Sales Tax Review

September  2006

Important Trade Circulars

No. AMD-1006/1A/Adm-3

Gentlemen/Sir/Madam,

        The Governor of Maharashtra had promulgated an Ordinance bearing No. VI of 2006 dated 20^th June 2006, whereby amendments to the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975, the Maharashtra Tax on Luxuries Act, 1987, the Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987, the Maharashtra Tax on Entry of Goods into Local Areas Act, 2002 and the Maharashtra Value Added Tax Act, 2002 have been effected.  The Ordinance has now been replaced by an Act of the Legislature (Mah. XXXII of 2006)

2. The salient features of the amendments are briefly explained in the different annexes which are appended to this circular.

3. This circular cannot be made use of for legal interpretation of provisions of law, as it is clarificatory in nature.   If any member of the trade has any doubt, he may refer the matter to this office for further clarification.
    

4. You are requested to bring the contents of this circular to the notice of all the members of your association.

Yours faithfully,

(B. C. Khatua)

Commissioner of Sales Tax,

Maharashtra State, Mumbai.

Annex-A

Gist of amendments to the Maharastra Tax on Profession Trades, Callings and Employments Act, 1975. 

1. In the Profession Tax Act, the references to the Bombay Sales Tax Act, 1959, are placed by substituting them with effect from 1^st April 2005 with references to the Maharashtra Value Added Tax Act, 2002 [e.g. definition of Tribunal, entry 8 of the Schedule I appended to the Act. ]
    

2. Section 6 is amended to substitute the reference to entry 23 of the Schedule appended to the Act by providing a reference to entry 21.  This is done on account of the substitution of the Schedule to the Profession Tax Act.
    

3. A provision is introduced u/s. 8 of the Act for issue of demand notice when tax as per return is not paid. A provision for granting installment is made. The Profession Tax Act provisions in these respects are now on par with the VAT provisions.  Similarly, it is made clear that the tax assessed under sections 7, 14 and 15 is to be paid within 15 days from the date of service of notice of demand.
    

4. Sections 12, 13, 14 and 18 are amended by which the existing Deputy Commissioners and Assistant Commissioners are re-designated as Joint Commissioners and Deputy Commissioners respectively.  Therefore, an appeal against the order of Profession Tax Officer shall now be made before the Deputy Commissioner and that against an order passed by the Deputy Commissioner before the Joint Commissioner.  These amendments are technical in nature.  The Commissioner of Profession Tax is now empowered to assign territorial jurisdiction and delegate powers to the officers appointed for the purposes of the Profession Tax Act.

Annex-B

Gist of amendment to the Maharashtra Tax on Luxuries Act, 1987.

1. All of the provisions in respect of Luxury tax on tobacco and textiles are deleted w.e.f. 20^th January 2005, i.e., from the date of judgment delivered by Hon’ble Supreme Court of India in the case of M/s. Godfrey Phillips India Ltd. (Writ petition No.567/1994.)
    

2. In section 3, the reference to the Bombay Sales Tax Act, 1959, is changed to a reference to the Maharashtra Value Added Tax Act, 2002 with effect from 1^st April 2005. 
    

3. The existing Deputy Commissioners, Sr. Assistant Commissioners,   Assistant Commissioners, Luxury Tax Officers Class I and Luxury Tax Officers Class II are re-designated as Joint Commissioners, Sr. Deputy Commissioners, Deputy Commissioners, Assistant Commissioners and Luxury Tax Officers respectively.  
    

4. A new section 8A is introduced to provide for a scheme of fresh  registration for hoteliers. The new provision is on par with the existing provision in the  Maharashtra Value Added Tax Act, 2002.  
    

5. In section 36, it is now provided that appeal against the order of Assistant Commissioner of Luxury Tax or Luxury Tax Officer or any other officer sub-ordinate to him shall be made to the Deputy Commissioner and if the order is passed by the Deputy Commissioner then to the Joint Commissioner, and if the order is passed by the Joint Commissioner then to the Commissioner.

Annex-C

Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987.

1. The various amendments in Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987 are carried out as a result of the introduction of Value Added Tax Act, 2002 with effect from 1^st April 2005, e.g.-

1. For the words “the Bombay Sales Tax Act, 1959” the words “The Maharashtra Value Added Tax Act, 2002” are substituted.
    

2. The deletion of sub-section (1) of section 4, the substitution of section 5 by newly inserted section 5, deletion of section 6 and insertion of section 9B.

