods and deemed sales of goods under works
contract and specified deemed sale of goods given on lease, the Act provides for an optional
method for discharging tax liability by way of composition. eing so, the tax liability has to
be determined with reference to the option exercised by the dealer for discharging tax
liability.
B&'i#(''(' c"8(*($ /- VAT
The VAT system embraces all businesses in the production and supply chain, from
manufacture through to retail. VAT is collected at each stage in the chain when value is added
to goods. *t applies to al* businesses, including importers, exporters, manufacturers,
distributors, wholesalers, retailers, works contractors and lessors.
*?
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P*! 9 4 R(,i'!*!i"# $(* VAT
R&l(' f"* *(,i'!*!i"#
#f a dealers annual turnover exceeds the below mentioned threshold, then it must register
with the local office of the ales Tax 8epartment.
All =igures in 3s.
ategory Annual Turnover of
ales
Turnover of sales or
purchase of taxable
goods not less than
=ees payable on
registration
#mporter *,//,/// */,/// *//
)thers 4,//,/// */,/// *//
#f the dealers turnover is less than the above threshold, then they are not liable to collect and
pay VAT. 'owever, if a dealer wishes to avail the benefits of being a registered dealer, then
they may apply for voluntary registration by paying a fee of 3s.4,/// -.
B(#(fi!' "f /(i#, *(,i'!(*($ $(l(*
As a registered dealer, they are entitled to2
collect VAT on the salesJ
claim set-off of tax Binput tax creditC paid on purchasesJ
#ssue tax invoices and, be competitive.
*4
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Eff(c!i8( $!( "f *(,i'!*!i"#
The effective date of registration, that is, the date front which a dealer may charge VAT on
salesJ will depend on the date they first become liable to pay VAT. This date will be
determined as follows2
: N(; /&'i#(''('oreover, such an option can be exercised by the contractor on contractto contract basis.
P*! 4 Clc&l!i#, !) li/ili!-
#n, order to calculate how much tax a dealer has to pay, he must, first determine his turnover
of sales and turnover of purchases. The second stage is to ascertain the amount of tax due for
payment.
Clc&l!i#, !&*#"8(* "f 'l(' #$ p&*c+'('
The turnover of sales is the total of the amounts received or receivable Bexcluding VAT
charged separatelyC in respect, of the sale of goods, less the amount refunded to a purchaser
in respect of goods returned, within six months of the date of the sale.
imilarly, the turnover of purchases is the total of the amounts paid or payable Bexcluding
VAT charged separatelyC in respect of the purchase of goods less Bthe amounts repaid to
dealer in respect of goods they return, within six months of the date of purchase.
C*($i! #"!(' #$ $(/i! #"!('=
#f the sale price, or the purchase price, of any goods is varied and either a credit note or a
debit note is issued, then the credit note or the debit note, as the case may be, should
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show separately, the tax and the price.
be accounted for in the period in which the appropriate entries are made in their books of
accounts.
Sp(cil c'('
A&c!i"#((*'
#f dealer is an auctioneer, then they must include in their turnover, the price of the goods they
auction for their principal
H"!(l'
There are special rules for hotels and other establishments that provide boarding and lodging
for an inclusive amount.
The rules provide a formula to enable them to calculate their turnover of sales for meals Bfood
and beveragesC which they provide.
The supply of food in a restaurant also includes an element of service. ut the full amount
charged is the sale price for the purposes of calculating turnover and tax.
W"*2' c"#!*c!'
VAT applies only to the sale of goods. upply of services is not liable to VAT. $orks
contracts are deemed sales where both, goods and services are provided in a transaction and
cannot be separated.A works contract may involve the creation of immoveable property, e.g. a house, a factory or
a bridge. ome other examples of works contracts are photography, repairs L maintenance
etc.
To calculate the amount a dealer should include it in their turnover of sales, so that they may
deduct it from the total contract price, the
costs of labour and service charges.
amount paid to sub-contractors.
charges for planning and designing, and any architectMs fees.
hiring charges for machinery and tools.
cost of consumables, such as, water, gas and electricity.
8ealers administrative costs relating to labour and services and any other similar
expenses.
any profit element that relates to the supply of labour and services.
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Alternatively, in lieu of the deductions as above, a dealer may choose to discharge the
liability arising on works contracts by referring to the table prescribed in the rules.
