Sales Tax Review

October  2006

Important Trade Circulars

No.VAT/AMD-1006/1B/Adm-3

Gentlemen/Sir/Madam,

The Maharashtra Value Added Tax Rules, 2005 have been amended,  by the Maharashtra Value Added Tax (Fourth Amendment) Rules, 2006, amongst other purposes, to give effect to the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2006 (Act No. XXXII of 2006).   The salient features of the amendments are briefly explained below:- 

1. Amendment of Rule 8:

1. Clause (c) of sub-rule (1) is deleted. By virtue of this amendment, a dealer would not be granted Maharashtra VAT registration certificate merely on the ground that he has become liable to be registered under Central Sales Tax Act, 1956.
    

2. Clause (d) of sub-rule (1) is substituted to provide for a period of 60 days for making application for registration if the business is succeeded due to death and for a period of 30 days if the business is succeeded on account of any other event.
    

3. Clause (e) of sub-rule (1) is deleted. It is now not necessary for any dealer to apply for registration merely on account of shifting of place of business to a different local area.  The rule is amended accordingly.
    

4. Sub-rule (3) is amended to provide that a single application is to be made by a dealer for all his places of business including any place for which he has obtained a Certificate of Entitlement under any Package Scheme of Incentives.
    

5. Amendment to sub-rule (7) is technical in nature.
    

6. Sub-rule (11)  and (12)-
   Clause (a) of sub-rule (11) is deleted and a new sub-rule, viz., sub-rule (12) is added.

           By this amendment, it is made mandatory to submit the Income Tax Permanent Account Number (PAN)  at the time of making application for registration for both categories of applicants (i.e., voluntary as well as those who apply after crossing the prescribed limit of turnover).  However, this provision is not applicable to the dealers specified at serial numbers (i), (ii), (iii), (iv) and (v) in the Explanation to clause (8) of section 2.

2. Amendment of Rule 9:-

1. Clause (c) of sub-rule (2) is deleted.  The amendment is technical in nature and is made to give effect to the deletion of clause (c) of sub-rule (1) of rule 8.
    

2. Clause (d) of sub-rule (2) is substituted to give effect to the amendment made in sub-rule (1) of rule 8. 
    

3. Clause (e) is deleted as now it is not required to obtain a new certificate of registration merely because of change of place of business.

3. Amendment of Rule 10:

       A new sub-rule (2) is added so that after a day notified by the Commissioner, every registered dealer will be given one hologram for each place of his business which will identify him as a registered dealer.  The registered dealer should securely affix and display the hologram at a prominent and clearly visible place near the entrance of his each place of business.

4. Amendment of Rule 11:-  

              This amendment is technical in nature and dispenses with the requirement of canceling the registration due to change in place of business.

5. Amendment of Rule 17:

1. In sub-rule (2), clauses (c) and (d) are added.    By virtue of clause (c), a dealer who has obtained a permission under rule 19 to file separate returns can file separate returns for those  of his places of business or for those  constituents of his business,  as the case may be,  in respect of which a permission to file separate returns has been obtained, to the appropriate registering authority.  However, the separate returns can be filed only after obtaining permission from the Commissioner of Sales Tax, not otherwise.
    

2. By virtue of clause (d), a dealer filing a fresh or revised return where any amount is due as per the fresh or revised return, shall first pay such amount in Government Treasury and attach a self attested copy of the challan in respect of the said payment with the fresh or revised return to be filed with the appropriate registering authority.
    

3. Sub-rule (4) is substituted. By virtue of this amendment, a new periodicity of returns has been provided which is as under:

1. A retailer who has opted for composition shall file a six monthly return within 21 days from the end of the period of the relevant six months.
    

2. A registered dealer whose tax liability during the previous year was Rs.36000/- or less or whose entitlement for refund during the previous year was Rs.36,000/- or less shall file a six monthly return within 21 days from the end of the relevant period of  six months.
    

3. A registered dealer other than those covered by (a) and (b) above, whose tax liability during the previous year, or as the case may be, whose entitlement for refund during the previous year has exceeded rupees one lakh shall file monthly returns within 21 days from the end of the relevant month.
    

