Maharashtra Value Added Tax

INTRODUCTION

The system of Value Added Tax (VAT) has been implemented, in the State of Maharashtra, wef 1st April, 2005.

INCIDENCE AND LEVY OF TAX

As per the provisions of Maharashtra Value Added Tax Act, 2002 (MVAT Act), a dealer is liable to pay tax on the basis of turnover of sales within the State. The term dealer has been defined u/s. 2(8) of the Act. It includes all person or persons who buys or sells 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. The term includes a Broker, Commission Agent, Auctioneer, Public Charitable Trusts, Clubs, Association of Persons, Departments of Union Government and State Government, Customs, Port Trusts, Railways, Insurance & Financial Corporations, Transport Corporations, Local authorities, Shipping and Construction Companies, Airlines, Advertising Agencies and also any corporation, company, body or authority, which is owned, constituted or subject to administrative control of the Central Government, any State Government or any local authority.

However, an agriculturist, educational institution and transporters shall not be deemed to be a dealer (subject to fulfilment of conditions).

Dealers liable to pay Tax: – [Sec. 3]

1. The dealers, holding a valid registration certificate under the earlier laws, whose turnover of either of sales or purchases exceeds the specified limits during the financial year 2004-05, shall be deemed to be registered dealer under MVAT Act and shall, therefore be liable to pay tax w.e.f. 1st April, 2005.
2. The dealers, holding a valid registration certificate under the earlier laws, whose turnover of either of sales or purchases has not exceeded the specified limits during the financial year 2004-05, but who have opted to continue their registration certificate (by applying to Assessing Officer in specified format), shall also be deemed to be registered dealer under MVAT Act and shall, therefore be liable to pay tax w.e.f. 1st April, 2005.
3. New dealers, whose turnover of sales exceeds the prescribed limits during any year, commencing on or after 1st April, 2005, are liable to pay tax from the date on which such limit exceeds.

It may be noted that there is a little change in section 3, w.e.f. 1st May, 2012, the words “turnover of sales” for new dealers have been changed to “turnover either of all sales or, as the case may be, purchases”. This is due to introduction of concept of purchase tax in respect of certain goods specified under Sections 6A and 6B (i.e. mainly Cotton and Oilseeds). In case of such dealers only, the turnover of purchases of such notified goods to be considered for this purpose, from the date of notification in respect of liability to pay purchase tax u/s. 6A and 6B. [Refer section 3(5A) and Trade Circular No. 13T of 2012 dated 6-8-2012.]

4. A successor in business of any dealer shall become liable to pay tax on and from the date of succession.
5. A dealer, applying for voluntary registration, shall be liable to pay tax from the date of registration.

Registration [Sec. 16, R 8]

Every dealer, who becomes liable to pay tax under the provisions of MVAT law, shall apply electronically for registration, within 30 days from the date of such liability. [In case of succession of business u/s. 8(3) i.e. succession due to death of proprietor, application can be filed within 60 days of date of succession].

Turnover limits for the purpose of Liability/Registration [Sec. 3(4)]

• W.e.f. 26th June, 2014 (Earlier this limit was ₹5,00,000)

It may be noted that while the total turnover of ₹ 1,00,000/- and ₹ 10,00,000/- are in respect of Turnover of Sales (which includes all sales whether tax free or taxable), the turnover limit of ₹ 10,000/- is in respect of taxable goods whether purchased or sold.

However, in case of those dealers, who are dealing in goods covered by sections 6A and/or 6B, turnover of purchases of such notified goods, which are liable for purchase tax, also to be considered for the purposes of these limits of ₹ 1,00,000/- and 
₹ 10,00,000/-.

Both the conditions have to be satisfied for the purposes of liability/registration under this category [Sec. 3(4)].

New Simplified Procedure of Registration under SAP System

The Sales Tax Department of Maharashtra has set a new simplified procedure for registration of dealers with effect from 7th May, 2016. Accordingly, a new combined online application form has been designed for all those who intend to take registration under MVAT Act, CST Act and/or Profession Tax Act, etc. The entire procedure of online application, uploading of scanned copy of documents, etc., are fully explained in Trade Circular Nos. 14T of 2016 dated 7th May, 2016 and 7T of 2016, dated 25th February, 2016. As per new procedure of registration, a person/dealer seeking registration under the above-mentioned Acts will not be required to attend personally before the Sales Tax authorities (except in few specified cases). On receipt of correct and complete online application with scanned copy of documents and in case of MVAT and CST registrations - on receipt of requisite amount of fees, the Department will generate TIN (Tax-payer Identification Number) and the same shall be displayed on the website of the Department. The Department shall also communicate the TIN to the applicant through e-mail, and, the Certificate of Registration shall be sent to the dealer by post. The dealer can also download digitally signed certificate of registration from the website of the Department.

However registration application can be rejected if application is incomplete, required documents is not uploaded, documents are inconsistent with information in application, documents are not legible or prescribed conditions are not satisfied. In such cases, Registering Officers will reject the application without giving any opportunity of being heard. But if applicant complies & sorts out the defect within 30 days from date of intimation of rejection order than original application will be restored. But however this opportunity is available only once. If defect is not complied within 30 days than earlier rejected application will not be restored & fresh application has to be filed.

The requirement of introduction from registered dealers in case of VRS is done away with.

(Also refer Circular No 38T of 2016 dated 30/12/2016 for grant of administrative relief for dealers registered after 25/05/2016)

Fees payable for MVAT Registration (refer Circular No. 4T of 2017 dated 02/02/2017)

The fees payable for voluntary registration is ₹ 5,000/- while for others it is ₹ 500/- only.

In addition to payment of fees, as mentioned above, a dealer seeking Voluntary Registration, on or after 1st May, 2011, will have to make a security deposit of ₹ 25,000/-. This amount of deposit shall remain with the Department (it cannot be adjusted against tax payable or other liability of the dealer). However, section 16(2A) provides that the amount of security deposit shall be refundable to the dealer on such conditions, restrictions and within such time as may be prescribed. Application for refund of security deposit has to be compulsorily made after completion of 36 months of registration & has to be made within 12 months from end of 36th month. It further provides that the security deposit shall be forfeited if there is no compliance of such conditions, restrictions and time limit.

The amount of fees as well as the amount of security deposit has to be paid online. SAP based Registration System is upgraded from 19/12/2016 wherein there is intergration of Payment Gateways for payment of fee or deposit or both along with application for new registration. Thus option of uploading the challan paid separately is done away. Payment will have to be made through payment gateways of GRAS & SBI e-pay.

New Simplified Procedure of Cancellation of Registration under SAP System:

As per circular 4T of 2017 dated 02/02/2017, the dealer shall apply online through SAP based system for amendment & cancellation of registration.

RATE OF TAX: [SECS. 5 & 6] AS PER SCHEDULES

[Refer Notification No. 1516/CR 123/Taxation1 dated 16-09-2016 for change in rates of tax]

Tax payable by a dealer: – [Sec. 4]

A dealer is liable to pay tax on the turnover of sales of goods, (and turnover of purchases of specified goods, in sections 6A and 6B) within the State, as per the rates specified in the schedules. The tax so payable for any tax period shall be reduced by the amount of input tax credit (set off) for which the dealer is eligible during the same tax period.

Introduction of the Concept of "Purchase Tax": (Sections 6A and 6B)

These newly introduced sections [vide The Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2012], w.e.f. 1st May, 2012, provide for levy of purchase tax on purchase of oil seeds in certain specified circumstances as provided in section 6B. Similarly purchase tax will be applicable on purchase of cotton, as provided in section 6A, from a date to be notified. The rate of purchase tax shall be same as provided in Schedule ‘C’.

Tax Period

Tax Period in relation to a dealer may be a calendar month or a quarter (a period of three months; i.e., April to June, July to September, October to December and January to March. (For periods up to 31st March, 2016, there was a concept of six monthly return period also).

FILING OF RETURNS AND PAYMENT OF TAXES

Every registered dealer is required to file correct, complete and self-consistent return, in prescribed form, by the due date. [Sec. 20, Rules 17 to 20].

Periodicity and due date: –

For periods commencing 1-4-2008 (till 31-3-2016)

For periods commencing on or after 1-4-2016:–

WEF 01-04-2016, half yearly returns are done away with. Thus from FY 16-17, periodicity of filing returns are monthly & quarterly only.

Special Provisions for first and last returns

1. In case of newly registered dealers, on or after 1st April, 2016, first return to be filed from the date of first transaction of sale or purchase as the case may be till the end of month to which such transaction relates. And thereafter monthly returns for all the periods till the end of the financial year in which registration is granted. (Earlier the newly registered dealers were required to file quarterly returns).
2. In case of closure or transfer of business, last periodic return to be filed from the first day of month/quarter/six month, as the case may, be till the date of discontinuance of business.

