Sr. No.

Points

Clarification

1.

A dealer, subjected to Vat Audit, is required to submit the audit report within a period of eight months from the end of the year. Whether any particular officer has been designated to receive all such reports or the same shall be submitted at the returns accepting counter/s?

The Form 704 is to be submitted to the office of the respective Jt. Commissioner in charge of Business Audit.

2.

Some of the dealers have lost their books of accounts, documents and other records of MVAT & CST in the 2005 floods / natural calamities. Whether the dealer can get copy of such returns from the Department for the purpose of audit? How the auditor should report?

Ordinarily, the dealers and the practitioners retain copies of the returns. However, if in any instance such copies are not retained by the dealer or the practitioner, then these can certainly be obtained from the Returns Branch on payment of copying  charges as provided in rule 73 (19).

3.

Many dealers (in the year 2005-06) were having two or more different registration numbers. Some of them have been filing separate returns for all such different places of business within the State. Howsoever, they are preparing one consolidated balance sheet. In the circumstances, whether separate audit report for each place of business or one consolidated report covering all the places within the State is to be filed.

If a dealer was having more than one certificates of registration in the year 2005-06 and was filing separate returns for his different places of business, he should now file only a single audit report in form 704 in respect of all such places of business for which he was filling separate returns in the year 2005-06.

If a dealer was holding an entitlement certificate during the year 2005-06, he should file a single audit report in respect of the year 2005-06. Even if the entitlement certificate had expired or was cancelled during the year 2005-06, he should still file a single audit report in respect of the year 2005-06.

4.

In case a dealer has failed to inform the opening of an additional place of business, the registration certificate has thus not been amended to that effect, but the turnover of such place has already been included in the turnover of main place and the taxes have been paid accordingly. Whether any specific report required?

This will be technical non compliance and appropriate disclosure should be made.

5.

All the dealers were required to file an application for TIN before a prescribed date. There are certain cases where the dealer failed to apply in time, resulting in automatic cancellation of registration. Some of them have taken fresh registration in the month/s of January/February/March 2006. The question arises about the Vat Audit:

    Whether, two different audits are required:

(a    if turnover in both the periods exceed the prescribed limit?

(b)   if turnover in the second period does not exceed the limit?

(c)  if turnover for each period separately does not exceed the limit, but taking the whole year together exceeds?

In some of the cases there may be a possibility of URD period also?

Single report for the whole year covering both periods as well as URD period, if any, should be submitted. The turnover for the entire year is to be taken into account for determining whether the prescribed limit of Rs.40 lakh has exceeded.

6a

Some of the dealers have not claimed setoff on miscellaneous purchases in their respective monthly/quarterly returns but claimed in the last month/ quarter of the year. Is it ok?

It may be claimed in the return including revised return for last month/quarter of the year. .

6b

Being petty amount, the dealer does not wish to claim set-off on items of miscellaneous purchases. And, therefore, has not included such purchases in the total turnover of purchases.  Is revised return required to be submitted?

Appropriate disclosure is sufficient. There is no need to file revised returns solely on this ground, i.e., unless otherwise required to file revised return.

6c

Filed monthly returns instead of quarterly or filed quarterly return instead of six monthly returns.  Should correct returns be filed now?

These are technical defects which should be disclosed but there is no need to now file appropriate number of returns or revised returns solely on this ground.

6d

The periodicity of returns filed is correct but a different Form No. (Such as 201 instead of 202 or vice versa) has been used it should require revised return?.

These are technical defects which should be disclosed but there is no need to file revised return solely on this ground.

7.

The Vat Auditor is required to report purchases from un-registered dealers of Rupees 10000/- or more. Whether the intention is to get report on each transaction of purchase exceeding the limit or all the purchases, during the year, from each such party where aggregate purchases from a party exceed the limit? 

Total party-wise purchases are required to be reported when aggregate of purchases from a single dealer in a year exceeds Rs. 10000/-, in case of capital assets and inputs only and not in case of purchases of tax free goods and expenses debited to trading payment.

8.

In case of certain works contracts, (using goods liable at different rates of tax), there is a possibility that the tax liability as worked out as per monthly/ quarterly returns may differ when calculated on yearly basis.

This appears unlikely. However, if this were to happen in any given case, then the tax liability should be worked out returnwise.

9.

The amount of Working Capital has to be reported in section ‘B’ of Part II, but in case of multi-state companies, where one consolidated balance sheet is prepared, it may not be possible to workout the working capital employed in the State of Maharashtra?