4. All other registered dealers shall file quarterly returns.

Explanations I to IV have been added to sub-rule (4), which clarify the meaning of the expressions ‘tax liability,’ ‘entitlement of refund,’ ‘period of six monthly return,’ ‘separate returns for Package Scheme of Incentive etc.’  These are briefly explained as follows:-

For the purpose of Rule 17, “tax liability” means the aggregate of all tax liability under C.S.T. Act, 1956 and MVAT Act, 2002 for all the places of business in the State after adjustment of set-off claimed by the dealer, and  “Entitlement for refund” means the net refund payable to the dealer in respect of all his places of business under the MVAT Act, 2002 and the C.S.T. Act, 1956 after adjustment of set-off.

First six monthly return shall be for the period from 1^st April to 30^th September and second six monthly return shall be for the period from 1^st October to 31^st March of every financial year.

A dealer holding “certificate of entitlement” is required under rule 18 to file quarterly returns.  If he has received permission to file separate return in respect of any other place of business or another constituent of his business, then he shall file quarterly returns for his separate place(s) of business, or separate constituent(s) of his business.

 The new periodicity would be applicable in respect of all periods ending on or after 8^th September 2006. 

6. Amendment of Rule 18:

                    In sub-rule (2), the words relating to change of place of business are deleted. This amendment is technical in nature.

7. Amendment of Rule 19:

                    Rule 19 is substituted by a new rule.  The provision for consolidated returns is deleted.  Now it is provided that to file separate returns, a dealer may apply and obtain permission to file separate returns for different places of his business or different constituents of his business.  This application is to be made to the Joint Commissioner of Sales Tax, (Head Quarter) II, Maharashtra State, Vikrikar Bhavan, Mazgaon, Mumbai- 400 010.

8. Amendment of Rule 20:

      In rule 20, certain words are substituted in view of the changes earlier made to the forms of returns so as to give clear guidelines as to what a complete and self consistent return would be. 

9. Amendment of Rule 24:

       The existing portion is re-numbered as sub-rule (1). The newly added sub-rule (2) provides the application Form 316 for cancellation of assessment order as provided in the newly inserted sub-section (11) of section 23.

10. Amendment of Rule 39:

         Rule 39 is substituted.  Sub-rule (1) provides for Form 412 for notice of forfeiture under sub-section (10) of section 29 and Form 420 as the form  of notice to be published in the Official Gazette for the information of the concerned persons where order of forfeiture is made.

11. Amendment of Rule 40:

1. In sub-rule (1), clause (a) is substituted.  A provision is now made for payment of tax deducted at source (TDS) within 21 days from the end of the month, in which tax is required to be deducted. A separate chalan in Form 405 is now provided for this purpose.
    

2. Clause (c) of sub-rule (1) is deleted.   This dispenses with the requirement of sending a statement in Form 403 to the departmental authorities.
    

3. Sub-rule (2) is substituted.  By virtue of this amendment, it is now provided that a contractor can apply in Form 410 for a certificate of no deduction of tax at source if the contract is not a works contract. If the particulars and documents furnished by the dealer are correct and complete and the Commissioner feels that it is not a works contract, then he shall grant such certificate and a copy of such certificate will be sent to the employer awarding such contract.
    

4. Sub-rule (3) is deleted. Now the employer who is liable to deduct tax is not required to apply for allotment of Tax Deduction Account Number.

12. Amendment of Rule 41:

      The words ‘fresh and revised returns’ are added.  The provision regarding time for payment is now equally applicable to fresh or revised returns.

13. Amendment of Rule 45:

1. In sub-rule (1), the  words ‘fresh return’ are added to make it clear that the provisions regarding method of payment laid down in the rule apply to fresh returns also.
    

2. Sub-rule (2) is substituted.
   
   It is now provided that all payments other than those with the return, shall be made in Form 210 or, as the case may be, in Form 405 [for TDS payments]
    

3. In sub-rule (6), the amendment provides that the instalment order would specify the amount of tax, interest or penalty and date of payment as also the interest due on tax paid by instalments.

14. Amendment of Rule 47:

        Rule 47 is substituted.  A New form of intimation in Form 418 is now provided for the purpose of sub-section (6) of section 32. The form for application for refund of forfeited amount will continue to be Form 413. 

