INTRODUCTION OF MVAT ACT 2002

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 0104
2005, 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.
Value addition can also be in the nature of expenses incurred on the procurement of the
goods and marketing thereof without adding anything into the intrinsic value of the goods such
as selling expenses, advertising expenses, transport etc. Even in such cases, VAT is applicable on
the sale of such goods. Another frequent query is in respect of the case where goods are sold at a
loss. In that case too, VAT is applicable on the sale price although offsetting the purchase tax
against such sales tax may result into a refund. There is no express prohibition under MVAT Act
to claim refund in such cases.
INTRODUCTION OF MVAT ACT, 2002:
The Maharashtra Value Added Tax 2002 (Herein after called as MVAT Act) has replaced the
Bombay Sales Tax Act, 1959 on & w. e. f. 1st April 2005 and now the sales tax is collected by
the Maharashtra government under MVAT Act, 2002.
When the sales tax was collected under The B. S. T. Act, 1959,
What was the reason to introduce the new MVAT Act, 2002?
What is the difference between the two Acts?
Why the government felt the need to replace the B. S. T. Act?
The basic difference is the charging of sales tax. Under the B.S.T. Act, 1959 it was a single
point levy of tax i.e. tax collection was at first stage and other stages are allowed as resales
and no tax payable on subsequent stages.
However to increase the revenue, the Govt. of Maharashtra in the BST regime.
Introduced resale tax which was maximum at 0.5 percent on sales. Under the MVAT Act, 2002
the concept of collection of sales tax has changed and now the sales tax is collected at every
stage of value addition till the goods reaches to the end user or consumer.
 SCOPE OF REGISTRATION MVATACT 2002
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 turn over of
sales exceeds Rs. 1,00,000/.
 REGISTRATION UNDER MVAT ACT 2002

REGISTRATION

Liability for registration

(S-3)

Irrespective of Turnover Based on Turnover

AS B
Dealer Registered under Earlier Laws
Dealer Limits

Successor/Transferor Importer Reaching Limits on /after 1-4-2005

Sales Exc

Voluntary Registration
Taxable sales

Non-Importer Reaching Limits after 1-4-2005

Sales Exc
 FRESH REGISTRATION:-

Every registered dealer who holds, on such date as the Commissioner may by
notification in the Official Gazette specify, a certificate of registration, which is valid
on the said date (hereinafter, in this section, referred to as the existing certificate of
registration), shall obtain in lieu of the existing certificate of registration a fresh
certificate of registration as provided in this section.
Every dealer, who is required to obtain a fresh certificate under sub-section (1), shall
apply in such form, manner and time and to such authority as may be prescribed; and
such application shall be accompanied by the existing certificate of registration
together with all additional copies thereof, if any, issued to him.
On receipt of such application, the prescribed authority shall, subject to rules, issue a
fresh certificate of registration, in the prescribed form to the applicant; and thereupon
the fresh certificate of registration, so issued, shall, for all the purposes of this Act, be
deemed to be a certificate of registration issued under section 16.
Without prejudice to the other provisions of this Act, all the existing certificates of
registration shall stand cancelled with effect from such date as the Commissioner may
notify in the Official Gazette.
The Commissioner may, by the notification issued under sub-section (1) or (4), also
provide that such notification shall apply only to such class of registered dealers as
are specified in the said notification and such notification may be issued by him, from
time to time.
The provisions of this section shall mutatis mutandis apply in respect of any other
certificate issued by or under the provisions of this Act as they apply in respect of the
certificate of registration.
 DOCUMENTS REQUIRED FOR VAT REGISTRATION

After filing the online application VAT Registration, Vat Acknowledgment will be generated by
the system in that Officer Number and Date will be mentioned, On the respective date visit the
deparments for Photo and Documents Verification with following documents.