E-Return Annexure

New Return Template consists of Sales & Purchases Annexure & Return in form 231,232,233,234,234 & IIIE from FY 16-17.

As per revised automation process, all dealers are required to submit details of all the sales and purchases periodically in the prescribed format. The return forms (231 to 235 and CST, etc.,) will get prepared automatically from the data filled in the said annexure.

Regular Return Annexure: (Applicable for return periods up to 31st March, 2016)

It is to be submitted by all the dealers, before uploading their periodic returns for all the periods commencing from 1st April, 2014 till 31st March, 2016. It is consisting of two annexure, commonly known as J-1 and J-2, wherein Tin wise details of all local sales and all local purchases respectively are to be reported.

It may be noted that this regular return annexure is to be submitted by all dealers. However, in case of those dealers who are covered by composition scheme/s for Retailers, Bakers, Restaurants, Secondhand Motor Vehicle Dealers and Developers of 1% & 1.50% composition scheme are required to furnish information in Annexure J-2 only i.e. Tin wise details of local purchases. They need not furnish information in J-1 i.e. in respect of sales.

(Refer Trade Circular No. 9T of 2014 dated 25th March, 2014 and Trade Circular No. 18T dated 26th September, 2014).

For returns for FY 16-17, no regular return annexure is required to be filled separately.

Annual E-Return Annexure

The dealers, who are not required to file audit report in Form 704, have to furnish certain information through Annual E-Return Annexure. It has to be submitted by all the dealers [except those who have opted for composition scheme/s under sub-sections (1), and (2) of section 42], who are not liable for VAT audit, u/s. 61 for relevant financial year. The due date for submission of Annual E-Return Annexure is 21 days from the last date of the financial year, i.e. 21st April. (Earlier, for returns period up to 31st March 2016, the due date for filing Annual E-Return Annexure was within three months from the end of financial year i.e. by 30th June).

This Annual E-Return Annexure is consisting of various sub-annexures commonly known as J-1, J-2, C, D, G, H and I). As information about local sale and purchase transactions, for all the periods of financial year 2014-15, is already reported through regular return annexure, the dealers need to report information, if any, for remaining sub-annexure i.e. C, D, G, H and I. But, submission of Annual E-Return Annexure is a must for all those dealers (except specified composition dealers) who are not required to submit audit report in Form 704. (Relevant for FY upto 31-03-2016)

For FY 16-17, the concept of J-1 & J-2 is not applicable. The annexures appended to Form 704 is required to be filed before 21/04/2017.

Due date for filing returns

Extended Due date for filing returns specifically for FY 16-17 (Refer Circular No 36T of 2016 dated 21-11-2016)

Notes:

1. The returns, whether monthly, quarterly or six monthly have to be uploaded in electronic format only.
2. The procedure for filing returns, in electronic format, has undergone total change for the return periods commencing on or after 1st April, 2016. For detailed procedure in this regard, please refer Trade Circular No. 7T of 2016 dated 25th February, 2016, 14T of 2016 dated 7th May, 2016, 22T of 2016 dated 26th & 30th August, 2016 and instructions given, from time to time, on the website of the Department. (www.mahavat.gov.in)
3. The facility of permitting grace period of 10 days, from the end of prescribed due date, which was prevalent for return periods up to 31st March, 2016, is withdrawn. Thus, all the dealers will have to submit their returns electronically within 21 days from the end of the period to which such return relates, for all periods commencing on or after 1st April, 2016.

Tax Liability for the purpose means aggregate of taxes payable by a registered dealer, in respect of all places of business within the State of Maharashtra, under the Central Sales Tax Act and MVAT Act after adjustment of amount of set off claimed.

As per Rule 17 of MVAT Rules, the Commissioner of Sales Tax is empowered to determine periodicity for different classes of dealers. Accordingly, the Sales Tax department determines, from time-to-time, periodicity of returns of all dealers and the same is made available on its website (www.mahavat.gov.in). The dealers are required to file return as per the periodicity determined by the department. If there is any mistake in it, the dealers are required to approach the concerned officer for correction. It may be noted that failure to file return as per prescribed periodicity, within the prescribed due date, attracts mandatory late fees of ₹ 5,000/- per return, w.e.f. 1st August, 2012. (Earlier, there was a provision to levy penalty @ ₹ 5000/- per return).

Concession in Late Fees

A dealer was liable to pay a Late Fee of ₹ 5,000/- on delayed return irrespective of period of delay. However, the provision was amended w.e.f. 1st July, 2014, whereby it was provided that if a dealer files return within 30 days from the prescribed due date of filing the return the late fee shall be ₹ 2,000/- . (It is further reduced to ₹ 1000 w.e.f. 1st May, 2015) and in all other cases it shall be ₹ 5,000/-. [Refer Trade Circular 6T of 2015 dated 14th May, 2015].

In respect of return periods up to 31st March, 2016, it may be noted that returns uploaded within the concessional period of 10 days from the due date (i.e. those returns where net tax payable is either nil or there is excess credit or the amount of tax payable has been paid before the prescribed due date but the return is uploaded with 10 days from the prescribed due date) will continue to be considered as filed within the time and late fee is not payable in such cases. [Ref. Trade Circular 15T of 2014 dated 6th August, 2014].

To encourage those dealers, whose return/s for past period/s could not be uploaded due to any reason, an additional concession was granted in respect of all those returns which were due to be filed on or before 31st March, 2014. Such dealers were permitted to upload their pending returns with a concessional rate of late fee of ₹ 1,000/- only in respect of each such return. Thus all pending returns, as on 1st April, 2014, were allowed to be filed along with payment of full tax and interest by paying late fee of ₹ 1,000 only, provided such returns were filed on or before 30-9-2014. It was also provided that if late fee is paid while filing such late return/s, the penalty levied earlier in respect of non-filing of such return/s will not be recovered. [Ref. Notification VAT 1514/CR-44/Taxation-1 dated 9th July, 2014 and Trade Circular 13T of 2014 dated 2nd August, 2014].

Thus, now late fee payable is ₹ 1,000/- per return if return is filed within 30 days of the due date, otherwise ₹ 5,000/- per return. The amount of late fee has to be paid before submission of return.

Late Fee Waiver: The Government of Maharashtra has issued a Notification dated 1st January, 2014 granting exemption from payment of Late Fees in certain specified circumstances. [Refer Notification VAT-1513/CR-124/ Taxation-1 dated 1st January, 2014 and Trade Circular No. 8T of 2014, dated 11th March 2014]

The Commissioner of Sales Tax, Maharashtra, vide Trade Circular No. 19T of 2012, dated 9th November, 2012, has clarified that if the due date falls on Sunday or Public Holiday then the compliance made on next working day immediately following the said Sunday or Public Holiday shall be considered as sufficient compliance within the prescribed time period for all the purposes of the Act.

The Commissioner of Sales Tax, Maharashtra, further vide Trade Circular No. 1T of 2017 dated 02/01/2017 have provided for full/partial exemption of late fees in two phases for returns not uploaded for any period up to 31-03-2016:

Return Forms and Payment of Tax

From 1st April, 2009, all dealers, whether required to file monthly, quarterly or six monthly returns, have to submit their returns in electronic format only.

There is separate return forms prescribed for various categories of dealers, i.e., Form Nos. 231 to 235. A dealer has to use appropriate form as may be applicable to him. All these forms have to be submitted electronically within the prescribed due date.

A dealer shall first make payment of tax due into the Government treasury through Form MTR-6 (earlier challan Form No. 210), and thereafter upload the return in appropriate form as may be applicable. It may further be noted that it is now mandatory for all the dealers to make payment of taxes electronically (except where permitted through specified bank/s for specified dealers).

In case of delayed payments, interest is payable at prescribed rates [Section 30, Rule 88(1)].

Rate of Interest

Till 30th November, 2015, there was a fix rate of interest payable by the dealers, on delayed payment of tax, if any, @ 1.25% p.m. or part thereof. However, the said Rule has been amended w.e.f. 1st December, 2015, vide Notification dated 5th November 2015. Accordingly rate of interest on delayed payment of tax, w.e.f. 1st December, 2015, is as follows: -

It may be noted that payment of such interest is mandatory and shall be paid before filing of return.

Refunds of any period can be adjusted in the return/s for subsequent or any other period/s within the same financial year. As per earlier provisions of MVAT Act, refund could not be adjusted against liability of the subsequent year; i.e., excess credit was not allowed to be carried forward to the next financial year. However, the Commissioner of Sales Tax was having powers to permit carry forward of refund of one financial year to the subsequent financial year. Accordingly, circulars were issued from time-to-time. The refunds relating to financial years 2005-06 and 2006-07 were permitted to be carried forward to subsequent financial year (without any monetary limit/s). And refunds for financial year/s 2009-10, 2010-11 and 2011-12 were also permitted to be carried forward to immediate succeeding financial year/s, subject to a ceiling of Rupees one lakh.