To be reported as per Balance Sheet along with appropriate footnote.

10.

Section ‘C’ of 704 requires consolidation of returns under the MVAT Act, 2002. However, certain information asked for may not be available in the copy of returns (being old forms viz. 201,202 etc.)?

The dealer may ask for true copies of the return from the Department.

11.

Some of the dealers, although holding CST registration, may not have filed CST return (being Nil turnover, following circular No.15 of 1981). In such cases, whether section ‘E’ should be reported as “Not Applicable”?

Appropriate disclosure should be made

12.

In section ‘F’, observations have been invited for non-payment or short payment of tax. However, there is no column for stating that amount paid. Thus, whether to that extent the table should be redrafted? Further, whether the information is restricted to VAT returns only or CST return should also be included here?

Tax short paid/ not paid should be included in the observation. CST returns should also be included in section F. .

13.

Sections ‘G’ and ‘H’ are regarding verification of turnover of sales and purchases.   Whether the amount to be mentioned here should be as per the books of account or as determined by the Vat Auditor, if the amount determined is not the same as per books?

The turnovers as determined by the Auditor are to be mentioned.

14.

In respect of section G-7.4, it may be necessary to clarify about the exclusion of sales of certain goods such as Petrol, etc., in case of petrol pumps. Likewise medicines also.

The turnover of sales of Motor Spirits and of medicines should be excluded, where appropriate.

15.

In part I of the report, the auditor has to work out the amount payable as differential tax liability or additional refund to be claimed by the dealer. The Vat Auditor has also to advise the dealer to file revised return(s). In such cases, whether it should be returns for all the periods during the year or the last return only to be revised (giving effect to all the observations together).

The return for the period ending on 31^st March 2006 should be revised to give effect to all of the observations of the Auditor.

16.

Statutory audit report is required to be enclosed to the Audit Report.  What statutory audit does it refer to?

Audit reports are required under certain other Acts, such as Income Tax Act, Companies Act, etc. Copies of such audit reports as are issued should be enclosed wherever applicable.

17.

In case of reporting Section ‘S’ regarding sales not supported by Sales Tax Declaration Forms, what should be disclosed?

Section S should be restricted to CST Act details only.

18.

At Section ‘P’ , in case of purchase of ‘C’ Forms resulting in contravention, how to report?

If goods are purchased from other States which are not mentioned in CST RC, then the CST RC needs to be amended with retrospective effect. Appropriate request may be made to the registering authority.

19.

What to do if rules are amended retrospectively after audit? How does dealer avail of the consequential benefit?

The Audit report should be correct as on the date of signature of the Auditor. The dealer may file revised return for the month / quarter ending March to claim benefit.

20.

‘Goods returns’ within 6 months of sale is allowable as deduction. Under VAT Law u/s.63, it is allowed in the period in which it is accounted for, whereas under the CST Act it has to be claimed in the year of sale.  Commissioner may please allow administratively the CST goods returns also as per provision under VAT law in order to smoothen CST returns and audit

Section 63 of the VAT Act would apply mutatis mutandis to the claim of ‘goods return’ under CST Act in so far as the accounting part is concerned.

21.

Composition schemes for Retailers, Hotels, etc. contains many conditions. If any of the conditions is violated, then it is a contravention of the scheme and the dealer is liable to pay VAT instead of lumpsum as per composition scheme. In such a case, the dealer is liable under VAT provisions from the date of contravention and not from 1^st April. This needs clarification.

A Trade Circular will be issued to clarify this issue.

22.

Whether all of the provisions and clarifications regarding audit report apply to liquor dealers even if their turnover is below Rs.40 lac.

Yes.

23

Many employers have not obtained tax deduction account numbers.

It is not necessary to provide the tax deduction account number.

24  (a)

In section C, at item number 12, the narration reads “unadjusted set-off ---- refund claimed in March ……..”. Whether this amount is to be claimed in the year 2006-07.

The unadjusted set-off / refund claimed in March is not to be adjusted in returns pertaining to the year 2006-07.

24  (b)

If the dealer has not applied for refund, how he can claim it now?

He may now apply in form 501.

25.

In section G, by number 8(6), it is provided that where the execution of works contract has been entered into before 1^st April 2005. The query is whether this description refers to on going contracts.

Yes. The reference is to ongoing works contract where the execution has started before 1^st April 2005.