2. The amendment in clause (l) of section 2 pertaining to the definition of ‘Purchase Value’ is introduced, since the intention is to collect the tax only on the rate differential between Maharashtra and the State from where the motor vehicle is imported.   As per the earlier definition, the entry tax was being levied on the component of sales tax, transport fee and freight charges paid in the other State. 
    

3. The amendment in clause (i) of section 2 and sub-section (1) of section 3 are carried out by substituting the words and figures “Motor Vehicles Act, 1939”  with the words and figures “Motor Vehicles Act, 1988”.

Annex –D

Maharashtra Tax on Entry of Goods into Local Areas Act, 2002.

1. The following amendments in Maharashtra Tax on Entry of Goods into Local Areas Act, 2002 are carried out as a result of the introduction Value Added Tax Act, 2002 with effect from 1^st April 2005.

1. The words “the assessing authority under the Sales Tax Act” are substituted by the words “the registering authority under the Value Added Tax Act”.
    

2. Clause (j) which read as  “the Sales Tax Act means the Bombay Sales Tax Act, 1959 and includes the Bombay Sales Tax Rules, 1959” is deleted.
    

3. A new Clause namely (m-1) which reads as  “Value Added Tax Act means the Maharashtra Value Added Tax Act, 2002 and includes the Maharashtra Value Added Tax Rules, 2005” is inserted.
    

4. The words and figures “Sales Tax Act, 1959 or the Bombay Sales Tax Rules, 1959” are substituted by the words and figures “the Maharashtra Value Added Tax Act, 2002 or the Maharashtra Value Added Tax Rules, 2005” respectively.
    

5. The words “reassess, reassessment, revision” are substituted by the word   “review”.

2. The following changes are made in the schedule appended to the Entry Tax on Goods into Local Areas Act, 2002 with effect from 1^st April 2005.

1. The entry No.3 of the schedule which related to “aviation turbine fuel (duty paid) as specified in clause (ii-b) of section 14 of the Central Sales Tax Act, 1956” is deleted.
    

2. The rate of tax on goods other than motor spirits is changed to 12.5%, i.e., at par with rate of tax under MVAT Act, 2002 on goods viz. bitumen, light diesel oil, naphtha, low sulpher heavy stock, kerosene-non-PDS and furnace oil including heavy furnace oil and residual furnace oil.

Annex E

Maharashtra Value Added Tax Act, 2002.

1. Amendment of section 2:

1. Some of the entries in the Schedules now employ the expression ‘brand name’.  For this reason, a definition of "brand name" is added as follows:

     “(3-a) brand name” when used in the schedule means a brand name, (whether registered or not), that is to say, a name or a mark such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person”.
 

      This definition is similar to the definition contained in the B.S.T.Act, 1959 as also in the Central Excise Tariff Act, 1985.

2. in clause (20) which deals with purchase price, Explanation IV is added w.e.f. 1.4.2005:

“Explanation IV. –The amount of Valuable consideration paid or payable by a dealer for the purchase of drugs specified in entry 29 of Schedule C shall be the maximum retail price printed on the package  containing the drugs”.

 

     For medicines, the definition of purchase price is thus brought on par with the definition of sale price of medicines.

N.B.:-  The dealers in medicines need not file revised return only on account of this retrospective amendment.

3. in clause (24) which deals with the definition of sale, in the Explanation, in sub-clause (ii) of clause (b), definition of " works contact" is provided so that the words "works contract " are substituted by " works contract namely, an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property”.  The Supreme Court judgment in Reheja Builder’s case (141 STC 298) will now be directly applicable to proceedings under Maharashtra Value Added Tax Act, 2002.

      Some queries have been received regarding the scope of the amendment and applicability of the judgment and of the present amendment.  A separate trade circular is being issued regarding the import of this amendment  and of the judgment.

2. Amendment of section 3:

1. The amendment is carried out to clarify that in sub-section (4),  the words " turnover" means " turnover of sales"
    

2. The amendment is carried out in sub-section (5) so that the words "turnover of sales" are retained and the words "turnover of purchases" are deleted. This is done to clarify that liability for registration is only on turnover of sales.
    

3. Sub-section (7) is deleted.  Now dealers are not required to get registration under MVAT, Act, 2002 merely because they have incurred liability for registration under the Central Sales Tax Act, 1956.  Consequently, the reference to sub-section (7) is also deleted from sub-section (3).

3. Amendment of section 8:

1. In sub-section (3) in the Explanation, a definition of a “developer of the special economic zone” is added and it is clarified that  the benefits available to the  unit in the special economic zone are also available  to an establishment situated within the Special Economic Zone .
    