#f the dealer finds that it is too complicated to calculate the deductions, then they may opt for
a composition scheme for any works contract.
Sl(' #$ p&*c+'(' #"! li/l( !" !) $(* VAT
The VAT law specifically excludes from value added tax all imports, exports and inter-state
transactions. These transactions are covered by the T Act. imilarly, transactions that take
place outside >aharashtra are not within the scope of >VAT Act.
P"i#! "f l(8- i# c(*!i# c'('
Hi*( p&*c+'($here there is a hire purchase agreement or an agreement for sale by installments, the date of
the sale is deemed to be the date of the delivery of goods. This is despite the fact that legal
ownership of the goods only passes to the buyer after payment of the final installment.
#f the hire-purchase agreement specifies the interest component then in calculating the sales
price, dealer should disregard the interest component included in the agreement.
Clc&l!i#, !+( m"! "f VAT $&( "# 'l('
8ealer should also make some ad1ustments to the total turnover of sales to arrive at the
amount on which tax is due.
=rom the total sales one should deduct
the total of exports and inter-tate sales.
the total of sales of goods that are tax free, and
branch consignment transfers to locations in >aharashtra as well as other tates.
the tax collected.
To calculate the tax due, dealer should start allocating their turnover of sales in the return
period Bnet of the above deductionsC to the rates of tax they have been charged. They should
also ensure that the correct tax rates are applied. The information should be readily available
from their records. This gives the total of sales tax due.
Clc&l!i#, !+( !&*#"8(* "f p&*c+'('
3ecords will provide the total figure, but they may not have paid VAT on all their purchases.
They must now deduct the total value of
imports from out of #ndia.
inter-tate purchases.
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purchases of tax free goods.
direct purchases from exempted units under the "ackage cheme of #ncentives.
consignment transfers, and
local purchased from unregistered dealers.
local purchases from registered dealers not supported by tax invoice.
The resulting figure represents purchases against tax invoices from registered dealers.
Clc&l!i#, !+( m"! "f '(! "ff $&( VAT pi$ "# p&*c+'(':
This is the next stage of tax calculation. At this stage VAT is charged on total purchases.
8ealer must, however, make some ad1ustments to this amount for, in certain cases, the full set
off of the VAT paid on purchases is not available.
A$%&'!m(#!' !" !) 8il/l( f"* '(! "ff
#f dealers purchases include goods, used
o as fuel, or
o for the manufacture of any tax-free goods, or
o as packaging for tax-free goods, this goods should be sold.
Then a dealer must calculate the value of those items and deduct tax O ?5 of the
corresponding purchase price from the amount otherwise available for set off. Bot applicable
to "# dealers other than the ew "ackage cheme of #ncentives for Tourism "ro1ects, *III
and also to manufacturers of tax-free sugar or fabrics covered by Entry A ?4 and where such
goods are sold in the course of export falling under section 4 of the T Act, *I4@C.
imilarly, if the goods are stock transferred by way of branch consignment transfer to a
place outside the tate, deduct tax O ?5 B* 5 in respect of goods covered by chedule C of
the corresponding purchase price from the amount otherwise available for set off.
8ealer must also make further ad1ustments as follows2 -
#f they have been used any goods Bother than capital assetsC as part of a works contract
for which they have been opted for payment composition O 65 on the total contract
value, they must also deduct ;@5 of the amount from the set off otherwise available
B?5 of purchase price in respect of construction contracts for which they have been
opted for payment of composition O 45 on total contract valueC.
$here a dealers sales are less than 4/ 5 of their gross receipts, then they can claim
set off only on those purchases of goods or packing materials effected in that year
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where the corresponding goods are sold within six months of the date of purchase or
consigned within the said period to another tate by way of stock transfers.
#n respect of office e%uipment, furniture or fixtures which have been treated as capital
assets, a dealer should reduce set-off otherwise entitled by an amount e%ual to ?5 of
the purchase price.
#f a dealer is the retailer of li%uor vendor and its actual sale prices are less than the
>aximum 3etail "rice, there is a special formula for calculating the amount of the
ad1ustment. Effectively this means that, if a dealer sells at 745 of the >3" then they
can claim set off only to the extent of 745 of the tax paid.
A dealer can not claim any set off for the tax paid on any purchases that remain unsold
on the date when business discontinues.
