Query No. 1

I am subscriber of your magazine Sales Tax Review

My client is the registered dealer under MVAT Act. Last year (F.Y. 2005-06) he opted the composition scheme and he has filed all the returns under that scheme. During current year he has filed his first quarterly return under composition scheme but during the second quarter he has started new business under the same MVAT R.C. number and he has made inter-State purchase transaction. Thus, he become importer by effecting this transaction.

1. What are the consequences on composition scheme?
    

2. Whether to file returns under composition scheme or normal VAT schemes for the second and subsequent quarters?
    

3. Whether composition scheme will be discarded from

1. 1-4-2006 or;

2. the date of affecting inter-State purchases or;

3. next year; i.e., 1-4-2007.

Reply

1. Since there are inter-State purchases, he will be ineligible for composition scheme from 1-4-2006 and tax should be discharged as a normal VAT dealer.
    

2. From very first quarter to file returns under normal VAT scheme.
    

3. The composition scheme will stand discarded from 1-4-2006.

Query No. 2

I am an outstation ordinary member of our esteemed institution and my Registration No. is 00/S00272. I have following queries regarding VAT Act.

As per sec. 96(1)(g) where a dealer registered under the Maharashtra Sales Tax on transfer of Property in Goods involved in the execution of Works Contract Act, 1989 entered agreement and commenced work before 31-3-2005 and continued thereafter, then such dealer shall pay tax in respect of the said contract in accordance with the provisions of the Works Contract Tax, 1989, without claiming set–off on the purchase corresponding to the contract effected on or after the appointed day to which he would have been entitled under the provisions of MVAT Act, 2002. Now my query regarding this is as follows:

1. Whether the dealer can opt for Composition scheme as per provisions of MVAT Act 2002; i.e., 8% or 5% on gross receipts and claim set–off 64% or 75% respectively.
    

2. Whether the dealer can opt to pay tax as per provisions of MVAT Act, 2002 u/r. 58 and claim set–off respectively.
    

3. Whether it is mandatory to pay tax as per the provisions of Maharashtra Sales Tax on transfer of Property in Goods involved in the execution of Works Contract Act, 1989.
    

4. If it is mandatory whether the dealer can opt various methods as per provisions of earlier VAT Act, 1989 to pay his tax liability.

Please give me your precious opinion on the abovementioned queries raised to you.

Dhiraj Ashok Shah

Reply

As mentioned by you the tax on ongoing contract is required to be discharged under old Works Contracts Act. Therefore the choices available under MVAT Act cannot be availed of. To adopt Works Contract Act is mandatory. However dealer can have choice of payment as per Works Contract Act, 1989.

Query No. 3

Some of my client are in business of FMCG distributors.

My query is as follows:—

1. The Distributors has to operate scheme for the retailers on behalf of the company and the same was reimbursed by the company to the distributors.
    

2. The distributors operates the scheme as follows:—

   Sales		Rs.10,000.00	A
   Less:—
   TPR Scheme 10%		– Rs. 1,000.00	B	TPR = Temp Price
   				Reduction
   		+ Rs. 9,000.00 C	= (A-B)
   Add:— VAT 12.50%
   (on ‘C’)+		Rs. 1,125.00 D
   Total amount of		Rs. 10,125.00 E = C+D)
   invoice Due

3. The distributor claims the TPR Scheme given for the month from the Company at the end of month and the same is reimbursed. Sometimes the reimbursement is lower than actual claimed and sometimes it is little more than claimed. The difference between the same if any is debited or credited to the trading a/c respectively.
    

4. My query is that whether the distributors are liable to pay the tax on the TPR Scheme operated by him and reimbursed by the company.
    

5. Whether the distributors has to deduct the TPR scheme after charging VAT on sales?

Please give me your precious opinion on the abovementioned queries raised to you. Please do the needful.

Dhiraj Ashok Shah

Reply

Normally sale price means the amount paid by buyer to seller. Since buyer is paying amount to Distributor after discount the taxable price for Distributor will be such reduced amount. However your facts are not very clear. The meaning of ‘Temp Price Reduction’ is also not very clear. We suggest that the scheme be examined properly because if from scheme documents it transpires that the company has paid amount on behalf of buyer then the situation will change.

Query No. 4

I am an outstation ordinary member of our esteemed institution and my Registration No. is 00/S00272. I have following queries regarding VAT Act.

One of my clients is in business of Cold Drinks distributor.

My query is as follows:—

1. The company has charged rental of the glass bottles in the invoice separately and collect 4% Lease Tax on the same.
    

2. The distributor is selling the bottles to retailers. Whether the distributor can also collect from the retailers the rental of the bottles and collect lease tax from the retailers?
    

3. If he has done, so whether he is eligible to claim set-off of Lease Tax paid by him to the company against his Lease Tax liability?
    

4. If the distributor has not collected rent separately from the retailer and he has charged it in the total Sales Price, whether he is eligible to claim set-off of the Lease Tax paid by him to company against his VAT Tax liability?

Please give me your precious opinion on the abovementioned queries raised to you.

Dhiraj Ashok Shah

Reply

The distributor can charge lease tax separately from retailers. The distributor will be entitled to claim set off of lease tax paid to company. Even if he has not collected lease tax separately still he will be entitled to claim set off of tax paid to company.

Reply of Query No. 5

A query has been received from C.H. Popat, Tax Consultant, Malkapur in Marathi which is not translated here. The sum and substance of the query is that the dealer has got registration from 10-1-2006 and there are purchases prior to above date. The issue is whether the dealer will be eligible to set off on such purchases. One of the conditions for getting the set off is that the dealer should be registered dealer at the time of purchase. Though some relaxation is given in Rule 55(1) (a) by amendment effected on 8-9-2006, it will not be applicable for 2005-06. Accordingly no set off on purchases as URD.

Query No. 6

Dealer has not applied for TIN No. by 31-12-2005. He has closed down the business since that date.

For the year 1-4-2005 to 31-12-2005 he has OMS Purchase of Rs. 10 lakhs. But all the purchase oms are sold as sale in transit. For OMS purchase he has issued C form till the purchase date 30-9-2005. Now last quarter C form is not issued.

What will be the position of the client with regard to BST/VAT and CST Act.

Whether he still can issue C form for the December-2005 quarter.

Alpesh B. Shah

Reply

If TIN is not applied then the Registration stood cancelled from 1-1-2006. However the old registration remains valid till 31-12-2005. You will be entitled to all the privileges of being registered dealer till 31-12-2005. You can also issue ‘C’ form for your purchases till 31-12-2005.

Query No. 7

My client is an registered Electrical Contractor & also registered Dealer under MVAT Act. He is taking Turnkey Contracts for Supply, Erection & Commissioning of Electrical Equipments from MSEDCL — a registered dealer holding licence for distribution of Electricity, under the Electricity Act, 2003.

As per the new order issued by the Finance Department, Mantralaya, Mumbai 400 032, dated 28-7-2006. Order No. VAT - 1505/192/Taxation – 1, any supplies made, then VAT TAX should be charged at 4% for all such goods. (i.e., any tax in excess of 4% will be exempted).

When we purchase the goods for these Turnkey Projects, we are required to pay VAT Tax @ 12.50%.

My client has not opted for composition scheme, as it is Divisible contract (Separate Bills are required for Material Supplies & Labour Bills separately, as per the terms of the contract).

Reply