But, now section 50(2) of MVAT Act has been amended, (vide Maharashtra Act No. VIII of 2013), which provides that for the period commencing on or after 1st April, 2012, a dealer whose refund claim in a year is Rupees Five lakhs or less, may carry forward such refund to the return or revised return for immediate succeeding year to which such refund relates. Thus, excess credit if any (up to Rupees Five lakhs) in the return of the last period of a financial year can now be carried forward to next financial year. (Applicable for financial year 2012-13 and onwards)

Revised Returns

According to amended provisions, if a dealer needs to file revised return/s, there may be three specified circumstances for which the conditions are as follows:

1. At his own – to rectify any mistake or omission – within the time permitted for filing vat audit report u/s. 61 of MVAT Act, 2002. Thus, revised return/s for any period/s of a financial year can be submitted by 15th January of immediately next financial year. (Refer Notification dated 26th April, 2016)

[Earlier the time limit was within 10 months from the end of financial year in which such tax period falls or before receipt of notice for assessment, whichever is earlier],

2. Due to Audit Report u/s. 61 – to reflect the differences if any arising due to audit findings – within thirty days from the due date for submission of audit report, such a return has to be filed for the whole year [annual revised return having consolidated figures determined as per Form 704],
3. Due to Intimation u/s. 63 – where the dealer agrees with the observations contained in the intimation issued by the Department – within thirty days from the date of service of such intimation. This return shall also be one single return (annual revised return) for the whole year. [Refer Trade Cir. No. 4T of 2013 dated 26th June, 2013]

It may be noted that earlier restriction of permitting only one revised return under each of the clauses (a), (b) and (c) of section 20(4) is now removed. Thus, there can be multiple revised returns or revised annual return/s.

Administrative Relief

The Commissioner of Sales Tax is empowered to grant administrative relief in cases of genuine hardship whether to a particular dealer or to a class of dealers or in general. Circulars to this effect have been issued from time-to-time. Some of these circulars are:

Trade Circular No. 36T of 2006 dated 28th November, 2006 for granting ADM relief due to disturbances caused by floods.

Trade Circular Nos. 33T of 2007 dated 18th April, 2007 & 36T of 2009 dated 24th December, 2009 for granting ADM relief to unregistered dealer/s in case of late application for registration. (Instruction given in para 2(b) of Trade Circular 33T of 2007 and 37T of 2008 have been withdrawn vide Trade Circular 8T of 2016).

Trade Circular 17T of 2011, dated 25th November, 2011, regarding correction of mistakes (such as period, TIN, etc.) in the challans paid into the Government treasury and for miscellaneous refunds of excess payment of taxes.

Various Trade Circulars issued from time-to-time granting ADM relief to specific classes of dealers.

Trade Circular 10T of 2012, dated 2nd July, 2012 granting ADM relief in respect of import/export licences, etc. covered by entry C-39 of the Schedule.

Trade Circulars 14T of 2012, dated 6th August 2012, 17T of 2012, dated 25th September, 2012, 1T of 2013, dated 4th January, 2013 and Trade Circulars 1T, 2T, 6T, 7T, 10T and 12T of 2014, granting various ADM reliefs to builders & developers.

Trade Circular 8T of 2016, dated 12th April, 2016, granting ADM relief to unregistered dealers.

Trade Circular 13T of 2016, dated 6th May, 2016, granting ADM relief with reference to Trade Circulars 33T of 2007, 68T of 2007 and 20T of 2015

INPUT TAX CREDIT (ITC) (SET-OFF): [Sec. 48, Rules 51 to 56]

Eligibility: 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.

Entry Tax: The amount of entry tax, paid by a registered dealer on the goods the sale of which is liable for VAT under MVAT, will be eligible for full set off.

ITC on Capital Goods: Tax paid on certain items of capital goods (defined) such as machinery, components, parts and spares etc. are also eligible for full set off, (on certain other items of capital assets such as furniture and fixtures, office equipments, etc. set off is admissible, subject to retention @ 3%, w.e.f. 8-9-2006).

ITC on Miscellaneous Goods: The amount of MVAT paid on purchase of miscellaneous goods, debited to Profit & Loss A/c. also eligible for full set-off.

ITC on Fuel: Tax paid on purchase of goods, which is used as fuel, shall be eligible for set-off, in excess of 3%.

Reduction in set-off: The amount of set off, available to a registered dealer, shall be reduced to the extent as provided, under the following circumstances:

1. 3% of the purchase price of respective goods, if taxable goods used as fuel.
2. Natural Gas (in specified circumstances – reduction @ 3%).
3. 2% of the purchase price of respective goods, if taxable goods used in manufacture of tax-free goods. [No such reduction, if tax free goods so manufactured (covered by Schedule 'A’) are exported out of India]. It is further provided, w.e.f. 1st May, 2012, that no reduction in this clause if goods manufactured is Sarki Pend or de-oiled cakes).
4. 2% of the purchase price of respective packing material used in the packing of tax-free goods sold. (No such reduction, if such tax free goods is covered by Schedule 'A’ and the same are exported out of India.)
5. 4% of the purchase price of respective goods, if taxable goods sent to any other State in India as Branch Transfer or on Consignment. (Earlier the rate of reduction, in this clause, was 4% from 1-4-2005 to 31-3-2007, 3% from 1-4-2007 to 31-5-2008 and 2% from 1-6-2008 to 31-3-2012).

   Provided that, if the rate of tax applicable, on the goods so purchased, for branch transfer outside the State, is less than 4% then rate of reduction shall be such lesser rate as specified in the Schedule for that goods.

   Provided further that no such reduction, if such branch transferred goods is received back in the State within a period of 6 months, whether after processing or otherwise.

6. In case the manufactured goods falls under Schedule entries D-5, D-6, D-7, D8 or D-9, and if such manufactured goods is stock-transferred outside the State then reduction @ 4% of the value of goods so dispatched outside the State. (The rate of reduction was 2% up to 31-3-2012.)
7. Specified percentage of set-off, if taxable goods used in Works Contract for which the dealer has chosen to pay tax under the Composition Scheme as provided in section 42(3). (Reduction @ 4% of purchase price in respect of goods used in notified construction contracts, and, @ 36% of eligible amount of set off in case of other contracts).
8. In case of Liquor, sold by dealers holding Liquor Vendor Licence in Form FL-II, CL-III, and CL/FL/TOD/III, as per formula, if the actual sale price is less than MRP. (Applicable up to 30-4-2011, refer Notification No. 1511/ CR-57/Taxation-1 dated 30-4-2011).
9. In case of dealers, whose total receipts on account of sale are less than 50% of total gross receipts of business then set-off restricted to corresponding purchases, which are sold within 6 months from the date of purchase. In case of Hotels and clubs covered by this Rule, in addition to set off on goods sold as above, the set off will be available on capital assets and consumables pertaining to kitchen and service of foods and drinks. In case of manufacturer of goods (not a job worker) covered by this Rule, set-off can be claimed on plant and machinery & its PCA & packing materials only in respect of period of first 3 years from effective date of certificate of registration.
10. In case of closure of business, the set off on goods held in stock (other than capital assets), on the date of closure, to be disallowed and accordingly be reduced fully.
11. 3% of the purchase price of office equipment, furniture & fixture treated by the claimant dealer as capital assets. This is not applicable to dealers who are in the business of leasing of these goods.
12. 2% of purchase price of goods which are used in the distribution or transmission of electricity (including the goods treated as capital assets), if the claimant dealer is holding a licence for transmission or distribution of electricity under the Electricity Act, 2003. (The rate of reduction earlier was 4% up to 31-3-2007 and 3% from 
    1-4-2007 to 31-5-2008.)
13. Reduction @ 2% on purchase price of goods used in textile processing (property in which passes during the process resulting into works contract) and packing material.
14. 53(11) (a) If the claimant dealer is engaged in the business of transferring the right to use (whether or not for a specified period) for any purpose, of passenger motor vehicles, then he shall be entitled to claim set-off of tax paid on the purchase of such motor vehicles only to the extent of tax payable on such transfer of right to use ; (b) the set off as determined under clause (a) in respect of the such vehicles shall be claimed in the period in which such right to use has been transferred by the claimant dealer.” [Notification No. VAT-1516/CR-53/Taxation-1 dated 1st April, 2016. Also refer Trade Circular 14T of 2016 dated 7th May, 2016].

Wherever such reduction in set-off is required to be done, it shall be done in the tax period in which such contingency arises.

If, for the purpose of reduction of set off, wherever required, it is not possible to identify the corresponding purchases then proportionate reduction on FIFO basis.

