Sales Tax Review

May 2008

TRADE CIRCULAR.

No. :-   VAT/Refund/2008-09/B-223

1.      INTRODUCTION:-

This office had earlier issued   a Trade Circular No. 56 T of 2007 Dt. 23.08.2007.  The circular laid down the procedure to be followed for grant of refund.  Some dealers, in whose cases the net worth of business is substantial, have continuous and large claims of refund.  Apart from this, the dealers having major exports and those with extensive distribution network all over India also claim large refunds respectively.

Some of such dealers have submitted a representation for fast processing of their refund claims. Considering the track record of such dealers, it is decided to develop a scheme for grant of quick and pre-audit refunds to them. The following guidelines are now notified.  It may be noted that this is a voluntary scheme.  The dealer may voluntarily avail the benefits of this Trade Circular, and if he is eligible in terms of this circular and if he complies with the conditions laid down in this circular, then the refunds in his case will be granted as provided herein. This Trade Circular applies only for refund claims in respect of periods starting on or after  1^st April, 2008.

2.      APPLICABILITY OF CIRCULAR: -

The scheme for refunds under this Trade Circular will be applicable to only those registered dealers, who fulfill the following conditions: -

1. Their net worth is Rs. 100 Crore or more, and 

2. At least one Refund Audit is completed in respect of any of the years ending prior to 1^st April, 2008 and the differential demand, if any, in respect of that year does not exceed 1% of the claim and

3. Refund claim in respect of the immediately preceding year is of Rs. 100 crore or more

4. The claim for refund in respect of any year does not exceed by an amount more than 20% of the claim for the immediately preceding year. 

3.      CONDITIONS  OF  ELIGIBILITY :-

1. The  ‘net worth’ of the business of the claimant dealer for the latest year for which accounts have been finalized and audited should be more than Rs. 100 Crore. The formula for calculating the net worth is shown in ‘Annexure-1’, to this circular. It is to be applied to calculate the net worth of the business.

2. To become eligible under this Trade Circular, at least one Refund Audit of the claimant dealer should be completed in respect of at least one year ending on or before 31st March 2008.

3. The dealer with net worth exceeding Rs. 100 Crore and wanting to avail the benefit of quick refund under this circular should apply to enrol himself with the Joint Commissioner of Sales Tax concerned, in the format provided in  ‘Annexure-2’.  Along with application the applicant should submit a complete copy of the last audited balance sheet and trading and profit and loss Accounts, and if the applicant dealer is a company, then a copy of the annual report.

4. The Joint Commissioner of Sales Tax having control over the Refunds and Refund Audit of the dealer will verify the enrollment application submitted by the dealer and after due verification shall communicate the eligibility to the applicant dealer.

5. For availing the refund, as per this circular, the dealer should submit the following documents with Form 501: -

1. Self-Certified Copies of returns filed for relevant periods.

2. No Dues Certificate as per ‘Annexure-3’.

6. The dealer who wants to avail benefit under this Trade Circular, in respect of any period contained in the year 08-09 should first declare his outstanding liability under the Central Sales Tax Act, to the extent of all types of missing declarations [in Form C, D, F, H, I and J] and certificates [in Form E1 and E2] for all the periods starting on or after 1^st April 2005 and ending nine months prior to the beginning of the year to which the refund relates. The payment of CST liability on such account should be made by the dealer before filing the first application for refund in respect of any year.  The details of the missing forms and details of the corresponding CST payment made by the claimant dealer should also be furnished in the form given in Annexure 5 at the time of making the first application for refund in respect of any given year.

7. The copies of the challans showing CST payment provided for above should be submitted with Form 501, while submitting the same to the appropriate Refund Authority.

8. In case, the missing declarations and certificates are received by the claimant dealer subsequently, he may submit a separate application for the corresponding refund claim to the extent of the CST liability discharged while making application for refund under this circular. The application should list the declarations and certificates subsequently received on which the dealer has already discharged tax liability. This application in Form 501 for refund of differential Central Sales Tax paid should be made by combining together all such CST refund claims for the last six months.  The dealer should not present such claims more than twice in respect of any year, to which such declarations and certificates relate.