2. An enabling power is taken to Government to exempt fully or partly from payment of tax the purchases of dealers specified in the Import and Export policy of Government of India subject to such conditions, exceptions and restrictions as may be laid down in the notification to be issued by the State Government .
    

3. The State Government is now authorised to exempt fully or partly the sales and purchases of the Canteen Stores Department, Indian Naval Canteen Services and unit run canteens. 
    

4. An enabling power is taken to the State Government to exempt fully or partly from the payment of tax any sales or classes of sales of goods made to

1. the State Government,
    

2. the Central Government,
    

3. a generating company as defined in The Electricity Act, 2003 for use in generation of electricity,
    

4. a registered dealer  holding a licence for  transmission under The Electricity Act, 2003 for use in transmission  of electricity,
    

5. a registered dealer holding a licence for distribution  of electricity under The Electricity Act, 2003 for use in distribution  of electricity,
    

6. the Mahanagar Telephone Nigam Limited,
    

7. the Bharat Sanchar Nigam Limited,
    

8. any telephone service provider, holding a licence granted under the Indian Telegraphy Act, 1885 and the Indian Wireless Telegraphy Act, 1933, to establish, maintain and operate telephone services upto subscriber’s terminal connections.

4. In sub-section (6) of section 16, the words " or the place of such business is changed to a different local area" and the Explanation of local area are deleted since under the new scheme of registration, it will not be necessary for the dealer to apply for new registration certificate merely on account of shifting of the place of business.
    

5. Amendment of section 20,

1. Sub-section (2) is substituted to enable  the dealer to file separate  returns for separate  places of business  or  separate constituents  of  his business after getting the permission of the Commissioner of Sales Tax.
    

2. By amending sub-section (4), the period for filing revised return is extended to eight months instead of six months from the end of the year.
    

3. A new sub-section, namely sub-section (5) is added to provide that if any amount of tax is required to be paid with the fresh /revised return, then such amount shall be paid in the Government Treasury and a fresh/ revised return along with a self attested true copy of the receipted chalan will be filed with the prescribed authority.

6. By amending sub-section (3) of section 21, the period for service of notice for assessment in respect of any period ending on or before 31^st March 2008 is made six years.
    

7. The amendment in sub-section (3) of section 22 is technical in nature.
    

8. In section 23,

1. sub-section (11) is added to enable the assessing authority to cancel the best judgment assessment order passed by him under sub-section (2), (3) or (4)  of section 23, if the application for the same is made by the dealer.
    

2. sub-section (12) is added to provide a period of eighteen months from the date of the order of cancellation of assessment order to make a fresh assessment order where the assessment order is cancelled under sub-section (11) of section 23.

9. In section 29, a new sub-section, namely sub-section (5), is introduced enabling imposition of penalty equal to one and half times the amount of tax on the purchases where goods are purchased at concessional rates because of the provisions of subsection (3), (3A), (3B) or (5) of section 8 but the purchaser has failed to comply with the conditions or restrictions subject to which the concession is granted .
    

10. In section 31,

1. in sub -section (1) , in clause (b), -

1. in sub-clause (i), an amendment  is carried out to clarify that tax deducted at source from the contract price is to be calculated after deducting from the amount payable to the contractor the service tax charged separately, if any, by the contractors.
    

2. sub-clause (ii)  is substituted to provide that, on an application made by the contractor, the Commissioner will, if the facts so warrant, grant a certificate that the contract does not require  deduction of tax at source  if he is satisfied that the contract is not a works contract.

2. sub-section (3) is deleted.
    

3. sub-section (4) of section 31 is substituted so that any amount deducted and paid into Govt. Treasury as per section 31 may be claimed as a  payment of tax by the contractor making the supply and credit of payment may be claimed by the contractor in the period in which the certificate for payment is furnished to the contractor by the employer deducting the tax.
    

4. sub-sections (8) and (10) are deleted  so there is  no requirement  to obtain sales tax deduction account number and file a yearly  returns by an employer.  It has been decided as an administrative measure that even in respect of the year 2005-06, such return unless already submitted, need not be filed.

11. In section 41, subsection (4) is substituted to provide that along with motor spirits, sales of petroleum products with effect from 1^st April 2005 made by notified oil companies to each other will also be exempted from the payment of full or part of tax subject to a notification being issued by the State Government. Also a provision for exemption of tax on sales at retail outlets (i.e., petrol pumps) of motor spirits is   made so that tax on motor spirits is effectively   collected at a single stage and petrol pumps are not required to collect or pay Value Added Tax.
     