Condition for grant of set-off

1. Set-off to be allowed only to a registered dealer.
2. A valid Tax Invoice is must to claim set-off.
3. Proper maintenance of account of all the purchases in a chronological order stating therein the date on which the goods so purchased, the name and registration number of the selling dealer, tax invoice number & date, the amount of purchase price paid and the amount of tax paid separately.
4. The set-off on eligible goods, purchased on or after 1st April, 2005, has to be claimed in the tax period in which the goods have been purchased (entered in the books of account), except in cases of restricted setoff as specified in Rule 52A, 52B and 53(11).
5. In case of newly registered dealers, set-off can be claimed on the goods (including capital assets) purchased before the date of registration, within the same financial year, provided that the goods so purchased is not sold or disposed of before the date of registration. (Effective from 8-9-2006).
6. Tax on earlier transaction is received in Government Treasury.
7. The amount of set-off on any purchase of goods shall not exceed the amount of tax in respect of same goods, actually paid, if any, under the MVAT Act, or any earlier law, into the Government treasury, except to the extent where purchase tax is payable by the claimant dealer on the purchase of the said goods effected by him. It has further been clarified through section 48(5) that where tax levied or leviable under MVAT Act or any earlier law is deferred or is deferrable under any Package Scheme of Incentives, implemented by the State Government, then the tax shall be deemed to have been received in the Government Treasury for this purpose.

No set-off: No set-off, under any Rule shall be admissible in respect of:

1. Purchase of passenger motor vehicles and parts components and accessories thereof. [unless the claimant dealer is engaged in the business of transferring the right to use (whether or not for a specified period) for any purpose in respect of the said vehicles, w.e.f. 1-4-2016]
2. Purchase of motor spirit (specified) by any dealer other than a dealer in motor spirit.
3. Purchase of Crude Oil, used by an oil refinery for refining.
4. Any purchase of consumables or capital assets by a job worker (pure labour job), whose only sales are waste or scrap of goods obtained from such labour job.
5. Purchase of raw material made by a dealer holding Entitlement Certificate under a Package Scheme of Incentives. (Such units are entitled for refund of tax paid on purchases).
6. Any purchase of goods of incorporeal or intangible nature other than:
   1. Import licence, Export Permits/licences or Quota, etc., covered by Entries 3 & 4 of Notification issued under Schedule Entry C-39.
   2. SIM cards
   3. Software in the hands of a trader in Software.
   4. Copyrights, if resold within 12 months from the date of purchase. Except above, all other intangible goods are debarred from set-off.
7. Tax paid on purchases by way of works contracts resulting in the erection of immovable property (other than plant & machinery).
8. Purchases of any goods used in the erection of immovable property (other than plant & machinery). However, a contractor, who undertakes construction of immovable property by way of works contracts, is eligible to claim set-off on purchase of such goods.
9. Office Equipments, Furniture & Fixtures, Electric Installations, etc., (treated as capital assets), purchased during the period from 1-4-2005 to 7-9-2006. (Such assets, if purchased on or after 8-9-2006, are eligible for set-off subject to retention @ 4% or 3% as the case may be).

It may further be noted that:

Small dealers/retailers, hoteliers, caterers, bakers, mandap decorators etc., opting for Composition Scheme, u/ss. 42(1), 42(2) and 42(4) of MVAT Act, are not entitled for any set-off. Similarly, builders/developers, opting for composition scheme u/s. 42(3A) are also not entitled for any set-off of taxes paid on their purchases.

10. There is no set-off of CST paid on inter-state purchases.
11. There is no set-off for any other taxes paid such as excise duty, import duty, service tax, octroi or such other levy or levies.
12. In case of hotelier, the set-off on capital assets is prohibited where such capital assets are not pertaining to sale or service of food/drinks.

Restricted set-off

Rule 52A: (1) If the claimant dealer has purchased goods (other than the declared goods) which are originally manufactured by a Mega Unit holding valid Identification Certificate under the Act, then he shall be entitled to claim set-off in respect of the said goods only to the extent of aggregate of−

1. The taxes paid or payable under the Central Sales Tax Act, 1956 on the inter-state resale of the corresponding goods, and
2. The taxes paid on the purchases of said goods, if are re-sold locally under the Act.

(2) The set-off as determined under sub-rule (1) above in respect of the said goods shall be claimed only in the month in which corresponding sales of such goods is effected by the claimant dealer:

Provided that, nothing in this rule shall apply to the purchases of such goods that are used within the State in the manufacturing of the goods. [Notification No. VAT-1511/CR-44/Taxation-1 dated the 17th March, 2011].

Rule 52B: (1) If the claimant dealer has purchased (i) goods covered under the entries 13 and 14 of the Schedule ‘D’ appended to the Act, (w.e.f. 1-1-2016) or (ii) mobile phone or cellular handset i.e. telephones for cellular network or for other wireless network (w.e.f. 1-4-2016), then the said dealer shall be entitled to claim set-off in respect of the said goods only to the extent of aggregate of-

1. The taxes paid or payable under the Central Sales Tax Act, 1956 on the inter-state resale of the corresponding goods, and
2. The taxes paid on the purchases of said goods, if are resold locally under the Act.

(2) The set-off as determined under sub-rule (1) above in respect of the said goods shall be claimed only in the month in which corresponding sales of such goods is effected by the claimant dealer:

Provided that, nothing in this rule shall apply to the purchases of such goods which are sold in the course of export of goods out of territory of India. However, it may be noted that no set off will be admissible, in case such goods are sent outside the State to agent’s place of business or principal’s place of business or to dealer’s own place of business. [Notification Nos. VAT-1515/CR-158/Taxation-1 dated 30th December, 2015 and VAT-1516/CR-53/Taxation-1 dated 1st April, 2016. Also refer Trade Circular 14T of 2016 dated 7th May, 2016].

Credit C/F and Credit B/F: If during a tax period (month/ quarter/six months) the tax on total turnover of sales is less than the amount of input tax credit, then such excess amount of credit may either be adjusted by the dealer against his tax liability under the CST Act for the same period or may be c/f to the next period. The unadjusted credit i.e. c/f of one period shall become the credit b/f for the next period. The excess credit may be carried forward in this manner till the end of the accounting year. The balance remaining at the end of financial year, if more than the permitted limit (at present rupees five lakhs), shall be claimed as a refund in Form 501 from the department, within a period of eighteen months from the end of the year for which it relates. However, if the excess credit at the end of financial year is within the permissible limit (up to rupees five lakhs), the dealer may opt either to carry forward it to the next financial year or claim refund by submitting Form 501 as per prescribed procedure.

Goods Return, Debit/Credit Notes: Sections 63(5) and (6) of the MVAT Act provides that the amount of goods returned during any period shall be reduced from the total turnover of sales/ purchase of that period in which the entries in respect of goods returned passed in the books of account, (provided that the goods has been returned within a period of six months from the date of sale or purchase thereof as the case may be). Similarly, other debit and credit notes, which are in the nature of increasing or reducing the sale price and/or the purchase price shall be given effect in the month in which such debit/credit note has been entered in the books of account of the dealer. Thus the amount of set-off, for that period, shall get increased or reduced to the extent it related to purchase return and debit/credit notes having impact on the purchase price of goods.

Exports: Exports are treated as zero-rated. Thus no tax is payable on export of goods out of India. However full set-off is available of input tax paid on purchases, from within the State of Maharashtra, used in such exports. As there are no concessional forms under MVAT, the exporters may have to claim refund of the VAT paid on their purchases (inputs).

However, the trading exporters (who were earlier purchasing goods against Form 14B), may purchase such goods against Form H of CST Act, provided all other conditions of section 5(3) of CST Act are fulfilled.(Penultimate Sales).

Inter-State Sales: The transactions of inter-State sales and inter-State movement of goods are governed by the CST Act. Thus the tax on such sale is levied according to the provisions of CST Act. Such transactions are not liable for MVAT. However full input tax credit is available for the value added tax paid in Maharashtra. (Except in case of branch transfers/consignments, where there will be retention @ 4% or 3% or 2% as the case may be).

TAX INVOICE

Essential ingredients of a Tax Invoice: Under the scheme of MVAT, the most important document is ‘Tax Invoice’. A registered dealer is entitled to claim set off only on the basis of a valid Tax Invoice. Set-off is not available on purchases affected through a bill or cash memorandum. A 'Tax Invoice’ is must to claim input tax credit (set-off). To be a valid Tax Invoice, section 86(2) provides that it shall contain the following particulars: —

1. The word Tax Invoice in bold letter at the top or at a prominent place.
2. Name, Address and Registration Number of Selling Dealer.
3. Name, Address and Registration Number of the Purchasing Dealer.
4. Serial Number and Date.
5. Description, Quantity and Price of the Goods sold.
6. The amount of tax charged, to be shown separately.
7. Signed by the selling dealer or a person authorised by him.
8. A declaration u/r. 77(1).

BILL OR CASH MEMORANDUM

Section 86(6) requires every registered dealer to issue, at his option, either a Tax Invoice or Bill/Cash Memorandum, for every sale made by him.

