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INTRODUCTION
MVAT Act, 2002, has been introduced in the state of Maharashtra
w.e.f. 01042005.As the name suggests, VAT i.e. Value Added Tax is a
tax upon every value addition. Prior to 01042005, Maharashtra had first
stage singlepoint levy system of taxation implemented through the
Bombay Sales Tax Act, 1959. Under that system, only manufacturers and
importers were required to pay the tax on the first sale taking place in the
state. As against this, VAT system contemplates tax at every stage in the
entire chain of transactions relating to the same goods. The concept has
become quite familiar with our fellow brothers and need not be explained
further with the help of examples etc. Suffice it to say, VAT is leviable on
each sale happening in respect of the same goods.
A question frequently is asked whether positive value addition at
every stage is necessarily required under VAT. The scheme of MVAT Act,
2002, does not require such value addition at every stage. Even if the
seller sells the goods at cost price, without adding any margin for his
expenses or profit etc., VAT is leviable on that sale. Value addition also
does not mean enhancement of the intrinsic value of the goods. To give
an example, A purchases motor car and fits accessories therein like air
conditioner, music system etc. In this case, there is positive value addition
to the intrinsic value of the goods and VAT is certainly applicable on the
sale of such motor car.
In another case, A purchases the said motor car and sells in the
same condition without any refurbishment. In that case too, VAT is
payable on the sale of such car although there is no value addition made
by the seller therein.
Scope Of MVAT.
The MVAT Act, 2002 deals with the law relating to the levy of tax
on the sale or purchase of certain goods in the State of Maharashtra. The
word State wherever used in the MVAT Act means the State of
Maharashtra.
Registration Liability:
Section 3 (4) prescribes the limits of turnover of sales for the
purpose of attracting registration liability. It must be borne in mind that it
is only the turnover of sales which has to be computed for this purpose
and not the turnover of purchases. The said limits are as under:
Category Of Dealer Limit Of Turnover Of Sales
Other Conditions
Importer Rs. 1,00,000/ Value of taxable goods sold or purchased during
the year is not less than Rs. 10,000/ Others Rs. 10,00,000/ Value of
taxable goods sold or purchased during the year is not less than Rs.
10,000/
Importer, here, means as defined u/s. 2(13) and is a dealer who
brings any goods into the state or to whom any goods are dispatched from
any place outside the state. Thus, he can be a dealer who receives the
goods from other states either by way of stock transfers or by way of
interstate purchases or by importing the goods from a foreign country.
The condition of minimum value of imported goods is conspicuously
absent in this section as compared to the corresponding section under the
BST Act. Therefore, a dealer who is an importer in the sense described
above, even for a negligible amount, would be liable for registration if his
turnover of sales exceeds Rs. 1,00,000/.
INCIDENCE OF TAX
The charging section is contained in section 4 which reads as
under: Subject to the provisions of this Act and rules, there shall be paid
by every dealer or, as the case may be, every person, who is liable to pay
tax under this Act, the tax or taxes leviable in accordance with the
provisions of this Act and rules. Thus, it is clear that every dealer/person
who is liable to pay tax is required to pay taxes in accordance with the
provisions of the Act and rules. The term person liable to pay tax has not
been expressly defined under the Act. However, considering the
provisions of section 3, 4, 5 and 6 collectively, one can infer that VAT is
payable only on the sales of goods where the threshold limit of turnover
of sales is crossed by the dealer. It is pertinent to note that there is no
provision for purchase tax under MVAT Act.
All items which are not covered in any of the above Schedules are
automatically covered in residuary Schedule E. Goods covered by
Schedule E are subject to tax at 12.5%.
VI. EXEMPTIONS
Following sales transactions are exempt from payment of tax under
MVAT Act:
One more notification dated 29th June, 2009 is issued by the State
Government u/s. 8(5) by which sale of certain specific goods for
satellite launch system to the Department of Space; Government of
India is exempted from payment of tax with effect from 1st July, 2009.
to 55 of the MVAT Rules, 2005. There are changes in rules from time to
time. The updated position of set-off Rules as on 01.07.2009 can be
summarized as under.
Important conditions:
1.
2.
3.
(i) Tax paid separately on purchases effected within the State and
supported by Tax Invoice. Entry tax paid under Maharashtra Entry Tax
on Goods Act as well as Maharashtra Entry Tax on Motor Vehicles Act.
Benefits of Registration:
i. He can claim set off of tax paid on the purchase if eligible to get any.
ii. He can issue various declarations prescribed C.S.T. Acts like Form C
etc.
iii. Registered dealers are preferred while awarding the government
contracts. The above mentioned benefits are denied to an unregistered
dealer.
Disadvantages of non registration:
1 Unregistered dealer is liable to pay tax on the sales affected by him but
he cannot collect tax.
2 He cannot claim any set off or refund of the tax paid by him.
3 Purchases at concessional rate of tax not available to him. He cannot
issue forms or declarations like Form C etc.
4 No authenticity in the market as majority of dealers purchases goods
from registered dealers only.
5 Possibilities of non consideration for awarding the government contract.
6 Imposition of penalty and prosecution for remaining unregistered.
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The dealer who is liable to file monthly or quarterly return during the
year 2014-15 shall not eligible to opt composition scheme.
What is the rate of Composition amount?
There are two options provided for payment of composition money.
Option 1 If dealer opt to pay composition amount on total turnover of
sales, then he shall pay 1% on entire turnover of sales including tax free
goods.
