MAHARASHTRA VALUE ADDED TAX, 2005

The concept Value Added Tax (VAT) as the term suggests, is a tax
on the value added to the commodity at each stage in production
and distribution chain. This may be due to passing of the product
through various hands in the channel of distribution or the value
added in its price due to some activity of production or manufacture
or process undertaken on the commodity.
It is a tax on the value at the final or retail point of sale, which is
collected at each stage of sale. Putting it in different words, the total
amount of tax, which is to be collected at the consumer, or the final,
or retail point of sale, is collected in instalments. VAT eliminates the
cascading effect of taxes, it promotes competitiveness of exports, it
has a simple and transparent culture and it improves compliance.
VAT is based on the value addition to the goods. To calculate value
addition, by and large, Invoice Method is being used.
Thus, VAT liability of the dealer is calculated by deducting input tax
credit from tax payable on sales during the return period. This input
tax credit will be given to both; manufacturers and traders on
purchase of inputs/supplies meant for sales irrespective of when
these will be utilized/sold. If the input tax credit exceeds the tax
payable on sales during the return period, the excess credit will be
carried over up to the end of the financial year. If there is any excess
unadjusted input tax credit at the end of the year, then the same
will be eligible for refund.

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

DEFINITIONS:

INCIDENCE AND LEVY OF TAX

As per the provisions of MVAT, a dealer is liable to pay tax on the
basis of turnover of sales within the State.
1. The term dealer is defined in Section2 (8) of MVAT Act as
under : Section Dealer means any person who for the purposes of
or consequential to or in connection with or incidental to or in the
course of his business buys or sells goods in the State whether for
commission, remuneration or otherwise and includes:
a) a factor, broker, commission agent, del-credre agent or any other
mercantile agent who buys or sells goods on behalf of any principal
whether disclosed or not;
b) an auctioneer who sells or auctions goods or who organizes the
sale of goods or conducts auction of goods whether or not he has
the authority to sell the goods belonging to any principal and
whether the offer of the intending principal is accepted by him or by
the principal;
 c) a non-resident dealer or an agent or a non-resident dealer who
buys or sells goods within the State;
d) any Society, Club or association of persons which buys goods
from, or sells goods to its members.

However an agriculturist, educational institution and transporters

shall not be deemed to be a dealer (subject to fulfillment of
conditions)

Dealers liable to pay Tax:

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.

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.

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.

A successor in business of any dealer shall become liable to

pay tax on and from the date of succession.
A dealer, applying for voluntary registration, shall be liable to
pay tax from the date of registration.

2. Person The term person is defined in section 2(17) of MVAT Act

as under

person includes an individual, any State Government, the

Central Government, any company or society or club or association
or body of individuals whether incorporated or not, and also a Hindu
Undivided Family, a firm and a local authority and every artificial
juridical person not falling within any of the preceding descriptions;
3. Business 3.4.1 The term business is defined in section 2(4) of
MVAT Act as :

Business includes any service, any trade, commerce or

manufacture or any adventure or concern in the nature of service,
trade, commerce or manufacture. Under Explanation to this
definition, the following activities/transactions have been deemed to
be business or deemed to comprise in business, viz. i) raising of
man-made forests or rearing of

Extended definition of dealer Under the explanation certain persons are

deemed to be a dealer qua the activity of selling the goods.
To illustrate following persons would be covered within the scope of dealer if
they are liable to pay tax under the MVAT Act, viz.
a) Any person who is engaged in the business of buying or selling goods.
b) Any agents, brokers, etc. who buy and sell goods on behalf of any principal
c) An auctioneer who conducts an auction.
d) Any Society, Clubs or association of persons etc.

e) Customs Department which sells or disposes of confiscated goods. f)

Union or State Government departments and Local authorities which may sell
any goods including capital assets and scrap. g) Public Charitable Trusts
which sells the goods like books, cassettes, prasads etc. h) Railway
Administration which dispose of any goods, capital assets, scrap, etc. and
supply/sell good and meals etc. i) Maharashtra State Road Transport
Corporation, Shipping and Construction Companies, Airlines, Air Transport
Companies and advertising agencies, which sell any goods, capital assets,
etc. j) Insurance companies which sells any goods including salvage. k)
Financial Institutions and Banks which sells any goods, capital assets,
confiscated and repossessed goods, etc. l) Port Trust