(Issue of bill/cash memorandum or Tax Invoice, as the case may be, is mandatory for each transaction of sale exceeding ₹ 50/-).

The dealer, choosing to issue ‘Tax Invoice’ must comply with the requirements prescribed in sec. 86(2), enumerated above.

The dealers, who have opted for Composition Scheme u/ss. 42(1), 42(2) or 42(4), are not entitled to issue a Tax Invoice. Such dealers shall issue a Bill or Cash Memorandum.

A bill or cash memorandum should be serially numbered, dated and signed by the dealer or his servant or manager. Such bill or cash memorandum shall contain such particulars as may be required/as may be prescribed. It shall also contain a declaration as provided u/r. 77(3).

A duplicate copy of all such bills/cash memorandum or Tax Invoice is required to be preserved for a period of eight years from the end of the year in which sale took place. (Earlier the period of preservation was three years only however the period of preservation is changed to eight years by an amendment through Mah. Act No. VIII of 2012 dated 25-4-2012).

The Commissioner of Sales Tax, vide Trade Circular 15T of 2015, dated 29-10-2015, has advised the dealers to issue tax invoice, bill and cash memo (as the case may be) on such a paper so that such a bill and the matter printed thereon lasts for a period of at least 8 years.

COMPOSITION SCHEMES

Section 42 provides for Composition Schemes for various classes of dealers, as may be notified by the State Government from time-to-time. The dealers opting for such composition schemes shall pay tax at such rates, with such conditions, as may be prescribed in the scheme. Accordingly, the Government of Maharashtra has notified different types of composition schemes for following classes of dealers:

(i) Retailers (ii) Restaurants, Clubs, Hotels and Caterers (iii) Bakers (iv) Dealers in 2nd Hand Motor Vehicles (v) Works contractors (vi) Builders & developers (vii) Dealers, who are in the business of giving on hire (leasing) of mandap, shamiana, tarpaulins, etc.

It may be noted the Composition Scheme for Retailers has been redesigned w.e.f. 1st October, 2014. (Refer Trade Circular 17T of 2014 dated 20th September 2014). And the turnover limit of 50 lakhs has been increased to ₹ One crore w.e.f. 1st April, 2016. Certain changes have also been effected in the Composition Scheme for Restaurants and in the Composition Scheme for Bakers, w.e.f. 1st April, 2016. (Refer Trade Circular 9T of 2016 dated 22nd April, 2016.)

WORKS CONTRACTS

There is no separate Act governing works contract transactions, all such transactions are now taxable as deemed sales under the MVAT Act. The rate of tax, on such deemed sales of goods, used in the execution of works contract, shall remain same as prescribed in the aforesaid schedules to the respective goods. However, the sale price of such goods has to be determined in accordance with the provisions contained in Rule 58 of the Maharashtra Value Added Tax Rules, 2005.

Accordingly, the value of the goods, at the time of the transfer of property in the goods (whether as goods or in some other form) involved in the execution of works contract, has to be determined by effecting the following deductions from the value of entire contract in so far as the amounts relating to the deduction pertain to the said works contract:

1. Labour and service charges for the execution of the works contract.
2. Service Tax collected separately.
3. Amounts paid by way of price for sub-contract, if any, to sub-contractors.
4. Charges for planning, designing and architect’s fees.
5. Charges for obtaining on hire or otherwise, machinery and tools for the execution of the works contract.
6. Cost of consumables such as water, electricity, fuel used in the execution of works contract, the property in which is not transferred in the course of execution of the works contract.
7. Cost of establishment of the contractor to the extent to which it is relatable to supply of the said labour and services.
8. Other similar expenses relatable to the said supply of labour and services, where the labour and services are subsequent to the said transfer of property.
9. Profit earned by the contractor to the extent it is relatable to the supply of said labour and services.

Provided that where the contractor has not maintained accounts which enable a proper evaluation of the different deductions as above or where the Commissioner finds that the accounts maintained by the contractor are not sufficiently clear or intelligible, the contractor at his option or, as the case may be, the Commissioner may in lieu of the deductions as above provide a lump sum deduction as provided in the Table below and determine accordingly the sale price of the goods at the time of the said transfer of property.

WORKS CONTRACT – SALE PRICE

TABLE

• The percentage given in the Table should be applied on total contract price after deducting the price on which tax is paid by sub-contractor. It is also provided that if any tax is separately charged by the contractor as per terms of contract then the deduction should be after excluding such separate tax.
• The value of goods so arrived at under Rule 58 (1) shall, for the purposes of levy of tax, be the sale price or, as the case may be, the purchase price relating to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.
• The dealer, opting to pay tax as per the above scheme, is entitled to take full input tax credit; i.e., full set-off of MVAT paid on purchases eligible for set-off.
• Service Tax, collected separately, shall not form part of the ‘value of contract’. Thus no VAT on service tax collected separately. [Ref. Trade Circular 6T of 2015 dated 14th May 2015].

Deduction from sale price for cost of land & other deductions in case of Construction Contracts related to sale of under construction units by builders/developers:

[Rule 58(1A)]

1. In case of a construction contract, where along with the immovable property, the land or, as the case may be, interest in the land, underlying the immovable property is to be conveyed, and the property in the goods (whether as goods or in some other form) involved in the execution of the construction contract is also transferred to the purchaser, the value of the said goods at the time of the transfer shall be calculated after deducting cost of the land from the total agreement value.
2. The cost of the land shall be determined in accordance with the guidelines appended to the Annual Statement of Rates prepared under the provisions of the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, as applicable on the 1st January of the year in which the agreement to sell the property is registered Provided that, after payment of tax on the value of goods, determined as per this rule, it shall be open to the dealer to provide before the Department of Town Planning and Valuation that the actual cost of the land is higher than that determined in accordance with the Annual Statement of Rates (including guidelines) prepared under the provisions of the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995. On such actual cost being proved to be higher than the Annual Statement of Rates, the actual cost of the land will be deducted and excess tax paid, if any, shall be refunded. [Rule 58(1A)].
3. The deduction u/r. 58(1) shall be made after deducting cost of land as per rule (1A).
4. No deduction for cost of land is applicable in cases of payment of tax under the composition scheme for builders & developers.

[Rule 58(1B)]

1. Where the dealer undertakes the construction of flats, dwellings, buildings or premises and transfers them in pursuance of an agreement along with the land or interest underlying the land then, after deductions under sub-rules (1) and (1A) from the total contract price, the value of the goods involved in the works contract shall be determined after applying the percentage provided in column (3) of the following TABLE depending upon the state at which the purchaser entered into contract.

TABLE

2. For determining the value of goods as per the Table clause (a), it shall be necessary for the dealer to furnish a certificate from the Local or Planning Authority certifying the date of completion of the stages referred above and where such authority does not have a procedure for providing such certificate then such certificate from a registered RCC consultant.

[Rule 58(1C)]

If the dealer fails to establish the stage during which the agreement with the purchaser is entered, then the entire value of goods as determined after deductions under sub-rules (1) and (1A) from the value of the entire contract, shall be taxable.

2) The value of goods so arrived at under sub-rule (1), (1A) or, as the case may be, under sub-rule (1B)] shall, for the purposes of levy of tax, be the sale price or, as the case may be, the purchase price relating to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.

WORKS CONTRACT – COMPOSITION SCHEMES

Section 42(3) provides for a Works Contract Composition Scheme, whereby a dealer, at his option, may choose to pay tax @ 5% on Construction Contracts (as notified) or in case of other contracts @ 8% on the total contract value. (After deducting therefrom the amount paid towards sub-contract, if any.)

However, in respect of such (other) contract/s, where the dealer has chosen to pay tax by way of composition @ 8%, the amount of set-off available on inputs will be restricted to 64% of the total amount of set-off for respective goods used in such contract/s.

In case of construction contracts (notified), where the dealer has chosen to pay composition @ 5% (w.e.f. 20-6-2006), the set-off on inputs is available subject to retention @ 4%, as provided in Rule 53.

Such retention/reduction shall not apply to set-off on capital assets, the goods, the property in which not passes in the execution of works contract. (w.e.f. 8-9-2006).

Sub-section (3A) is inserted w.e.f. 1-4-2010 to empower State Government by issue of notification to provide composition scheme for registered dealer who undertakes construction of flats, dwellings or buildings or premises and transfer them in pursuance of an agreement along with the land or interest underlying the land. Accordingly, a Notification has been issued providing for a composition scheme whereby a dealer (builder/ developer) can discharge his tax liability by paying composition amount @ 1% without entitlement for any set-off.

