• A brief Introduction of MVAT

- By Chinmay Gangwal

WHAT IS VALUE ADDED TAX (VAT) ?• VAT (Value Added Tax) is a multistage tax system for collection

of sales tax.

• VAT is a tax on Value addition made at each stage and benefit of Setoff will be continued from manufacture up to retailers, so that ultimate Consumer should bear the tax.

• Prior to 1-4-2005, the system for levy of tax in Maharashtra was, in general, single point tax system. As a consequence to national consensus for introduction of VAT, the earlier Bombay Sales Tax Act, 1959 is replaced by Maharashtra Value Added Tax Act, 2002. The Act has come into force with effect from 01/04/2005.

• Rules for levying VAT :-There are two conditions required

for levying Vat i.e. possession and use of goods.

Ex: - VAT is also charged on rental of machinery because in that transaction ownership is not transfer but possession and use of goods happens.

• Goods

Includes:-1) All Movable

Property.2) Livestock's3) Growing crops4) Trees5) Plant including the

produce of.6) Property in such

attached to or forming part of the land

Excludes:-1) Newspaper2) Actionable claim3) Money4) Stock5) Shares6) Securities 7) Lottery Tickets

How does sale price is to be calculated under MVAT Act...??

• Sale price means the amount of valuable consideration paid or payable to a dealer for any sales made including any sum charged for anything done by the seller in respect of goods at the time of or before delivery thereof, other than the cost of insurance for transit of installation, when such cost is separately charged.

Which dealers are covered under MVAT Act...??

• A dealer is liable to pay tax on the basis of turnover of sale within the state. The term dealer has defined u/s 2(8) of the Act. It includes all person or persons who buys or sells of goods in the state whether for commission, remuneration or otherwise in the course of their business or in connection with or incidental to or consequential to engagement in such business.

• Dealer

Includes:1) Traders2) Companies3) Brokers4) Commission Agent5) Auctioneer6) PWD7) Department of Union

& State Government.

Excludes:1) Agriculturist2) Educational

insititution3) Transporter

Types of Works Contract

Divisible Contract• In Divisible Contract, There are three Option for calculating VAT and these are as

follows:• 1) Normal Taxation after deduction as per books from contract value. ( Deduction of all

expenses such as planning, designing or artichect’s fees, depreciation Etc. is allowed only if proper accounting is made)

• 2) Normal Taxation after % Wise deduction from contract value. ( Installation of Plant and Machinery-15%, Fixing of marble slabs, polished granite stones and tiles -25%, Civil contract of building -30%, Any other Works Contract-25%)

• 3) Composition Scheme • ( a) Tax @ 5% on Construction Contract s ( As Notified) – Setoff on Inputs is available

subject to retention @ 4% ,as provided in rule 53.• (b) Tax @ 8% on the total contact value ( After Deducting there form the amount paid

towards sub contract ) – Setoff on Input is available subject to retention @ 36%.

Indivisible Contract

In Indivisible Contract , the dealer and builder has option to pay

the tax on the basis of the composition scheme.

VAT is to be charged either on agreement to sale or sale deed whichever is earlier andRate of vat is 1% on the contract value.

This option is also available to Sub Contractor.

Note : If Principal Contractor opted for stated above option then sub contractor hasto be this option.

TDS IN WORKS CONTRACT

• Any Person paying any sum exceeding of Rs 5 Lac’s to dealer for execution of works contract in a particular year then WCT-TDS shall be deduct on it.

• In the case of Registered Dealer ,2% of total amount payable is to be deducted as WCT- TDS and for unregistered Dealer it is 5 %.

• Return of WCT – TDS is E File as in Form 424.

And the Form 402 is to be given as certificate of Tax deduction by dealer toWorks Contractor. Otherwise Works Contractor does not get benefit of WCT –TDS for paying the tax Liability.

INPUT TAX CREDIT (ITC) (SET OFF)• All registered dealers, whether manufacturer or traders, are eligible to take full set off of the

taxes paid on inputs; i.e., Value Added Tax paid, within the State of Maharashtra, on purchases of Raw Material, Finished Goods and Packing Material, or any goods debited to profit and loss account.

Sr.No Particulars Rate of Reduction

1) ITC on Capital Goods ( Furniture, Office Equipment, Computer )

3%

2) ITC on Profit & Loss A/c Item Full Setoff Available

3) Fuel 3%

4) Tax free 2%

5) Packing Material used in the Packing of tax free 2 %

6) OMS Branch Transfer 4 %

Registration Limit

• The Dealer has threshold Limit for VAT registration is Rs 10 Lac.

Sr. No. Category of Dealer Total turnover of sales to exceed

Turnover of sale or purchases of taxable goods

1) Importer: ` 1,00,000/- Not less than ` 10,000/

2) Others (Including manufacturer, reseller, liquor dealer, works contractors, leasing etc.)