All this information should be available from their records, including tax invoices and bills or
cash memorandum they have issued, and the tax invoices they have received.
S(! "ff #"! 8il/l(
There are various items on which set-off is not available such as, goods of incorporeal or
intangible character other than those specified, passenger motor vehicles, motor spirits, crude
oil, building material used for construction etc.
C"#$i!i"#' f"* climi#, '(! "ff
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.
T) p-/l(
The amount of set-off admissible can be ad1usted against tax payable. The amount of net tax
payable is the total of sales tax collected on sales less the set-off available.
R(f$ c'('
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#f the amount of set-off admissible during the period is more than the amount of tax payable,
then dealers return would reflect a balance refundable to the dealer. The amount of set-off
can be more than the tax payable for a variety of reasons, such as
#nputs are taxable at higher rate as compared with the rate of tax on output.
)utputs are tax-free goods while inputs carry tax.
)utputs are export sales.
)utputs are T sales which are taxable at the concessional rate of T.
>anufactured goods or trading goods are transferred to branches outside the tate or
are sent on consignment transfers.
Apart from part of the admissible set-off which can remain unutili(ed, excess credit can be on
account of2
unutilised portion of tax deducted at source or
refund payment order or
ad-hoc payment made is more than tax payable.
$hatever may be the reason for credit in excess of tax due and payable during a tax period,
dealers are eligible to claim refund of such excess credit. =or the purpose of granting refund,
dealers have been classified under two categories vi(. aC specified class of dealers and bC
other dealers
R(f$ !" 'p(cifi($ cl'' "f $(l(*'
pecified classes of dealers are 2 -
Exporters exporting out of the country or dealers selling to an exporter against form
'.
A unit set-up in EP or T" or E'T" or a *//5 E)! unit. These units have to be
certified by the ommissioner of ales Tax.
An Entitlement ertificate holder availing of the benefit of incentives under the
"ackage cheme of #ncentives B"#C.
pecified class of dealers and the dealers who have made a sale in the course of inter-tate
trade or commerce and in the return he has shown any amount to be refundable are eligible to
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claim refund in each of the returns filed by them. =ull amount of excess credit can be claimed
as refund due for the return period.
The dealer eligible to claim refund has to file refund application in =orm 4/*. The application
has to be filed with the 3efund ranch. The 3efund ranch may ask for ank Huarantee and
any relevant information for checking correctness of refund claimed. ormally, refund would
be granted within one month from the receipt of ank Huarantee or within three months from
the date of receipt of refund application in =orm 4/*, or as the case may be, the date of
receipt of the additional information, whichever is later.
R(f$ !" "!+(* $(l(*'
)ther dealers are not eligible to get refund in each of the return filed. They are re%uired tocarry forward excess credit to the next return within the same financial year and claim refund
of excess credit in the return for the period ending >arch.
The dealer claiming refund in >arch return has to make refund application in =orm 4/*. The
application has to be filed with the 3efund ection. ormally, refund would be granted
within six months of the end of the year to which the return relates. 'owever, refund would
be granted within six months to the new dealers at the end of the year succeeding the said
year.
A&$i! "f *(f$ clim'
The refund granted to dealer would be sub1ect to audit by the 3efund Audit ection. The
audit may be taken up before granting the refund or after the refund is granted. ormally,
refunds made against ank Huarantee would be taken up for audit after the refund has been
granted. 8uring the course of the audit, the audit team will check dealers eligibility to claim
refund and the correctness of the amount of refund claimed by them.
I#!(*('! "# $(l-($ *(f$
o interest is payable on the refund due to a dealer as per returns filed by a dealer. 'owever,
if granting of refund is delayed beyond the above mentioned periods, dealer is eligible for
interest for delayed payment. imple interest at the rate of @5 per year would be payable for
the period from the due date to the date of refund.
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S"m( !ip' f"* ,(!!i#, !im(l- *(f$
8ealers claim of refund would be processed faster if2 -
They had filed the return with the 3eturns branch as per the prescribed time schedule.
The return filed by the dealers should be correct, complete and self-consistent.
They should have claimed refund as per the appropriate periodicity.
The amount of refund due to them should be computed correctly.
3efund application in =orm 4/* is filed with the 3efunds branch in time.
They should have promptly furnished ank Huarantee 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 re%uired to file.