PROOF OF CONSTITUTION OF BUSINESS-

1. Proprietorship No proof required

2. Partnership Partnership deed

3. Limited Liability Partnership (LLP) Copy of the Certification of incorporation and LLP
agreement.

PROOF OF PERMANENT RESIDENTIAL ADDRESS OF ALL

DIRECTORS/PARTNERS/PROPRIETOR

1. Copy of Electricity bill is mandatory if not in your name additionally maintenance receipt
is also required

2. Copy of Electricity bill is mandatory if not in your name additionally maintenance receipt
is also required

PROOF OF PLACE OF BUSINESS

1. Containing signature

a) Rent owner Agreement

b) NOC from owner
c) ID proof

2. Owned Purchase agreement

 3. Rent Free consent letter

4. Electricity Bill Compulsory in all case

5. Maintenance Bill if electricity bill is not in name of concerned person

6. Two latest passport size photograph of the applicant ** (Please do not paste the photo on
the printout of application.)

7. Copy of PAN card of Company

8. Copy of PAN card of all Directors/ Partners/ Proprietors

9. Demand Draft from Nationalize Bank

PROOF OF CONSTITUTION OF BUSINESS (AS APPROPRIATE):

In case of proprietary firm: No proof required.

i.
In case of partnership firm:
Copy of partnership deed.
ii. (Registered/unregistered

In case of company: Copy of M.O.A and A.O.A

iii.

In case of other constitution: Copy of relevant documents

iv.
 INTEREST & AUDIT OF MVAT ACT 2002

With a view to promoting compliance with the provisions of this Act, the
Commissioner may arrange for audit of the business of any registered dealer. For
the purpose of this section, the selection of dealers for audit shall be made from
amongst the dealers,-

(a) who have not filed returns by the prescribed dates; or

(b) who have claimed refund of tax; or

(c) where the Commissioner is not, prima facie, satisfied with the correctness of
any return filed by a dealer or is not satisfied with any claim made, deduction
claimed or turnover disclosed in any return filed by the dealer; or

(d) who are selected by the Commissioner on the basis of the application of any
criteria or on a random selection basis; or

(e) where the Commissioner has reason to believe that detailed scrutiny of the case
is necessary.

INTEREST ON LATE PAYMENT OF TAX.(SEC. 9)

The interest for late payment of tax or any additional demand of tax raised in assessment
is 1.25 % p.m. with effect from 1-7-2004 (2%p.m. up to 30-6-2004.)

INTEREST ON REFUND OFEXCESSPAYMENT OF TAX (SEC. 19A)

If any refund is due from any or during respect of period1 .4.2004 and onwards the interest once
fund @6% p.a. is receivable by such person entitled to refund, for maximum 18 months
"Sec. 30 (4)

after the commencement of,-

audit of the business of the dealer in respect of any period, or the dealer shall be liable to
pay by way of interest, a sum equal to 25 % of the additional tax payable as per the return
or, as the case may be, revised return." kindly tell, with source of info.,

if possible

if audit as mentioned above means MVAT audit only, or any other audit under companies
act, IT Act, etc.

is 25% calculated straight forward without taking into account the period i.e return date to
date of filing of revised return?

Audit here means Business audit or assessment carried out by the department and not the
MVAT, IT audit etc. Sec 30 (4) will be not applicable in that case.
PENALTIES OF MVAT ACT 2002

The penalties under MVAT Act, 2002 are prescribed in section 74, which are as follows:

Section 74(1)(a)

Rigorous imprisonment for minimum one month and maximum one year and with fine for
following offences:

1 If an unregistered dealer represents himself as a Registered 74(1)(a)

. Dealer at the time of sale or purchase

2 If he filed false returns 74(1)(b)

.

3 If he produces a false bill, cash memorandum, voucher, 74(1)(c)

. declaration, certificate or other document referred to in sub-
section (29)(4)

4 If he produces false accounts of the value of goods bought or sold 74(1)(d)

. by him in contravention of section (63)(1)

5 If he produces false accounts registers or documents or 74(1)(e)

. knowingly furnishes false information, or
 6 If a dealer issues to any person any false certificate, declaration 74(1)(f)
. under the Act, rules or notifications or a Bill, cash memorandum,
voucher, delivery challan, lorry receipt or other documents which
he knows or has reason to believe to be false.

7 If a dealer represents him wrongly that he is authorised under 74(1)(g)

. section 82 appears before any authority in any proceeding

Section 74(1A)

Rigorous imprisonment for minimum of one year and maximum up to two years and with
fine for the following offences:

1 Knowingly with the intention to defraud revenue, issues or produces a false 74(1A)
. Tax Invoice and thereby makes a false claim in respect of the set off or the
refund, or claims any other deduction that results into reduced tax liability
or enhanced refund

2 Abets any of the aforesaid offences 74(1A)

.