9. The dealers, who are dealing in Iron and Steel or Dyes and Chemicals, are not eligible to avail the benefit of this Trade Circular. However, the manufacturers, whose basic input is iron and steel or dyes and chemicals but their final manufactured product is not covered by these respective entries are eligible to avail the benefits under this Trade Circular, subject to satisfaction of other conditions.

10. The dealers eligible under this Trade Circular should submit 'Annexure-4 , with Statutory Audit Report (Form-704, when due).

11. The claim for VAT refund under this circular shall not be considered after one year from the end of the financial year to which the claim relates.

12. If the claimant dealer fails to comply with any of the conditions above, he will not be eligible to receive 100% pre-audit refund, without Bank Guarantee.

13. Only those refund claims arising for the periods starting on or after 1st April. 2008 onwards will be entertained under this Trade Circular.

14. The claimant dealer should follow all statutory deadlines to file the returns and other obligations under the MVAT Act and Rules.

4.   BANK GUARANTEE:  -

1. The eligible dealers need not furnish any Bank Guarantee in respect of his claim of refund.

2. The conditions laid down in the earlier Trade Circular 56 T of 2007 Dt. 23.08.2007 in respect of Bank Guarantee, are not applicable to eligible dealers for claiming refund under this circular.

5.      PRE REFUND AUDIT PROCESSING:

            The claim of the dealer for the refund would be scrutinized vis a vis the statutory requirements as also requirements under this circular including verification of form 501, its annexure and attachments. Thereafter the claim shall be processed and refund will be granted. 

6.      GRANT OF REFUND: -

1. The refund will be granted under this Trade Circular within 15 working days of making the application, along with all the required details and annexure and the grant of refund will be subject to post refund audit.

2. Full refund will be granted as per application in form 501, subject to other conditions laid down in this circular.

3. In case of a PSI dealer who holds the entitlement certificate for part of an industrial undertaking through investment in an expansion unit and whose production from the old and expansion units is identifiable, (i.e. production facilities are separate), then in such cases, the refund will be granted only in respect of purchases corresponding to the production of the expansion unit in the total production. Cases in which the investment in expansion unit does not result in identifiable (separate) production capacity but strengthens/upgrades the existing technology, product quality or quantity, purchases entitled for refund shall be worked out in proportion to the new (PSI) investment in the total investment.

7.      POST AUDIT:-

1. Only one post-refund audit would be undertaken in respect of any year. In case of Refunds of dealers who have been accorded Large Tax Payer Unit Status (LTU dealers) the audit of the dealers shall be taken up by the Refund and Refund Audit branch in consultation with JC (LTU).  However, where the eligible applicant dealer is not a LTU  dealer  the Refund Audit would be initiated in his case by the refund audit branch. Audit in every case will be taken up after filing of Audit Report in Form 704.  No intermediate Refund Audit of the beneficiary dealers will be performed by the departmental authorities under this circular.

2. Where the vendors have not paid the due tax in full or part the claimant dealer is expected to discharge such liability before Post Audit, by submitting a Revised Return and paying the due tax. This tax has to be paid by the eligible dealers under this circular before the Post Audit starts. Excess Refund granted, if any, will be recovered from the dealers as per the provisions of the law.

3. Following documents are to be submitted by the dealers before the Post Audit i.e. Annual Audit (Only once in a year).

1. Monthly summary of Sales and Purchases.

2. Reconciliation statement, if there are any differences in Return figures and Monthly summary of Sales and Purchases.

3. Details of Sales effected by the claimant dealer in the form shown in Annexure 6.

4. Challans showing CST payment for missing declarations.

5. Statement of goods returns/Dr. Notes and Cr. Notes.

For taking refund under this Trade Circular in respect of any period starting on or after 1^st April, 2008 for the year 2008-2009, all of the above mentioned procedures must be completed.  

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.

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

(A.G.Deshmukh)
Commissioner of Sales Tax,
Maharashtra State, Mumbai.

.