Thus, if they are re%uired to file a %uarterly return, but they file a monthly return, then the
refund would not be granted for the monthly return. #n order to be eligible for refund, they
would have to file a %uarterly return.
P*! 4 Fili#, *(!&*# #$ p-i#, !+( !)
VAT is a self-assessment system and dealers are expected to make self assessment for a
given tax period and declare their VAT liability by filing returns. The returns have to be filed
in the prescribed form and by the specified dates. =urther, they are also re%uired to pay the
tax due as per the return filed.
#n >aharashtra, return form is return-cum-chalan. As such, filing of returns along-with
payment of tax on or before the due date at the notified bank would be considered as
sufficient compliance. 'owever, where any amount of tax including interest or penalty is due
as per a fresh or revised return, then they should first pay such amount in Hovernment
Treasury and file the return in the local office of ales Tax 8epartment along with a self
attested copy of the chalan. #f no payment is due or a refund is claimed as per the return, they
are also re%uired to file the return in the local office of the ales Tax 8epartment.
R(!&*# f"*m'
The return forms prescribed are as follows.
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F"*m N"= T" B( U'($ B-
00* All VAT dealers other than dealers executing works contract, dealers engaged
in leasing business, composition dealers Bincluding dealers opting for
composition only for part of the activity of the businessC, "# dealers and
notified )il ompanies.
000 All composition dealers whose entire turnover is under composition
Bexcluding works contractors opting for composition and dealers opting for
composition only for part of the activity of the businessC.
00; VA T dealers who are also in the business of executing works contracts,
leasing and dealers opting for composition only for part of the activity of the
business.
00? "# dealers holding Entitlement ertificate BTransactions by "# dealers
relating to the business of execution of works contracts, leasing, frading and
composition only for part of the activity of the business to be included in a
separate return in =orm 00;C.
004 otified )il ompanies BTransactions by )#+ ompanies relating to the
business of execution of works contracts, leasing and composition only for
part of the activity of the business to be included in a separate return in =orm
00;C.
A dealer can refer to the instructions given in the form before filling the return.
"lease ensure that the return for a tax period covers all the transactions of sales, purchases,
branch transfers received, branch transfers made etc. =urther, they must ensure that all the
columns of the return are duly filled in and are clearly legible. #f a particular column is not
relevant, please do not leave it blank but mentionQ not applicableQ. The return filed by them
must be correct, complete and self-consistent.
Tim( 'c+($&l( f"* fili#, *(!&*#'
P(*i"$ici!- "f fili#, *(!&*#' i' ' f"ll";'< 4
3etailers who have opted for composition should file six-monthly returns.
ewly registered dealers should file %uarterly returns until the end of the year in
which they first register.
All package scheme dealers should file %uarterly returns.
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All other dealers should file returns as given below 2-
o 8ealers whose tax liability in the previous year was less than 3s.*,)),)))1-
B3s.*lakhC or whose entitlement for refund was less than 3s.*/,)),)))1-
B3s.*/lakhC should file six-monthly returns.
o 8ealers whose tax liability in the previous year was more. than 3s.*/,//,///-
B3s.*/lakhC or whose entitlement for refund was more than 3s.l,//,//,///-
B3s*croreC should file monthly returns.
o All other dealers should file %uarterly returns.
=iling and payment dates for return-cum-chalan are as follows2
R(!&*# F*(.&(#c- Fili#, J P-m(#! $!(
>onthly 0* days from the end of the return periodRuarterly 0* days from the end of the return period
ix >onthly 0* days from the end of the return period
Sc*&!i#- "f *(!&*#' fil($
The return filed by the dealer should be correct, complete, and self-consistent in every
respect. The ales Tax )ffice will check the return to ensure that there are no obvious errors
in consistencies or contradictions in calculations. #f this check reveals discrepancies, then the
dealers will be advised and invited to submit a fresh return. The department will issue this
defect notice within four months of receiving their return. Then they should file their fresh
return within ;/ days of the notice. #f they fail to do so, it will be deemed not to have filed the
return within the time allowed, and will so liable to a penalty charge.
At the same time, as the department issues the defect notice, dealers will be sent a Mshow
causeM notice, explaining that a penalty may be imposed.
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Off(#c(' *(l!i#, !" fili#, "f *(!&*#' #$ p-m(#! "f !)