15. Amendment of Rule 51:

1. In sub-rule (1), it is now specified that claim and grant of set off under this rule will not be subject to the rules 53 & 54 (i.e., rules regarding reduction and non-admissibility of set-off).
    

2. In sub-rule (2) in clause (b), it has been now added that if the goods in stock are subjected to the processes enumerated in rule 3 of the B.S.T. Rules, 1959 and such processed goods are sold before 31^st December 2005 or are used in the packing of goods so  sold, then set off would be available on the goods in the opening stock and on purchases of packing material in stock.
    

3. An Explanation is added to the clauses (b) and (c). It is now clarified that for the purposes of these clauses, sale will also include branch transfers to own place of business in another State or to the place of business of principal if the dealer is a commission agent.

16. Amendment of Rule 52:

1. In clause (a) of sub-rule (1), the word ‘tax’ is substituted for the words ‘Sales Tax’. By virtue of this amendment, it is now clarified that it is possible for purchasing employer-dealers to claim set off of composition amount charged by works contractors.
    

2. In clause (a), an amendment is made to clarify that set off is available on the purchases of goods which are debited to the profit and loss account or trading account. 

17. Amendment of Rule 53:

1. In clause (a) of sub-rule (2), an Explanation is added by virtue of which it is now provided that a dealer who is a manufacturer of sugar or fabric covered by entry 45 of schedule A and which goods are exported out of India, can get full set off without retention of 4%, which is otherwise applicable to manufacture of tax-free   goods.  This amendment is retrospective and is w.e.f. 1^st April 2005.
    

2. In sub-rule (3), clauses (a) and (b) are added whereby it is now provided that the retention in case of ‘B’ schedule goods which are branch transferred would be 1% in so far as purchases of corresponding taxable goods are covered by schedule B. As per clause (b), if the goods purchased are covered by the entry 29 of schedule C and are dispatched outside the  State in the same form in which they were purchased, then purchase price for the purpose of this sub-rule would be the actual purchase price and not the MRP printed on the package containing the said goods.   These amendments are w.e.f. 1^st April 2005.
    

3. It is also provided that the deduction of set off on account of branch transfer would not be applicable if the dispatched goods are brought back to the State within six months of the date of dispatch whether after processing or otherwise. This amendment is w.e.f. 1^st April 2005.
    

4. In sub-rule (4) which deals with the set-off available to a works contractor who has opted for composition, the following is provided.
   
                 The amount of set off, other than that relating to capital assets and on the goods in which property is not transferred, shall be reduced and the available set-off shall be calculated by multiplying it by 16/25 where dealer has opted for composition @ 8% of contract value and for the periods starting after 20.6.2006, by reducing the set-off by 4% of the purchase price where the dealer has opted for composition @ 5% of the contract value of construction contracts.
    

5. Sub-rule (6) is substituted. By virtue of this amendment, it is now provided that if out of the gross receipts of the dealer in any year, the receipts on account of sale are less than 50% of the gross receipts then the dealer would be entitled to claim set off only on those purchases effected in that year where the corresponding goods are sold or consigned within six months of the date of purchase and on the purchases of packing materials.   In the case of hotels and clubs, purchase of capital assets and consumables pertaining to the kitchens and service of food and drink are eligible for set off. An Explanation is provided at the end of sub-rule (6), whereby it is clarified that the receipts relating to branch transfer will not be treated as receipts for the purpose of this sub-rule.
    

6. In sub-rule (7), an Explanation is added whereby it is clarified that in case of Liquor dealers the “actual sale price” means sale price exclusive of the element of tax where tax is charged separately and where tax is not charged separately, the sale price will mean price arrived at as per reduction of sale price under rule 57(1).
    

7. A new sub-rule (7A) is added after sub-rule (7), which now enables a dealer to claim set off in excess of 4% on office equipment, furniture and fixtures.  These goods were earlier under the negative list of set off.

18. Amendment of rule 54:

1. In clause (a), the words “being passenger vehicles” are substituted for greater clarity in place of the words “not being goods vehicles”. 
    

