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Amendments in schedules : A shock treatment
Three amendments have been made on different dates
to carry out desired changes in various schedules under MVAT Act, 2002. Three
notifications had to be issued for the purpose which shows lack of co-ordination
on the part of the Government. Rate of tax on any commodity is a sensitive issue
since it can cause tremendous financial loss to a dealer if not informed about
the changes in them well within time. Time and again, we have been demanding
that a well thought-out policy with a fixed time schedule must be chalked out to
bring about changes in the rates of tax instead of resorting to such shock
treatment.
There are certain issues arising out of these
amendments. From 1-1-2008 fuel made out solid waste procured from any local
bodies or on their behalf has been made tax-free since it is included in entry
A-21. The purpose seems to encourage substitutes for scarce petroleum products.
However, it is not known why there is a limitation on the sources of procurement
such as local bodies or their agents. Secondly, no procedure has been laid down
to substitute such claims of procuring supplies from prescribed sources. Thus,
it will become difficult for the dealer to prove his claims for tax-free sales
of fuel although he might be doing a commendable job of developing a substitute
form of fuel.
Entry C-58 has been recast. LPG for domestic use
sold on or after 18-4-2006 has been made taxable at 4% along with Kerosene oil
sold under Public Distribution System. This amendment was long awaited since
section 14 under CST Act was amended on 18-4-2006 so as to insert clause (va)
therein covering Liquefied Petroleum Gas for domestic use. Thus, the
restrictions imposed under section 15 of the CST Act are applicable on it such
as ceiling on rate of tax at 4%, refund of tax paid locally within the State if
such goods are sold in the course of inter-state trade and CST is paid thereon
etc. In view of this development, the State Legislature did not have any right
to levy and collect VAT at more than 4% on LPG used for domestic use. The oil
companies were already charging 4% on such LPG on the basis of CST amendments
although there was no corresponding amendment under MVAT Act. It is hard to
believe that it takes nearly two years to merely bring out a consequential
amendment of this nature.
Due to lack of clarity, if subsequent dealers such as distributors, stockists
etc. have charged higher rate; i.e., 12.5% for this intervening period, then
they will have to face actions like forfeiture, penalty etc. Secondly, the mode
or procedure for proving this claim; i.e., use for domestic purpose is not
prescribed which may cause hardships to the dealers.
The product Liquefied Petroleum Gas [LPG] is
widely used as fuel for domestic purpose. It is not a ‘motor spirit’ as defined
in notification No. VAT-1505/CR-135/Taxation.1 dtd. 30-11-2006 read with
clarificatory Trade Circular N o.24T of 2007 and therefore, exemption granted to
retail outlets selling motor spirits other than ATF and Aviation Gasoline is not
available to the retailers selling LPG to individuals. Thus, impact of VAT is
borne by such consumers although LPG is essential commodity and already high
priced. Similar is the case with SKO sold through PDS. Government needs to
reconsider these issues.
Food stuffs are costlier – Is the amendment valid?
Food stuffs and food provisions have been made
more expensive by raising rate of tax from 4% to 12.5%. This has happened due to
deletion of clause [f] from Schedule entry C-107[11].
Section 9 of the MVAT Act, 2002 provides for the
procedure to amend the schedules. The State Government has been empowered to
amend the schedule by issuing a notification to that effect. The proviso
thereunder puts an embargo on this unfettered right. It provides that no
notification which provides for enhancement of rate of tax shall be issued after
the expiry of the period of two years from the appointed day and not more than
one such notification shall be issued within such period.
The period of two years from the appointed day;
i.e., 1-4-2005 has already expired on 31-3-2007 but still the notification has
been issued to enhance the rate of tax on Food Stuffs/provisions etc. covered by
entry C-107 [11] [f]. Is the provision u/s. 9 overlooked conveniently by the
Government? Thus, the question arises about the validity of this amendment.
The said section 9[2] also provides that
provisions u/s. 83[6] relating to amendments of rules shall apply to the
provisions meant for amendment of Schedules u/s. 9 [1]. The said notifications
have to be laid down before both the Houses of the Legislature for a total
period of 30 days. Let us assume that the procedure may be followed in the next
session of the State Assembly for the above-mentioned notification. However, one
does not know whether earlier similar notifications amending schedules have been
presented before both the Houses of Legislature or not? In the interest of
propriety of the matter, the Government should declare whether the above
mandatory provision has been followed or not.
Although the section, strictly speaking, does not
require the Government to give reasons for the amendments, it should spell them
out in the form of Statement of Objects and Reasons as is done in the case of
amendments in the Act by the State Legislature in the larger interest of the
public and to showcase a fair play in such matters. |