The following are the offences liable for interest penalty prosecution etc.
hort- payment non- payment of tax due
=ailure to file returns
8elay in filing returns
Nnowingly furnishing false returns
=iling of incorrect or incomplete or inconsistent returns
C"#'(.&(#c(' f"* fili#, *(!&*# ;+ic+ i' #"! c"**(c! c"mpl(!( #$ '(lf4c"#'i'!(#!
Each of the returns filed by them is checked to confirm that the same is correct, complete and
self-consistent. #n case the return is defective, a defect notice is issued by the 3eturns ranch
pointing out the error or the omission. )n receipt of the notice, it is re%uired to file fresh
return which is correct, complete and self-consistent and should also pay differential tax due,
if any.
The return filed by them in response to defect notice is termed as =resh 3eturn and the dealer
should indicate so on the return in the space provided for the same.
=resh return rectifying the defects has to be filed within the time limit specified in the defect
notice. =ailure to comply with the notice would be construed as non-filing of return and
conse%uently, il!(*l ()4p*!(: ''(''m(#! "*$(* ;"&l$ /( p''($ .
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Fil&*( !" fil( *(!&*#
#f dealers fails to file a return within the time allowed, then they are committing an offence
and, in addition to any tax and interest that may be due, which is liable to a penalty.
As no return has been filed by them, a unilateral assessment without giving them a notice will
be made. This unilateral assessment order is non-appealable. 'owever, they can get this
assessment order cancelled only by filing the return and paying the tax and interest due as per
the return. =or this purpose they should file application in =orm ;/? and submit to 3eturns
ranch.
P-i#, !+( !) $&(
All the dealers or the person must file their return and should pay the tax due, in a bank that
is authori(ed to accept the return. #f they are re%uired to file a revised return, and the tax due
exceeds the amount which they had paid when submitted earlier form, then they should pay
the balance amount which is due now.
The bank will give them an acknowledgement of the receipt of their return and payment. #f
there is any doubt that where to file the return and pay the tax due, then can ask to their local
sales tax office.
R(8i'($ *(!&*#
ubse%uent to filing the return, in case dealer notices any error or omission, 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, whichever is earlier. uch return
should be accompanied by payment of tax and interest, if any. #n case the return filed by them
is a revised return, then they should indicate it on the return form in the space provided for
the same.
The various types of returns and their description have been summarised as under2
T-p( Of
R(!&*#
D('c*ip!i"#
)riginal The return filed by the dealer originally along with the payment in the
bank.
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=resh The return filed by the dealer after the department issues a defect
notice.
3evised The return filed by them to correct any error or omission.
Fili#, "f *(!&*#' i# 'p(cil c'('
The first return for the newly registered dealer is for the period up to the end of the %uarter
containing the date of its registration.
E)mpl( 3
The turnover exceeds the threshold on *st ovember. Then they should apply for registration,
which is granted on ;/th ovember and the date of effect is *st ovember. The first return is
for the %uarter ended ;*st 8ecember covering the period *st, April to ;*st 8ecemberJ and the
second return is for the %uarter ending following ;*st >arch.
E)mpl( 9
#f turnover exceeds the threshold on *st ovember. ut dealer apply late for registration i.e.
on */th 8ecember, and the registration is granted on l/th 8ecember, then the date of effect
registration is */th 8ecember i.e., 8ate of application. The first return is due for the %uarter
ending on ;*st 8ecember Bcovering. the period */th 8ecember to ;*st 8ecemberC. .
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Fili#, "f *(!&*# i# c'( "f c#c(ll!i"# "f *(,i'!*!i"#
8ealers registration may be cancelled if they discontinue, transfer or sell the business. They
may also choose to cancel their registration if their turnover falls below the threshold limit.
E)mpl(
#f dealers file the returns %uarterly and their, last return was for the %uarter ending ;/th
eptember. #f a dealer closes the business on *4th ovember, then their final return will be
for, the period *st )ctober to *4th ovember. The return should be filed within one month,
that is, before *4th 8ecember.
D(l(* $(* !+( Pc2,( Sc+(m( "f I#c(#!i8('
#f dealers hold a ertificate of Entitlement granting an exemption from payment of tax or
deferment of payment of tax, it should be for the unit which is eligible for the incentives, file
a %uarterly return, in F"*m 99. They must continue to file %uarterly return till the ertificate
of Entitlement remains valid.