Section 74(2)

After conviction rigorous imprisonment for minimum of three months and maximum up to
one year and with fine for the following offences:

1 If the dealer wilfully evading tax or payments of tax, penalty and interest
. leviable under this Act 74(2)

Section 74(3)
Simple imprisonment, up to six months and with fine for the following offences, if the dealer:

1. Fails, without sufficient cause to comply with the requirements 74(3)(a)

of section (14) sub-sec. (3)

2. Engaged in business as dealer without being registered under 74(3)(b)

Section 16,

3. Failure to get the new registration certificates in lieu of existing 74(3)(c)

certificate, when required to do so, as per the provision of sec.
(17) sub-sec.(1)

4. Fails without sufficient cause, in furnishing any information as 74(3)(d)

required by section 18

5. Fails without sufficient cause, to furnish a declaration/revised as 74(3)(e)

provided in sec.(19) sub-sec.(1); i.e., information regarding the
manager of the business or fails to communicate PAN of the
business or information regarding having applied for the same as
provided in sec. (19) sub-sec. (2)

6. Fails, without sufficient cause, to furnish any return or complete 74(3)(f)

and self-consistent return by section 20 by date and in the
manner prescribed,

7. Fails, without sufficient cause, in paying TDS by the employer, 74(3)(g)

in deducting TDS or to file TDS Return as required under the
provision of section 31

8. Fails, without sufficient cause, to comply with the requirements 74(3)(h)

 of section (33) sub-sec. (1)

9. Fails, without sufficient cause, to comply with the requirements 74(3)(i)

of any order issued under the section (35) sub-sec.(1)

10 Fails, without sufficient cause, to comply with the requirements 74(3)(j)

. of any order issued under Section (38) sub-sec.(3)

11. Fails, without sufficient cause, to comply with the requirements 74(3)(k)
of section 42

12 Without reasonable cause, contravenes any of the provisions of 74(3)(l)

. sec. 60

13 Fails, without sufficient cause to get his accounts audited or 74(3)(m)

. furnish the audit report, as required under section 61

14 Fails, without sufficient cause, to comply with the requirements 74(3)(n)

. of sec. 63

15 Fails, without sufficient cause, to comply with the requirements 74(3)(o)

. of sec. 64

16 Fails, without sufficient cause, to comply with the requirements 74(3)(p)

. of sec. 65

17 Fails, without sufficient cause, to furnish any information or 74(3)(q)

. return required by sec. 70 by the date & in prescribed manner, or
files incorrect information or return knowingly.
 18 Fails, without sufficient cause, to issue a tax invoice, bill or cash 74(3)(r)
. memorandum as required under section 86

19 Fails, without reasonable cause, any of the conditions, subject to 74(3)(s)

. which the Certificate of Entitlement is granted.

20 Fails, without sufficient cause, to comply with any notice in 74(3)(t)

. respect of any proceedings

Section 74(4)

Simple imprisonment, for minimum one month but not exceeding one year and fine for the
following offences:

Whoever aids or abets or induces any person in commissioning of any offences listed under sub-
sections (1) and (2).

Simple imprisonment, for one month and with the fine in addition to the punishment
provided for the following offences if the dealer:

whoever aids or abets or induces any person in commissioning of any offences listed under sub-
section (3).

Section 74(5)

Punishment of 100/- per day during the continuation of the offences specified under sub-
sections (1) to (4).

Section 74(6)

Same punishment as provided under the relevant sub-sections for person who is deemed to
be Manager as provided under section 19 of the dealer accused of an offence specified in
sub-sections (1) to (3) of section 74.
 CONCLUSION

Under MVAT Act, 2002 assessment will be made sparingly and hence more importance is
given to returns. In absence of scrutiny assessments, returns will be fulfilling the purpose of
assessment and hence Department gives more importance to returns.

Hence penalties are provided for defaults. Dealers should take care to comply with the law.
The above is only an indicative discussion and more issues can crop up in course of time and
on facts of the case, which are required to be taken care of by the concerned dealers and
persons.

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.
 BIBLIOGRAPHY

www.mahavat.gov.in

www.wikipedia.com
M.com II (text book Manan Parkashan)