` 10,00,000/- (With effect from 01/07/2014 and Rs. 5,00,000 up to 30/06/2014)

Not less than ` 10,000/-

3) Voluntary Registration - NA- - NA-

What are the rates levied under MVAT Act...??

• In MVAT act, there are following rates are charged on selling of goods.

Sr.No Particular Rate Applicable

1) Schedule A Nil Rate Tax-free goods i.e. necessary goods

2) Schedule B 1% Bullion, Jewellery, precious stones, diamond Etc

3) Schedule C 2,3,5% IT Product, Declared goods, Cloth, Drugs and Pharmacy, Medicines Etc

4) Schedule D 20% to 34% Liquor, Motor Spirit, ATF Etc

5) Schedule E 12.5% Residuary Entry

Which form is required for Filing of E-Return in MVAT & CST..??

• There are six forms which are applicable to the Different categories of dealer for filing of E return under MVAT & CST Act and these categories are as follows:

Sr.No Name of Form Applicable

1) Form 231 Regular Dealer

2) Form 232 Composition dealer in second hand motor vehicles, retailer, works Contract, restaurant, club, caterers Etc

3) Form 233 Dealer who are in the business of executing works contract, leasing etc

4) Form 234 Dealer who are PSI units holding Entitlement Certificate.

5) Form 235 Dealer notified oil companies & also any other dealer effecting sales of motor spirits.

6) Form III E Dealer who is dealing in interstate sales.(No CST Return is to be filed if interstate sale is NIL in period, as per trade Circular 15T of 1981,52T of 2007 & 15T of 2009.)

How many Different forms under CST Act...??

• There are Ten forms required for claiming the concessional rate, application of Registration Etc and these are as follows:-

Sr.No Form Description Frequency

1) A Application for registration Once

2) B Certificate of registration Once3) C Declaration by purchasing registered dealer to

obtain goods at concessional rateTo be obtained for every quarter and submitted on quarterly basis.

4) D Form of certificate for making government Purchases ( D Form cannot be issued in case of sale made to government on or after 1-4-2007)

No Question arise after 01-04-07

5) E-I /E-II Certificate for sale in transit To be obtained for every quarter and submitted on quarterly basis.

Sr.No Form Description Frequency

6) F Form by branch/ Consignment agent for goods received on stock transfer

To be obtained for every month and submitted on Monthly basis.

7) G Indemnity Bond when C Form Lost When required

8) H Certificate of Export To be obtained for every quarter and submitted on quarterly basis.

9) I Certificate by SEZ Unit Not Specified in rules (But should be submitted before assessment)

10) J Certificate to be issued by foreign diplomatic Mission or consulate in India or the UN Agency

Up to the time of assessment by first assessing authority.

What is the due date for Payment and Return under MVAT & CST...??

• According to the periodicity, due date for payment and filing of return under MVAT and CST Act is depends. So that following table are helpful for understanding of due dates.

Sr.No Periodicity Due Date for Payment

Due Date for Filing of Return

1) Monthly 21st of the Next Month

10th day from the date of Payment

2) Quarterly 21st of the Next Month from End of Quarter.

10th day from the date of Payment

3) Half yearly 30th of the Next Month from End of half year.

10th day from the date of Payment

On what basis, Periodicity is to be Determined...??

Sr. No. Category Periodicity1. A) Newly registered dealers (up to 30/4/10)

Half yearly B) Retailers opted for composition Scheme

C) Tax liability, in the previous year, up to Rs. 1 lakh or Refund entitlement up to Rs. 10 lakhs.

2. A) Dealers under Package Scheme of Incentive

Quarterly B) Tax liability, in the previous year, exceeds Rs. 1 lakh but up to Rs. 10

lakhs or refund entitlement exceeds Rs. 10 lakhs but up to Rs. 1 crore.

C) Newly registered dealers (w.e.f. 1-5-10)

3. All other dealers whose tax liability, in the previous year, exceeds Rs. 10 lakhs or refund entitlement exceeding Rs. 1 crore.

Monthly

MVAT Audit• Applicability: MVAT Audit is applicable to the dealer whose turnover is exceeding ofRs 1 Crore's. Form 704 is e File as MVAT Audit Report under MVATAct,2002.

Due date of filing of MVAT Audit : 15 – Jan

Manual Submission date of MVAT Audit : 10th Day after the due date of E-file of MVAT Audit.

What are the Penalties under MVAT Act...??

• In MVAT Act , there is a penalty levied in the form of late fees for MVAT Return and Interest is charged for late payment and these are as follow :-

Sr.No Particular Amount

1) Late filing Fees (Return is not filed within due date)

Rs 1000 if Return is filed within one month after due date otherwise Rs 5000.

2) Interest u/s 30(2) (Payment is not made within due date)

Late Payment interest rates slab wise viz for delay of first month @1.25% P.M, for Next two Months @1.5% P.M and thereafter @2% P.M ( As Per latest Amendment)

3) Non Filing of MVAT Audit U/S 61 (2)

0.1 % of Sales Turn Over .