$hen the validity of the ertificate of Entitlement ends, then dealer must file2 -
a %uarterly return, in f"*m 99, for the period from the first day of the %uarter in
which the event occurs to the date the ertificate of Entitlement ceases, #$
a %uarterly return, i# f"*m 993 "* 999 "* 99>as the case may be, for the remainder
of that financial year. =or succeeding years, the period and fre%uency of the returns
will be determined on the basis of the tax liability or entitlement for refund of the
preceding financial year.
Fili#, m&l!ipl( *(!&*#'
8ealers are re%uired to file a single return at its principal place of business for all its
businesses or places of business. #f they desire to file separate returns for separate places
divisions, then they must apply for F"*m 933for permission to file multiple returns. 8ealer
should ensure that correct, complete and self-consistent returns are filed at all the locations in
the tate.
T) $($&c!i"# ! '"&*c( /- # (mpl"-(* i# ;"*2' c"#!*c!
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The works contractor is obliged to pay the tax on the works contracts executed by him.
'owever, the employer i.e. 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,
excluding the amount of tax, if any, separately charged or service tax levied by the
contractor.. The tax amount so deducted and paid to the Hovernment treasury # considered
as a payment made on behalf of the works contractor.
The employer is re%uired 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.
P*! 4 R(c"*$' #$ cc"!'
K((pi#, *(c"*$'
"roper records are an essential part of effective management and control of their business.
8ealers are re%uired by law to keep a true and accurate account of the transactions effected
by them. This will also help them to correctly %uantify their tax liability or refunds, as the
case may be.
They should keep all their accounts, registers and documents relating to their stocks of goods,
purchases, sales and deliveries of goods, at their place of business. #f they wish to keep them
at a different location they may do so, but only if they have the permission of the
ommissioner of ales Tax.
N!&*( "f *(c"*$'
ormally, this department will not expect them to keep any special records for VAT purposes.
'owever, 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.
#f ales Tax )ffice happens to find that their records are not properly maintained, then they
will issue a notice, informing dealers about what records they must keep.
A dealer should maintain the following records2 -
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to identify the nature and value of goods purchased and soldJ
distinguish between -
o local sales, interstate sales L exports.
o local purchases, interstate purchase L imports.
indicate value of -
o sale and purchase of tax free goods.
o sales exempted from tax.
o purchases from !38.
o rate-wise purchases L sales.
o local purchases from registered dealer with VAT shown separately.
record payments for the purchases and sale of goods in cash book bank book.
include a summary of VAT paid separately on purchases, VAT charged on sales, VAT
paid to the tate treasury and VAT refundable refunded to the dealers.
contain ade%uate proof that goods have been exported or importedJ
be supported by invoices for all goods purchased, and copies of invoices, and bills or
cash memoranda, issued for goods sold.
T) i#8"ic(' #$ m(m"*#$ "f 'l(' "* p&*c+'('
As a registered dealer, they should issue a tax invoice when they sell goods to another
registered dealer and charge VAT. =or sales made to consumers and unregistered dealers, they
must issue a tax invoice, or a bill or cash memorandum. 'owever, if a dealer is a composition
dealer other than a works contractor, they must issue a bill or cash memorandum only and not
a tax invoice. =ailure to issue a tax invoice or a bill or cash memorandum may result in a
penalty.
The tax invoice must contain2 -
the words MTax invoiceM, printed in bold letters at the top or at a prominent placeJ
dealers name, address and registration number BT#C.
the name, address and the registration number of the purchaserJ
serial number of the invoiceJ
date of issueJ
description of the goods, the %uantity and price of the goods soldJ
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rate and the amount of the tax charged and indicated separatelyJ
prescribed declaration regarding validity of the registration and payment of taxJ
And it must also be signed either by dealer or by someone who is authori(ed by the dealer.
#f a dealer issues a bill or cash memorandum, it must contain2 -
words Mill cash memorandumM, printed in bold letters at the top or at a prominent
placeJ
if a dealer is Ma composition dealer Bother then works contractorC then the words
omposition 8ealer at the top of the bill cash memorandumJ
dealers name, address and registration number BT#CJ
the name and address of the purchaserJ
serial number of the bill cash memorandumJ
date of issueJ
description of the goods, the %uantity and price of the goods soldJ
prescribed declarationM regarding validity of the registration and payment of taxJ
And it must also be signed either by dealer or by someone who is authori(ed by the dealer.