Option 2 If dealer opt to pay composition amount on turnover of sales
of taxable goods only, then he shall pay 1.5% on such turnover of sales.
What are the consequences after application of composition scheme?
1.
composition dealer
2.
issue the cash memo, sales bill, etc. if value of goods sold exceeds Rs.
fifty.
3.
A dealer opting for composition scheme is not eligible for set off.
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row (e) of box 14 of the returns in Form 232 or row (e) of box 13 of the
returns in Form 233, as the case may be.
5.
14
16
17
Eating
House,
Refreshment
Room,
Boarding
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3. who purchases any goods from a registered dealer whose sales of the
said goods are not liable to tax by virtue of the provisions contained
in sub-section (1) of section 8 or
4. who sells at retail liquor including liquor imported from out of India,
Indian Made Foreign Liquor or Country Liquor except as provided
in sub-section (2)
Scheme as Applicable to Bakers
(a) What are class of sales and purchases which are eligible for enabling
benefit under this scheme ?
(b) What is Composition Amount Payable (Tax payable)
1. % of the first Fifty Lakh rupee of the total turnover of sales of
goods referred above in (a) goods imported out of Maharashtra
State, if any, including bread in loaf, rolls, or in slices, toasted or
otherwise,
2. in the case of a registered dealer and 6 per cent. of the first Fifty
Lakh rupee of the total turnover of sales of goods referred to in (a)
above and goods imported out of Maharashtra State, if any
including bread in loaf, rolls, or in slices, toasted or otherwise
(c) Conditions in which this scheme will be applicable to retailers
i.
ii.
The claimant dealer shall not be entitled to claim any set off under
the MVAT Rules, in respect of the purchases corresponding to any
goods which are sold or resold or used in packing of goods referred
in (a) above,
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iii.
iv.
v.
vi.
If the Dealer opts for Composition Scheme form 1st April, 2011 he
shall apply from on or before 30th June 2011,
vii.
If the Dealer opts for composition at any time on or after 1st April
of any year then the option shall be effective only form the
beginning of next financial year,
viii.
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ix.
x.
xi.
xii.
Before 1st April 2011 the turnover limits were Rupees Thirty
Lakhs
1. Restaurants,
Eating
House,
Refreshment
Room,
Boarding
What are class of sales and purchases which are eligible for enabling
benefit under this scheme ?
The scheme shall be applicable to total turnover of sales made by
a registered dealer, who is a retailer as provided in section 41 (and
explained above), of any goods excluding the turnover of resales if any,
effected by him, of the following goods:1. Foreign liquor, as defined in rule 3(6)(1) of the Bombay Foreign
Liquor Rules, 1953.
2. Country liquor, as defined in Maharashtra Country Liquor Rules,
1973.
3. Liquor imported from any place outside the territory of India as
defined, from time to time, in rule 3(4) of the Maharashtra Foreign
Liquor (Import and Export) Rules,1963.
4. Drugs covered by the entry 29 of the Schedule C appended to the
Act.
5. Motor Spirits notified by the State Government under subsection
(4) of section 41 of the Act.
Composition Amount (Tax payable)
The composition amount shall be, calculated on the,
Excess, if any, of the total turnover of sales, including turnover of
sales of tax - free goods but excluding liquor, Drugs, and Motor
Spirits referred above, in respect of any six monthly period
over the turnover of purchases including turnover of purchases of
tax free goods, but excluding liquor, Drugs, Motor Spirits referred
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The selling dealer does not collect tax separately in respect of the
sales specified above.
ii.
The claimant dealer shall not be entitled to claim any set off under
the Maharashtra Value Added Tax Rules, 2005, in respect of the
purchases corresponding to any goods which are sold or resold or
used in packing of such goods sold.
iii.
The turnover of sales of such goods does not exceeded rupees fifty
lakh in the year previous to which the composition is availed of
and if the dealer was not liable for registration, in the immediately
preceding year, then he shall be entitled to claim the benefit of the
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scheme in respect of the first fifty lakh rupees of the total turnover
of sales in the current year
iv.
v.
In respect of the six monthly period starting on the 1st April 2005,
for calculating the excess, 5/6th of the turnover of sales of the six
monthly period is to be considered instead of the entire turnover of
sales for that period.
vi.
vii.
viii.
ix.
x.
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xi.
xii.
Any other purchases from unregistered dealers are meant only for
packing of goods resold.
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Conclusion
In nutshell, it can be stated that a person effecting sales has to
ascertain that whether he is doing so in the capacity of a dealer having
regard to the frequency, continuity, regularity, volume etc. of the
transactions. Refer Supreme Court judgment in the case of State of
Gujarat vs. Raipur Manufacturing Co. Ltd. (19 STC 1).
Once it is established that he is a dealer carrying on a business
having regard to the peculiar definitions of the terms under the MVAT
Act, he has to ascertain the total turnover of sales so as to determine his
registration liability. The incidence of tax will be on the transactions of
sales effected during the course of business by the dealer and not
otherwise. The liability of tax has to be discharged taking into
consideration the rates of tax as per schedules.
Although the Act nowhere confers an express right to collect the
taxes from the buyers, there is no prohibition to recover the taxes form
the buyers as well. Considering all the provisions of the Act
harmoniously, it can be concluded that the dealer can collect the taxes
separately through the invoices only equal to his liability of tax on the
said transaction.
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Webliography
www.finance.indiamart.com
www.caclubindia.com
www.servicetax.gov.in
www.management paradise.com
www.tax4india.com
www.wisegeek.com
www.wikipedia.com
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