2. Existing clause (f) is substituted w. e. f. 01-04-05.  It is provided that set off on purchase of goods of incorporeal or intangible nature other than those mentioned in clause (f) would not be admissible. A new item, viz.  “copy right  which is resold within twelve months from the date of purchase” is added in the list of intangible goods eligible for set-off. 
    

3. Clause (g) is substituted. It is now clarified that if purchases are effected by the employer by way of works contract which results in immovable property, then set off would not be admissible on corresponding purchases. However, this clause will not be applicable to plant & machinery. 
    

4. Clause (h) is substituted. This clause denies set off on any purchases which are not resold and which are used by the dealer for the erection of immovable property (other than plant & machinery).
    

5. Clause (i) is substituted. The new clause denies set off on purchases of IMFL or country liquor if the dealer has opted for composition under sub-section (2) of section 42. 
    

6. Clause (j) is added.
   
               This clause denies set off on purchases of mandap, tarpaulin, pandal, shamiana, decoration of such mandap, pandal or shamiana and furniture, fixtures, lights and light fittings, floor coverings, utensils and other articles ordinarily used alongwith a   mandap, pandal or shamiana  if the purchasing dealer has opted for composition of tax  under sub-section (4) of section 42.
    

7. Clause (k) is added, which denies set-off to a hotelier on purchases made by such dealer which are treated by him as capital assets and which do not pertain to the supply by way of or as part of service of food and drinks. [e.g. curtains, mattress etc. used in hotels.]

19. Amendment of rule 55

1. In sub-rule (1) clause (a) is substituted.  It is now provided that if a dealer has obtained registration in any particular financial year, then he would be eligible to claim set-off  in respect of the purchases effected prior to date of registration if the goods purchased are treated as capital assets or are used, consumed disposed or sold after the date of registration.
    

2. In clause (b), the word “sales tax” is replaced by ‘tax’.  By virtue of this amendment, it is clarified that, the dealer can claim set off of the composition amount charged by works contractor. 
    

3. Sub-rule (3) is substituted. This new sub-rule provides for adjustment of set off. The set off can be adjusted against the tax payable according to the return, against CST payable towards that period or against the entry tax payable under the Maharashtra Tax on Entry of Goods into Local Areas Act, 2003. 
    

4. Paragraph (b) of sub-rule (3) provides that after adjustment as provided in para (a), the dealer may claim refund of the excess or can carry forward the excess towards tax payable as per return to be filed for any subsequent period in the same year including the tax under CST Act or the Maharashtra Tax on Entry of Goods into Local Areas Act, 2003.  
    

5. New sub-rule (7) is added, which enables a dealer succeeding the business to take credit of any set off that is carried forward in the event of death, transfer, or disposal of the business.

20. Amendment of Rule 57:

1. In sub-rule (1), some printing mistakes are corrected.

2. In sub-rule (2), the amendment is clarificatory in nature.

3. A proviso to rule 57 is inserted, which specifies that the deduction under the rule will be available only when the purchases are supported by tax invoice or bill as provided in sub-rule (2A) of rule 77. 

21. Amendment of Rule 58:

1. In clause (a), the words “where labour and service done in relation to the goods is subsequent to the said transfer of property” are  deleted.
    

2. In the table, one more contract, namely   “Annual maintenance contract” is added for which the deduction is forty percent. The amount to be deducted from the contract price  for “any other works contract” is now revised to 25 % from the earlier amount of 20%.
    

3. After the table, it is now clarified that the percentage provided in the table is to be applied after deducting the price of sub-contract on which tax is paid by the sub-contractor and the quantum of tax separately charged by the contractor.

22. Amendment of Rule 60:

        Rule 60 is substituted.  It now  specifies that application Form for refund shall be Form 501, the refund order shall be passed in Form 502, refund payment order in Form 503 or Form 504, and refund adjustment order in Form 506. 

23. Amendment of Rule 61:

      Rule 61 is substituted.  The rule now specifies that the bank guarantee should be obtained from any branch of a bank notified as Government Treasury and the maximum period for the guarantee would be of 36 months.   The bank guarantee should be submitted to the respective Joint Commissioners in charge of grant of refunds.

24. Amendment of Rule 73:

        In this rule, two entries are substituted in the Table. Fee for registration is increased from Rs. one hundred to Rs. five hundred, and in entry 23, provision is made for application for furnishing separate returns which is in Form 211.  