Registration
Every dealer, who becomes liable to pay tax under the provisions of
MVAT, shall apply electronically for registration to the prescribed
authority, in Form 101, within 30 days from the date of such liability.
Turnover limits for the purpose of Liability/Registration [Sec. 3(4)]

Category of dealer Total turnover of sales Turnover of

taxable goods

purchased or sold
Importer Rs. 1,00,000 Rs.
10,000
Others Rs. 5,00,000 Rs.
10,000

It may be noted that while the total turnover of Rs. 1,00,000/- and
Rs. 5,00,000/- is in respect of Turnover of Sales (which includes all
sales whether tax free or taxable), the turnover limit of Rs. 10,000/-
is in respect of taxable goods whether purchased or sold.
Both the conditions have to be satisfied for the purposes of
liability/registration under this category.

Documents required for the purposes of Registration

The Commissioner of Sales Tax, Maharashtra, has issued a circular dated 4th
May, 2005, whereby a dealer is required to submit following documents along
with the application for registration in Form 101:
Documents to be submitted along with the application for registration:
(Note: Copies of documents must be self-attested and are subject to
verification from the original
A. IN CASE OF FRESH REGISTRATION
1. Proof of constitution of business (as appropriate):

i. In case of No proof required.

proprietary firm:

ii. In case of Copy of partnership deed.

partnership firm:
(Registered or
unregistered)

iii In case of Copy of Memorandum of Association

. company: and Articles of Association.

iv In case of other Copy of relevant documents.

. constitution:

2. Proof of permanent residential address* (please provide at

least 2 documents out of the following documents):
i. Copy of passport.
ii. Copy of driving licence.
iii. Copy of election photo identity card.
iv. Copy of property card or latest receipt of property tax of
Municipal Corporation/Council/Gram Panchayat as the
case may be.
v. Copy of latest paid electricity bill in the name of the
applicant.
3. Proof of place of business
i. In case of owner: Proof of ownership of premises; viz.,
copy of property card or ownership deed or agreement
with the builder or any other relevant documents.
 ii. In case of tenant/sub-tenant: Proof of tenancy/sub-
tenancy like copy of tenancy agreement or rent receipt or
leave and licence or consent letter, etc.
iii. Copy of Electricity Bill
4. Two latest passport size photographs of the applicant **

5. Copy of Income Tax PAN Card (in case of Proprietary

business: PAN of Proprietor; in case of partnership business:
PAN of partnership firm and of all partners; and in case of
registered company: PAN of the company; in case of HUF: PAN
of HUF and Karta etc.).

6. Challan in original showing payment of registration fee. (As

per new procedure, the amount of fees is payable through a
bank draft to be deposited with the registering authority along
with the application. The bank draft shall be prepared, for
applicant in Mumbai, in the name of "Bank of Maharashtra A/c.
MVAT", and in case of other places in the name of "State Bank
of India A/c. MVAT).
B. REGISTRATION IN CASE OF CHANGE IN CONSTITUTION OF THE
DEALER
1. Proof of change in constitution (e.g., if proprietary dealer
converted to partnership firm then copy of Partnership deed,
etc.).
2. Copy of latest return-cum-challan.
3. Pay order for payment of fees.
4. PAN of new firm.
5. Proof of permanent residential address.
C. REGISTRATION IN CASE OF TRANSFER OF BUSINESS
1. All documents from 1 to 6 given in 'A'.
2. Copy of transfer deed.
3. Copy of latest return-cum-challan of the original dealer.
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:
Labour and service charges for the execution of the works contract.
Amounts paid by way of price for sub-contract, if any, to sub-
contractors.

Charges for planning, designing and architects fees.

Charges for obtaining on hire or otherwise, machinery and
tools for the e
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.
 Cost of establishment of the contractor to the extent to which
it is relatable to supply of the said labour and services.

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.

Profit earned by the contractor to the extent it is relatable to

the supply of said labour and services.

CONSTRUCTION CONTRACTS

Contracts for construction of,

(1)Buildings, (2) Roads, (3) Runways, (4) Bridges, Railway
overbridges, (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

Any works contract incidental or ancillary to the contracts

mentioned in paragraph above, if such work contracts are awarded
and executed before the completion of the said contracts.