R(!(#!i"# "f *(c"*$'
A dealer must keep all their records including tax invoices bill cash memorandum, relating
to their stock of goods, purchases, sales, deliveries and payments made or received for the
purchase or sale of goods for a minimum of five years from the end of the year to which they
relate.
'owever, in case any legal proceedings are pendingJ the records pertaining to that period
should be retained till the proceedings reach finality.
I#$(p(#$(#! &$i! "f cc"!' /- C+*!(*($ Acc"!#!
#f dealers annual turnover of sales exceeds 3s.?/lakhs, or if they hold a license for the
manufacture or sale of li%uor, then they must have their books of accounts audited by a
practicing chartered accountant.
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The hartered AccountantMs audit report, to be made on =orm 7/? and it must be submitted
within 6 months from the end of the financial year. #f they fail to submit the audit report to
the ales Tax 8epartment within the prescribed time, then they may be liable to a penalty.
P*"$&c!i"# #$ i#'p(c!i"# "f cc"!' #$ $"c&m(#!'
#f the concerned sales tax authorities have reason to believe that there may have been
attempts to evade the payment of tax, they may re%uire dealer to produce all their books of
accounts.
#f a dealer fails to comply with such a re%uirement, it may commit an offence and will be
liable to a penalty.
P*! 4 B&'i#('' A&$i!
usiness Audit is a new function of the ales Tax 8epartment. This will be conducted by the
ales tax officials ordinarily at the dealerMs place of business. This audit is independent from
the audit by a hartered Accountant. usiness Audit is however, not an activity of
enforcement for search and sei(ure at dealersM business premises.
O/%(c!i8(' "f B&'i#('' A&$i!
The ob1ective of a usiness audit is to close any possible gap between the tax declared byM a
dealer and the tax legally due. #t aims to ensure optimum revenue collection and voluntary
compliance. The aim of usiness audit is to encourage the highest possible level of voluntary
compliance in a system of self-assessment.
S(l(c!i"# f"* &$i!
The main purpose of an audit is to ensure tax compliance, cross check of transactions and
initiate corrective actions, if necessary. The returns filed by the dealers will be examined for
discrepancies. ased on such examination and pre-determined criteria, some dealers will be
selected for audit. Henerally, cases selected for audit will include those dealers &
who file its returns late
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in whose case they have reason to believe that the return may not be correct or a
detailed scrutiny is necessary
chosen randomly, on the basis of certain criteria.
A dealer who consistently and regularly complies with the VAT law and files correct,
complete and self consistent returns will normally not be selected for audit. The selection of
audit cases will be by exception rather than as a rule.
T+( B&'i#('' A&$i! P*"c(''
#f any of the dealers business is selected for an audit, then ales Tax )ffice will inform them
and then fix a suitable date.
The audit officer will inspect the books of accounts and supporting documents. At that time
dealer should make available any information or documents that he may re%uire to enable
him to carry out the audit effectively and speedily.
The audit officer may like to understand dealers business process and examine their stocks
of goods. 'e may also like to interview the person or its employees for this.
The audit officer cannot remove any books of accounts or documents from their premises.
'owever, audit officer can re%uest for copies.
R('&l!' "f !+( &$i!
#f the audit shows that the returns filed do not reflect the true picture of the dealers business,
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. The
audit may result in additional tax demand or a refund.
A$$i!i"#l !) $(m#$
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#f any additional tax is due, the auditor will issue a notice explaining the additional demand.
#f the dealer accepts the additional demand shown, then they should file a revised return
along-with the payment of tax.
'owever, if the dealer disagrees with the findings of the auditor, 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. The assessment order
will also include interest due from the date they should have paid the tax to the date of the
assessment. #n addition, they may also impose a penalty. They should pay the dues as per the
assessment order or they may prefer an appeal against this order.
Tim( limi! f"* &$i!
There is no time limit prescribed for conducting usiness Audit. ormally, they may carry
out an audit within two years of filing the return. They may follow the timelines as prescribed
for completion of assessments under the >VAT Act and >VAT 3ules.
I#8('!i,!i"#
ormally, the ales Tax 8epartment will make usiness Audit visits by appointment.