Notes:

1. A dealer, executing works contract, whether chooses to pay tax u/r. 58 or under the composition scheme, u/s. 42(3), is entitled to issue tax invoice in respect of all such sales affected by him by way of execution of works contract, by charging tax separately in such tax invoice.
2. A dealer (contractor) is free to choose either sale price method or composition scheme, as he may deem fit, qua each contract. There is no requirement of any prior approval etc.
3. The relationship between the contractor and sub-contractor is considered as that of principal and agent. Thus, the responsibility for payment of tax is joint and several. It has been provided, therefore, that liability to pay tax may be discharged either by the main contractor or the sub-contractor. If the main contractor chooses to pay tax on the entire contract, he may issue a declaration and certificate (in Forms 406 and 409) whereby the sub-contractor shall not be liable to pay tax on the portion of work undertaken by him. Similarly, where the sub-contractor undertakes to pay tax, he shall issue a declaration and a certificate, (in Forms 407 and 408), to the main contractor regarding payment of taxes made by him on his portion of works contract. Thus the main contractor will be liable to pay tax only on the difference.
4. Builders/developers opting for 1% composition scheme under section 42(3A) are not entitled for any set-off.

CONSTRUCTION CONTRACTS

The Government of Maharashtra, vide Notification No. VAT. 1506/CR-134/Taxation-1, dated 30-11-2006, has notified the following works contracts to be the 'Construction Contracts’ for the purposes of clause (i) of the Explanation to sub-section (3) of section 42 of the Maharashtra Value Added Tax Act, 2002: –

1. Contracts for construction of: (1) Buildings, (2) Roads, (3) Runways, (4) Bridges, Railway over bridges, (5) Dams, (6) Tunnels, (7) Canals, (8) Barrages, (9) Diversions, (10) Rail tracks, (11) Causeways, Subways, Spillways, (12) Water supply schemes, (13) Sewerage works, (14) Drainage, (15) Swimming pools, (16) Water Purification plants and (17) Jettys
2. Any works contract incidental or ancillary to the contracts mentioned in paragraph (A) above, if such work contracts are awarded and executed before the completion of the said contracts.

WORKS CONTRACT – ONGOING CONTRACTS

In respect of contracts, which have entered into and commenced before 1st April, 2005 and continued thereafter, the dealer is required to discharge his tax liability, under the MVAT Act, in accordance with the provisions of earlier law (i.e., old Works Contract Tax Act). Thus the dealer shall be liable to pay tax on such ongoing works contracts at the rate/s prescribed (or as per the old composition scheme, if so adopted) under the earlier law. And such a dealer shall not be entitled for any set off on purchases of goods used in the execution of such on-going works contracts.

WORKS CONTRACT – TDS PROVISIONS

Section 31 provides that the Commissioner may, by notification, require any dealer or person or class of dealers or persons (hereafter referred as 'the employer’) to deduct tax on such amount payable on the purchases effected by them, as may be notified.

All such employers shall have to:

1. Obtain Sales Tax Deduction Account Number (w.e.f. 26-4-2016) [Applicable only to those employers who are not a registered dealer under MVAT Act]. The number so obtained shall be mentioned in all documents, statements and returns, etc.
2. Deduct tax, at prescribed rate, from the amount paid or payable to a contractor during a given period.
3. Deposit the amount so deducted with the Govt. treasury within 21 days from the end of month in which tax deducted or required to be deducted. [Challan Form MTR-6, w.e.f. 21-5-2013, earlier Form 210].
4. Issue a certificate of deduction of tax, immediately (after payment of tax), in Form 402.
5. Maintain necessary records in prescribed format, (Form 404).
6. Submit Return (e-return in Form 424) within 21 days from the end of month in which tax is so remitted (applicable in respect of tax deducted on or after 1st April, 2016). [Earlier the employer/s were required to submit annual e-return in Form 424 within three months from the end of the year].

Notes:

1. The TDS provisions are applicable only to specified employers.
2. A contractor, awarding sub-contracts, is not required to deduct TDS from such sub-contractor/s.
3. TDS provisions are not applicable in respect of works contract liable to tax under the CST Act.
4. TDS not required to be deducted where the amount or the aggregate of the amount payable to a dealer by such employer is less than ₹ 5 lakhs during the financial year.
5. TDS is required to be deducted on the amount paid/ payable in respect of works contract. Thus TDS not to be deducted on taxes (whether VAT or service tax) charged separately by the contractor.
6. No TDS on advance payments, however TDS on such advances to be deducted at the time when such advance is adjusted towards the amount payable.
7. A contractor can apply in Form 410 for a certificate of no deduction of tax at source if the contract is not a works contract.

Facility of transferring TDS credit by main contractor to sub-contractor/s

Section 31(4) of the MVAT Act has been amended w.e.f. 26th April 2016. The amended section provides as follows:

Any amount or any sum deducted, on or after 1st April, 2016, in accordance with the provisions of this section and paid to the State Government may be:

1. Claimed as payment of tax by the said person making the said supply to the employer, or
2. Transferred as a credit to the sub-contractor in the prescribed manner, if sub-contract has been awarded, in respect of the concerned contract.

The principal contractor shall be eligible to claim credit of such amount or sum, in the period in which the certificate for payment is furnished to him by the person deducting tax. The sub-contractor may claim credit of such amount in the period in which the principal contractor has transferred the credit of such amount to him or in subsequent period.

Rule 40(1)(e) further provides that: The principal contractor, desiring to transfer the credit to the sub-contractor, as provided in clause (ii) of sub-section (4) of section 31, shall file a return in Form 424A electronically on the website. After filing of such return, the principal contractor shall issue a certificate in Form 402A to the sub-contractor for transferring such credit. Such principal contractor shall maintain a separate account in Form 404A, for each year, containing details of credit, so transferred.

Employers notified for the purposes of TDS

RATE OF TDS

TDS has to be deducted @ 2% if the contractor is a registered dealer under MVAT Act, otherwise @ 5% w.e.f. 1st April 2012 (earlier the rate was 4% up to 31-3-2012).

TAX COLLECTED AT SOURCE (TCS)

Section 31A, inserted w.e.f. 1st May, 2012, provides for tax collection at source by certain notified persons in certain circumstances. Accordingly, a Notification, No. VAT 1512/CR 149/Taxation-1 has been issued on 15th February, 2013, which specifies that the District Collector or Cantonment Board, or any other authority under the Central Government or State Government, as the case may be, having jurisdiction over the area, shall collect tax at source @ 10% of the auction amount of right to excavate sand, etc., from the person or dealer who has been awarded the right to excavate.

Rule 40A requires that every such authority or agency (responsible for collecting tax at source) shall:

1. Deposit the amount so collected into the Government Treasury, in challan in FORM MTR6, within 21days from the end of the month during which such amount is collected.
2. Issue a certificate of tax collection in FORM 421 immediately after such tax collection.
3. Maintain a separate account for each year, in FORM 422, showing the amount collected towards sales tax, certificate of collection issued, and,
4. Submit a return electronically on the website in FORM 423 within 21 days from the end of the month in which amount of sales tax is so collected (tax collected on or after 1st April, 2016).

TAX ON RIGHT TO USE GOODS (LEASING AND HIRE CHARGES)

Earlier the tax on leasing was payable under the provisions of Maharashtra Tax on Right to Use Goods Act. But now, as there is no separate Act, all such transactions of deemed sale shall be liable to tax under MVAT Act at the same rate of tax as prescribed in the aforesaid schedules.

Section 42(4) of MVAT Act provides for a composition scheme for those dealers who undertakes transfer of the right to use mandap, tarpaulin, pandal, shamiana or the decoration of such mandap, pandal or shamiana and the transfer of the right to use furniture, fixtures, lights and light fittings, floor coverings, utensils and other articles ordinarily used along with a mandap, pandal or shamiana (whether or not for a specified period). The rate of composition in such cases is fixed @ 1.5%.

DETERMINATION OF SALE PRICE IN CERTAIN CASES

Sale of Food by Residential Hotels (Rule 59)

Rule 59 provides for determination of taxable turnover of sales/ service of food & drinks in case of residential hotels charging composite amount, for lodging and boarding, which is inclusive of breakfast, lunch, or dinner or any such combination.

The turnover in such cases has to be determined by applying specified percentage on the amount of such composite charges.

Reduction in Sale Price in certain cases

1. If a dealer has chosen not to collect tax separately from its customers, the tax payable by him on the turnover of sales shall be calculated by reducing from the turnover of sales an amount arrived at through the following formula: [Rule 57(1)].

Sale Price * Rate of Tax/(100+Rate of Tax)

2. In case of a dealer selling goods, originally manufactured by a dealer enjoying exemption under the Package Scheme of Incentives, and the tax is not recovered separately in his purchase invoice, the taxable turnover shall be determined by reducing from the sale price, the amount of purchase price paid in respect of such goods including the price of goods used in the packing if packing is charged separately. [Rule 57(2)].
3. In case of sale of goods under any hire purchase agreement or any system of payment by instalments, component of interest, as specified in agreement [Rule 57(4)].