25. Amendment of Rule 74:

The amendment is technical in nature.

26. Amendment of Rule 77:

                 It is now provided that a reseller selling goods originally manufactured by an Exemption unit will print a certificate on his tax invoice or bill as provided in the rule.

27. Amendment of Rule 78:

1. In sub-rule (2), clause (b) is substituted. The rule is about CQB calculation in respect of inter-state sales and provides that CQB on inter-State sales would be the same as what would have been the CST liability if the dealer was not holding a certificate of Entitlement.  
    

2. An Explanation V is provided which specifies that for the purpose of calculation of CQB under 1988 and 1993 schemes, the term ‘goods manufactured’ shall include “credit of Duty Entitlement Pass Book” which is earned by the said E.C. holder by exporting goods outside India, manufactured in the Eligible Unit.

28. Amendment of Rule 79:

1. In sub-rule (1), the words ‘except the new Package Scheme of Incentives for Tourism Project – 1999’ are now included. This means that the dealer under the said scheme would not be entitled for refund under this rule.
    

2. Sub-rule (2) is substituted.  The new sub-rule specifies that the deductions/retentions in grant of set-off applicable for a normal dealer in the event of the following will not be applicable to the dealer under the Exemption mode under the Package Scheme of Incentive

1. of any taxable goods purchased by it and used as fuel.
    

2. of any taxable goods (other than those used by it as fuel) and used in the manufacture of tax free goods
    

3. of any taxable goods (other than those used by it as fuel or used in the manufacture of tax free goods), if the corresponding taxable goods are dispatched by it outside the State, not by way of sale, to its own place of business or of its agent.
    

4. It is further provided that if the goods purchased are covered by any entry in Schedule B, then the refund of tax shall be one percent of purchase price.

3. Sub-rule (3) is deleted.  The refund mechanism for the units   holding entitlement certificate would be as per rule 60.
    

4. In sub-rule (4), it has been provided that the set-off would be available to the dealer under new Package Scheme of Incentives for Tourism Project – 1999 w.e.f. 01.04.2005.  It is also necessary to make a retrospective amendment to Rule 54 in this context.  Accordingly, a proposal is being submitted to Government.

29. Amendment of Rule 80:

1. in clause (a) the words “news paper” are added.
    

2. A new clause (c) is added, which specifies that certain processes would be  manufacturing processes for the purposes of  rules relating to Package Scheme of Incentives when used in respect of units certified by SICOM, or Directorate of Industries or the District Industries Centre, as the case may be, w.e.f. 01.04.2005., namely:-

1. Ginning of seed cotton in order to separate seed and cotton lint;

2. Conversion of ginned cotton to baled cotton;          

3. Preparing butter from cream;

4. Preparing ghee from butter.

30. Amendment of Rule 81:

In sub-rule (2), clauses (f) and (g) are substituted.  It is now provided that,-

1. the condition of filing of return with the concerned authority mentioned in the certificate of Entitlement is done away   with.  Now the Eligible Unit is to file return with each of the registering authority having jurisdiction over each of the respective places of business. However, this is not applicable to the dealers who are under Package Scheme of Incentives under the Power Generation Promotion Policy, 1998.
    

2. clause (g) is substituted.  The new clause states that the eligible Industrial Unit shall file return covering the sales and purchases pertaining to deferment of tax and file separate return for other transactions of sales and purchase not pertaining to deferment of tax.

The newly substituted clauses apply with necessary differences to exemption units also.

31. In Rule 84, a Table is provided for giving the NPV values of deferred tax.  There were some printing mistakes in the earlier Table which were brought to the notice of all concerned for the Trade by circular No. 31T of 2005 dated   3.10.2005.   The table is now substituted by a new table with retrospective effect.
     

32. Rule 87 is amended to provide for service of notice or order by sending a scanned copy by e-mail.  It is also provided that notices and orders may be  sent by employing a courier agency.
     

33. In rule 88, an amendment is made for providing the rate of interest when refund granted in excess is required to be recovered.
     

34. 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.
     

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

Yours faithfully,
(B.C.Khatua)
Commissioner of Sales Tax,
Maharashtra State, Mumbai.