12. Amendment of section 42:-

2. In clause (b) of sub-section (1), a technical amendment is made by substituting the word ‘subsection’ for the word ‘section’.
    

3. Amendment in clause (c) of sub-section (1) is made to withdraw the provision of non-applicability of composition scheme to vendors selling Indian made foreign liquor or country liquor at retail shops.
    

4. By amending sub-section (2), it is provided that the State Government may provide for notification for a composition scheme for vendors selling Indian made foreign liquor or country liquor at retail shops.
    

5. Sub-section (3) is substituted. The rate of composition  applicable to the works contracts is reduced to 5% in case of construction contract and is maintained at 8% for other types of works contracts.

The Explanation to the sub-section provides that the ‘construction contracts’ will be as notified by the State Government. 
 

      It is further provided that the words “the amount payable towards sub-contract involving goods” will mean the aggregate value of goods on which tax is paid and the quantum of tax paid by the sub-contractor or as the case may be the sub-contract value on which composition tax is paid.

6. sub-section (4) is newly introduced  to provide  for a scheme of composition  to the dealers  liable to pay tax on leasing of mandap, pandal, shamiana, the related decoration and furniture, fixtures, lights, light fittings, floor coverings, utensils and other articles ordinarily used alongwith.   The rate of composition shall be one and a half per cent. of the turnover. 

13. Amendments of section 50:-

1. It is clarified that the refund shall be by order.
    

2. If return, fresh return or revised return for any period is filed showing refund, then the refund may be adjusted during the same financial year towards dues of the MVAT Act, 2002, C.S.T Act, 1956 or the Maharashtra Tax on Entry of Goods into Local Areas Act, 2002.

14. Amendment of section 51:-

1. The existing section 51 is substituted to expedite and streamline the grant of refunds. The refunds under this section will no more be treated as provisional   refunds.
    

2. Sub-section (3) provides that an exporter, a unit specified in the Explanation to sub-section (3) of section 8, a holder of a certificate of Entitlement under any Package Scheme of Incentives (except the New Package Scheme of Incentives for Tourism Projects, 1999) or a dealer who has made a sale in the  course  of inter-State trade and commerce, can now apply for grant of refund as per periodicity of his return. The Commissioner may require any such dealer to furnish a bank guarantee as prescribed and may call for any additional information.  Refund will be granted within one month of the receipt of the Bank Guarantee.  If the dealer has not furnished a bank guarantee  or the Commissioner has called for any additional information, then refund will be granted within three months from the date of receipt of  the application or receipt of additional  information whichever is later.  Refund will not be granted without an application and the period within which the application is to be made is three years from the end of the year to which the refund relates.
    

3. A dealer who has obtained new registration on or after 1.4.2005 and has not furnished a bank guarantee will get refund within six months of the end of the year succeeding the year in which registration is obtained.
    

4. Subject to sub-section (2), any other dealer will get refund within six months of the end of the year.
    

5. A registered dealer whose refund is due as per returns should file an application for such refund.  Refund shall be granted within six months of the end of the year to which return relates.  Refund relating to all the periods contained in one year can be granted by a single order. 
    

6. If the return or revised return is filed after the prescribed date of filing of the last return, then the period of six months shall be counted from the date of filing of such return.
    

7. If a notice for assessment is issued or if any proceedings under sub-section (3) or sub-section (4) of section 64 are initiated in respect of a period to which return claiming refunds relates, then if the dealer has not furnished any bank guarantee then no refund will be granted and if the bank guarantee is furnished then refund will be granted equal to the amount of bank guarantee.
    

8. If any order is passed by which it is found that refund granted under section 51 is in excess of the refund due as per return, then the excess amount will be recovered along with simple interest from the date of refund.

15. Amendment of section 52:-

      Amendment to this section is made to delete the word “provisional”.  This amendment is technical in nature.

16. Amendment of section 53 is technical in nature.
     

17. Amendment of section 86:-

    This amendment is carried out so that the Commissioner may, on an application made by the dealer, permit him to maintain record of bills or cash memos on an electronic system.  The amendment is made to simplify the procedure. This amendment is effective from 1^st April 2005.

18. Amendment in section 96.

      Clause (g) of sub-section (1) of section 96 is substituted with effect from 1^st April 2005.  This is a savings clause for those works contract whose execution has started before the appointed day.  It is now additionally provided that the contractor who claims saving under this clause will not be entitled to claim set-off in respect of the purchases effected after the appointed day in so far as these purchases pertain to the said contract.