Fair Market Value

The concept of ‘Fair Market Value’ has been introduced, for the first time, by inserting a new section 28A vide Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2016, which provides as follows:

During the course of any proceedings under the Act, if the Commissioner is of the opinion that any transaction entered into by any dealer for sales price, which is below the prescribed fair market price for commodity for a prescribed class of dealers, so as to be liable, to pay tax less than the tax, which would have been otherwise become payable on such sales or purchases, then the Commissioner shall determine the tax liability as per the fair market price of such transaction while passing an order in the said proceedings.

It may be noted that provisions of section 28A are applicable retrospectively w.e.f. 1st April, 2011

ASSESSMENT, RECTIFICATION AND APPEALS

Assessment (section 23)

Rectification of Mistakes (Section 24)

The Commissioner may, at any time within two years from the end of a financial year in which any order passed by him has been served, on his own motion, rectify any mistake apparent on the record, and shall within the said period or thereafter rectify any such mistake which has been brought to his notice within the said period (two years), by any person affected by such order.

A dealer seeking rectification shall file an application in Form 307 within two years from the end of financial year in which the said order has been served.

Provided that, no such rectification shall be made if it has the effect of enhancing the tax or reducing the amount of a refund or interest payable on refund, unless the Commissioner has given notice in writing in the prescribed form to such person of his intention to do so and has allowed such person a reasonable opportunity of being heard. An application for rectification shall not be rejected on the ground that there is no mistake apparent on record unless the person concerned has been given a reasonable opportunity of being heard.

In cases, where dues have arisen due to non-production of Declaration Forms, due to any reason, at the time of passing an order, such orders can also be rectified on being an application made by the dealer within the aforesaid period of two years from the end of financial year in which the said order was served. Provided that an appeal has not been preferred and only one such application can be entertained against such an order.

Appeals (Section 26)

Section 26 permits a dealer to prefer appeal against any order passed under MVAT Act, Rules and/or notifications (except as provided in section 85).

All such appeals have to be submitted, in the prescribed manner, in prescribed form (Form 310), after paying prescribed fees and within the permitted time limit of 60 days from the date of receipt of the order appealed against.

The First Appeal against an order passed by Sales Tax Officer or Assistant Commissioner of Sales Tax shall lie to the Deputy Commissioner of Sales Tax (Appeals).

The First Appeal against an order passed by a Deputy Commissioner or Sr. Deputy Commissioner of Sales Tax shall lie to the Joint Commissioner of Sales Tax (Appeals). The First Appeal against an order passed by a Joint Commissioner or Sr. Additional Commissioner or the Commissioner of Sales Tax shall lie to the Tribunal.

In the case of an order passed, in appeal, by a Deputy Commissioner or a Joint Commissioner of Sales Tax, the Second Appeal shall lie to the Tribunal.

A dealer seeking stay against the order, shall submit an application, in Form 311, for grant of stay by the Appellate Authority. The Appellate Authority, after examining the matter and circumstances may stay the order appealed against either in full or part with such conditions or restrictions as it may deem necessary including a direction for depositing of a part or whole of the disputed amount by the appellant.

Fees Payable

Note: Wherever the amount of fees payable is up to ₹ 100/- only, the same can be paid by affixing court fee stamps of same value. Otherwise all such fees so payable shall be paid into the Government Treasury in the same manner as taxes are being paid. (In challan Form No. 210/MTR-6 to be paid through authorised banks).

ADVANCE RULING

The Government of Maharashtra has introduced ‘Advance Ruling’ provisions by replacing section 55 of the MVAT Act, vide Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2016, w.e.f. 26th April, 2016.

Please refer Trade Circular 14T of 2016, dated 7th May 2016, for detailed procedure in this regard.

It may be noted that provision regarding determination of disputed question (DDQ), contained in section 56 of MVAT Act, have been deleted w.e.f. 26th April, 2016.

INTEREST AND PENALTIES

Interest Payable (Section 30)

1. On non-payment or late payment of tax by an unregistered dealer or dealer who have failed to apply for registration in time: Simple interest at prescribed rate/s for each month or part thereof from 1st day of April of respective year till the date of payment.
2. Late payment of tax by registered dealer: Simple interest at prescribed rate/s for each month or part thereof from due date till the date of payment. In case of fresh or revised return, for any period, due date of original return shall be considered for differential dues if any.
3. Interest on differential dues on assessment of a registered dealer: Simple interest at prescribed rate/s for each month or part thereof from the next date following the last date of the period/s covered by assessment order till the date of assessment order.

The rate of interest payable under sub-sections (1), (2) and (3) of section 30 as prescribed in Rule 88(1) are as follows (w.e.f. 1st December, 2015):

Period liable for Interest Rate of Interest

4. Interest on Additional Dues: A penal rate of interest @ 25% of the additional amount of tax payable on filing a revised return for any particular period (whether by a registered dealer or unregistered dealer), under any of the following circumstances:

Additional dues arising in a revised return filed:

1. After the commencement of: (i) Audit of the business of the dealer in respect of any period, or (ii) Inspection of the accounts, registers and documents pertaining to any period, kept at any place of business of the dealer, or (iii) Entry and search of any place of business or any other place where the dealer has kept his accounts, registers, documents pertaining to any period or stock of goods,
2. In consequence of any intimation issued under sub-section (7) of section 63.

Concession in additional interest u/s. 30(4): (Refer Trade Circular 15T of 2014 dated 6th August, 2014)

1. Wherever the additional tax liability paid as per revised returns on account of audit or investigation proceedings is less than 10% of the tax paid with original returns, then the additional interest of 25% u/s. 30(4) shall not be payable.
2. Interest u/s. 30(4) shall not apply, where the additional tax liability arises on account of non-production of declarations. [New proviso inserted in section 30(4)]

Although, there is no bar on filing appeal against order levying interest u/ss. 30(1) and 30(3), the specific power of appellate authority, to either confirm or cancel or modify such order of levying interest, has been removed w.e.f. 1st May, 2011.

There is no provision for remission of interest, and, no appeal shall lie against orders levying interest under sections 30(2) and 30(4).

Interest Receivable (Sections 52 and 53, Rule 88)

A dealer is entitled to receive interest on refunds due to him @ 0.5%, for each month or part thereof, for the period commencing from the next day of the end of the period to which refund relates till the date of sanctioning refund or for a period of 24 months whichever is less.

Such interest is to be granted on the net amount of refund (after adjustment of any dues under the earlier laws, under the MVAT Act and under the CST Act). The interest shall not be granted on any refund/s u/s. 51.

The dealer is also entitled to receive interest @ 0.5%, for each month or part thereof, on delayed refunds for the period commencing the next day after expiry of 90 days from the date of order granting refund till the date of refund.

It has further been provided that the decision of Commissioner of Sales Tax for exclusion of any period, while working out such refund, shall be final.

Penalties (Section 29)

Penalties

Notes:

1. No Order of Penalty under above provisions shall be passed in respect of any period after 8 years from the end of the year containing the said period.
2. However, if due to some reasons, assessment is done after 8 years, penalty may be imposed while passing such assessment order. (as per amended provision w.e.f. 26th June, 2014)
3. Prior approval of the Deputy Commissioner needed by a Sales Tax Officer or an Assistant Commissioner for issuing order for imposing a penalty under any of the above sub-sections if penalty exceeds ₹ 5 lakhs; (This requirement of prior approval is deleted w.e.f. 26th June, 2014).
4. Prior approval of the Joint Commissioner needed by a Deputy Commissioner or a Senior Deputy Commissioner for issuing order for imposing a penalty under any of the above sub-sections if penalty exceeds ₹ 10 lakhs. (This requirement of prior approval is deleted w.e.f. 26th June, 2014).

MAINTENANCE OF ACCOUNTS

Section 63(1) requires, every dealer, liable to pay tax under the MVAT Act, and any other dealer who is required to do so by the Commissioner, to maintain a true account of the value of goods sold or purchased by him.

Sections 63(2) and (3) empowers the Commissioner to give direction to any dealer or any class of dealers to maintain accounts and records in such form and in such manner, as may be directed by him in writing.

Section 63(4) requires every dealer to keep all his accounts, registers and documents relating to his stock of goods, purchases, sales, delivery of goods and payments made or received towards purchase or sale of goods, at his place of business.

Section 63(5) requires goods return claims to be made in the period (month, quarter, six months) in which appropriate entries are made in the books of account.

Similarly, section 63(6) requires that the effect of all such debit notes or credit notes, which are in the nature of increasing or decreasing either sale price or purchase price of goods, shall be taken in the return for the period in which entries for such debit/ credit notes are taken in the books of account.

Rule 68 requires every registered dealer to preserve all books of account, registers and other documents pertaining to stocks, purchases, dispatches and delivery of goods and payments made towards sale or purchase of goods for a period of not less than eight years from the expiry of year to which they relate.