'owever, if the department suspects any tax evasion, it may conduct investigation of the
business including search and sei(ure operations at any time without giving notice. uch
investigation will be carried out by a duly authori(ed investigation officer Bnot audit officerC.
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CHAPTER III
APPENDIX
+ist of important forms referred to in the Huide
S*=
N"=
F"*m
N&m/(*
S&/%(c!
* */* Application for 3egistration under the >V AT Act, 0//0.
0 */; Application for cancellation of 3egistration ertificate.
; 0*/ halan in respect of payment made otherwise than with return by a
dealer under the >VAT Act, 0//0
? 00* 3eturn-cum-chalan for all VAT dealers other than dealers executing
works contract, dealers engaged in leasing business, composition
dealers Bincluding dealers opting for composition only for part of the
activity of the businessC, "# dealers and notified )il ompanies.
4 000 3eturn-cum-chalan for all composition dealers whose entire turnover
is under composition Bexcluding works contractors opting for
composition and dealers opting for composition only for part of the
activity of the businessC.
@ 00; 3eturn-cum-chalan for VAT dealers who are also in the business of
executing works contracts, leasing and dealers opting for composition
only for part of the activity of the business.
7 00? 3eturn-cum-chalan for "# dealers holding Entitlement ertificate.
BTransactions by "# dealers relating to the business of execution of
works contracts, leasing, trading and composition only for part of the
activity of the business to be included in a separate return in =orm
00;C.6 004 3eturn-cum-chalan for otified )il ompanies. BTransactions by )#+
ompanies relating to the business of execution of works contracts,
leasing and composition only for part of the activity of the business,
to be inc*uded in a separate return in =orm 00;C.
I ;/? Application for cancellation of assessment order under section B*C of
section 0; of the >aharashtra Value Added Tax Act, 0//0.
*/ ;*/ Appeal against an order of assessment, interest, penalty or fine.
** ;** Application for grant of stay against order of assessment, penalty,
interest or fine
*0 ?*? Application for tax clearance certificate.
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*; 4/* Application for refund under sub-section B*C of section 4* of the
>aharashtra Value Added Tax Act, 0//0.
*? 7/? Audit report under section @* of the >aharashtra Value Added Tax
Act, 0//0.
?@
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Li'! "f Sl(' T) Offic(' i# !+( S!!( "f M+*'+!*
There are total Sl(' T) Offic( located all over the >aharashtra. )ut which some of
them are in2 M&m/iB'ead RuartersC, andra, 3aigad B8ivisionC, Thane B8ivisionC, Nalyan,
alasopara, "alghar, "une B8ivisionC, olapur, Nolhapur B8ivisionC, atara, angli, 3atnagiri,
asik B8ivisionC, Ahmednagar, Aurangabad B8ivisionC, agpur B8ivisionC, $ardha,
Amaravati B8ivisionC, Akola, and many moreS
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CHAPTER IV
C"#cl&'i"#
VAT BValue Added TaxC is a multistage tax system for collection of sales tax. The system
envisages levy of tax on the sale at each stage and contemplates allowing of set off of tax
paid on purchases. Thus, tax is getting paid on the value addition in the hands of each
intermediatory vendor. Through the whole chain, tate collects tax on actual consumer price.
The process covers whole chain of distribution i.e. from manufacturers till retailers. "rior to
*-?-0//4, the system for levy of tax in >aharashtra was, in general, single point tax system.
As a conse%uence to national consensus for introduction of VAT, the earlier ombay ales
Tax Act, *I4I is replaced by >aharashtra Value Added Tax Act, 0//0. The Act has come into
force with effect from /*/?0//4. Thus, from *-?-0//4, sales tax is being collected.
The system of Value Added Tax BVATC has been implemented, in the tate of >aharashtra,
w.e.f. * April 0//4. Every dealer, who becomes liable to pay tax under the provisions of
>VAT, shall apply electronically for registration, within ;/ days from the date of such
liability.
R!( "f T)otor pirits, etc. - 0/5 and above
chedule E & All other goods Bnot covered by A to 8C - *0.45
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Bi/li",*p+-
3= Vl&( A$$($ T) B- Sl(' T) D(p*!m(#!=
9= ;;;=,"",l(=c"m
>= ;;;=!)i#$i=c"m
= ;;;=8!=m+*'+!*=,"8=i#