AUDIT OF ACCOUNTS

Section 61 of MVAT Act requires certain dealers/persons to get their accounts audited by an accountant, within the prescribed period from the end of the year. The report of such audit is required to be furnished in a prescribed format. The provisions contained in the Act and Rules in this regard are reproduced below for the attention of members.

"61(1) every dealer liable to pay tax shall;

For the periods up to 31st March 2013:

1. If his turnover of sales or, as the case may be, of purchases, exceed or exceeds rupees forty lakh/sixty lakhs (as the case may be) in any year, or
2. If he is a dealer or person who holds licence in:
   1. Form P.L.L. under the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966, or
   2. Form B-RL under the Maharashtra Manufacture of Beer and Wine Rules, 1966, or
   3. Form E under the Special Permits and Licence Rules, 1952, or
   4. Forms FL-I, FL-II, FL-III, FL-IV under the Bombay Foreign Liquor Rules, 1953, or
   5. Forms Cl-I, CL-II, CL-III, CL/FL/TOD III under the Maharashtra Country Liquor Rules, 1973,
3. if he holds an Entitlement Certificate in respect of any Package Scheme of Incentives, granted under this Act or, as the case may be, under the Bombay Sales Tax Act, 1959. (applicable from 1-5-2010)

For periods commencing on or after 1st April, 2013:

1. If the,
   1. Aggregate of his turnover of sales and the value of goods transferred to any of his place of business or of his agent or principal situated outside the State, not by reason of sale, or
   2. Turnover of purchases,

exceeds rupees one crore in any year

2. (deleted)
3. if he holds an Entitlement Certificate in respect of any Package Scheme of Incentives, granted under this Act or, as the case may be, under the Bombay Sales Tax Act, 1959.

Get his accounts in respect of such year audited by an Accountant, within the prescribed period from the end of that year, and furnish within that period a complete report of such audit, in the prescribed form, duly signed and verified by such accountant and setting forth such particulars and certificates as may be prescribed.

(For FY 2015-16, due date was extended till 09-02-2017 for efiling on 704 & 20-02-2017 for physical submission of Form 704 to Nodal Officer vide Circular No. 3T of 2017 dated 11-01-2017.)

Explanation: For the purposes of this section, "Accountant" means a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 or (w.e.f. 15-8-2007) a Cost Accountant within the meaning of Cost & Works Accountants Act, 1959).

(2) If any dealer liable to get his accounts audited under sub-section (1) fails to furnish a complete report of such audit within the time as aforesaid, the Commissioner may, after giving the dealer a reasonable opportunity of being heard, impose on him, in addition to any tax payable, a sum by way of penalty equal to one-tenth per cent of the total sales.

Provided that the dealer fails to furnish such report within the aforesaid period but files it within one month of the end of the aforesaid period and the dealer proves to the satisfaction of the Commissioner that the delay was on account of factors beyond his control, then the Commissioner may condone the delay. (This proviso is deleted w.e.f. 26th June, 2014).

Explanation: Explanation-II (w.e.f. 1st May, 2011) provides that for the purposes of section 61, an audit report shall be deemed to be “complete audit report” only if all the items, certification, tables, schedules and annexure are filled appropriately and are arithmetically self-consistent.

Sub-section 2A (inserted w.e.f. 1st May, 2011) further provides that where a dealer, liable to file audit report u/s. 61, knowingly furnished the audit report which is not complete, then the Commissioner may, after giving a reasonable opportunity of being heard, impose on him, in addition to any tax payable or any other penalty leviable under section 61, a sum by way of penalty equal to one-tenth per cent of the total sales.

(3) Nothing in sub-sections (1) and (2) shall apply to Departments of Union Government, any department of any State Government, local authorities, the railway administration as defined under the Indian Railways Act, 1989, the Konkan Railway Corporation Limited and the Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950."

"Rule 65. The report of audit under section 61 shall be in Form 704." The auditor is required to download latest version of Form 704 from the website.

"Rule 66. The report of the audit under section 61 shall be submitted electronically within nine months and fifteen days from the end of the year to which the report relates." The due date for uploading audit report, in Form 704, for the financial year 2015-16 shall be 15th January, 2017, which was extended till 09th February, 2017 (3T of 2017 dated 11-01-2017).

Submission of Form 704

1. The dealer is required to submit "Statement of submission of Audit Report in Form 704" along with this statement, the dealer is also required to submit the following documents:
   1. A copy duly signed by VAT auditor as well as dealer, of an acknowledgment generated after uploading of Form 704.

(Copy of Balance Sheet, Profit & Loss Account, Trial Balance, other Audit Reports, Part I of 704 Audit Report etc. not required to be submitted)

1. The aforesaid documents shall be submitted:
   1. To the concerned LTU officer, if the dealer is Large Taxpayer;
   2. To the "Desk Audit Cell" in the Office of the Joint Commissioner of Sales Tax (Business Audit) in Mumbai if the dealer is not Large Taxpayer. For & from FY 2015-16, it has to be submitted to jurisdictional Nodal Officers.
   3. In the rest of the State to the concerned LTU officer, if the dealer is Large Taxpayer, and in any other case to the Joint Commissioner of Sales Tax, VAT (ADM).

(Please refer Trade Circular No. 27T of 2009, dated 1-10-2009.)

In order to ascertain whether any person or dealer is required to get his books of account audited under the MVAT Act, the following will have to be examined/determined:

1. For clause (1)(a): –
   1. Whether the person is a dealer within the meaning of section 2(8) of MVAT Act.
   2. If a dealer, then whether he is liable to pay tax under the provisions of MVAT Act. A useful reference may be made to section 3 of MVAT Act in this regard.
   3. If the dealer is covered by the provisions of section 2(8) as well as section 3, then it is immaterial whether the dealer has taken registration or not. Thus even an unregistered dealer may also be liable to get his books of account audited. The only criteria to be checked are whether the turnover either of sales or purchases exceeds the limit of ₹40 lakh, ₹60 lakh or ₹ 1 crore (as the case may be) during a financial year.

If all the three criteria discussed above are fulfilled, then such a dealer shall get his books of account audited as per the provisions of section 61 and shall submit the report of audit accordingly. It may be noted that for the purposes of section 61 the term 'Turnover of Sales’ and 'Turnover of Purchases' have to be examined carefully. The same are defined u/s. 2(33) and 2(32) respectively. A useful reference may also be made to the definition of 'Sale' ‘Sale Price’ and ‘Purchase Price’ as given u/ss. 2(24), 2(25) and 2(20) respectively.

It may also be noted that for the purposes of section 61 ‘Turnover of Purchases’ will include all purchases of Goods within the State of Maharashtra whether it is trading goods, raw material, packing material, fuel, consumables, capital assets and/or purchase of goods in any other form say by way of expenses debited to Profit and Loss A/c. such as Printing & Stationery, Repairs and Maintenance, etc. Likewise 'Turnover of Sales' shall also include, apart from normal sales, any sale or disposal of capital assets, scraps etc.

2. Clause (1)(b) of section 61, before its deletion, required every person, whether a dealer or not, holding Liquor Licence of any of the categories as described in (i) to (v) above to get his books of account audited. Thus all such persons were required to comply with the provisions of this section, irrespective of the amount of turnover of purchase or sales during a year. However, now from financial year 2013-14 and onwards such persons/ dealers will be required to get their accounts audited if their turnover exceeds the prescribed limit.
3. Clause (1)(c) has been inserted, w.e.f. 1st May, 2010, providing for compulsory audit of accounts of all those dealers who are holding Entitlement Certificate in respect of any Package Scheme of Incentives of the Government of Maharashtra, irrespective of their turnover of sales or purchase during a financial year. (This clause is applicable for audit of accounts for financial year 2010-11 and onwards.)

SALE/PURCHASE OF GOODS BY PSI UNITS

PSI Units: The units enjoying benefits, whether by way of exemption or deferral, under the Package Scheme of Incentives may continue to enjoy the same. However, after introduction of VAT, they have to effect their purchases by paying full tax and claim refund of such tax paid on their purchases. (There are no concessional forms, such as BC forms, etc., which were available earlier under the Bombay Sales Tax Act/Rules).

Certain changes have been made in the provisions related to PSI units (contained in sections 88 and 89 of MVAT Act), with reference to Ultra Mega Units, Mega Units, Very Large Units, etc., vide Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2016, w.e.f. 26th April, 2016. For details, please refer Trade Circular 14T of 2016, dated 7th May, 2016.

Resale of goods purchased from PSI Units: As the units, enjoying exemption, do not charge tax on their sale, the subsequent dealer will not be in a position to take input tax credit. It is provided, therefore, that such subsequent dealer shall pay tax under the reduced value method; i.e., reducing the sale price by the amount of purchase price. Thus the tax is calculated on the amount of value addition only. Such a dealer, reselling goods purchased from PSI unit, shall make an additional declaration, as prescribed in Rule 77(2A), in his Tax Invoice or bill or cash memorandum as the case may be.