Survey – Whether a fulfil exercise?

The survey section of the sales tax dept. is in full swing and is issuing standard notices to the already registered dealers serving no purpose. In addition, TDS circle of the survey branch is also issuing stereotyped notices to the employers regularly paying TDS on works contracts.

Section 66 of the MVAT Act, 2002 deals with survey and sub-section [1] thereof clearly chalks out the roadmap for such survey. It begins with the wordings "With a view to identifying dealers who are liable to pay tax under this Act but have remained unregistered, the Commissioner shall _____________". These wordings throw light on the purpose of the section viz. catching the URDs in the net of VAT. But in practice, we observe that survey notices are being issued to registered dealers only.

The standard format of notice states that "we have obtained information from the Shops and Establishments Act, 1948 which indicates that you are engaged in business activity". Thereafter, the letter suggests that registration under MVAT Act, 2002 is compulsory and application needs to be made within 30 days from the date of crossing the turnover limit of Rs.5 lakhs. The list of documents required for registration is also attached.

However, an obvious aspect seems to have been overlooked. It was obligatory for the survey section to first check their list of registered dealers in order to weed out such names of the persons who are already registered. No purpose is served by sending such notices to the dealer who are already on the roll. Proper homework does not seem to have been made in this regard although there is nothing wrong in hunting out URDs in the process.

Similar standard notice is sent under Profession Tax Act to find out unenrolled / unregistered persons/employers. These are also mostly served on persons who are already enrolled or registered. The dept. can publish the data as regards the number of dealers liable for registration but not so registered under both the Acts who have been located by them so far in order to throw light on the success of the whole exercise. The efforts and cost can be definitely minimised if the process of weeding out registered dealers from the list is done.

Similar notices are also sent by TDS circle of Survey Branch to the persons responsible for deducting TDS on works contracts. The letter begins with the following paragraph.

"The MVAT Act, 2002 casts an obligation on every employer awarding works contract to file return in Form 405. As per this provision, you have filed return and in this return certain defects are noticed which are as follows:–"

Thus, it is clear that employers have already filed returns and the defects mentioned in the letter are standard for everyone. In short, the employer has to obtain R. C. Nos. of the contractors in order to cut the TDS @2%. The letter also mentions that TDS has to be deposited even on the bills from OMS contractors. Under which provision of the Act, the authorities can direct the employer to deduct tax on OMS contractors’ bills and how would they avail of the credit in respect of those TDS certificates when they are not registered dealers in Maharashtra? Such problems can arise especially in case of OMS printers whose jobs are considered as works contracts. They are liable to pay tax in the State from where such printed materials are supplied. Therefore, there is no question of deducting TDS in Maharashtra in case of such dealers.

Secondly, printers in Maharashtra are, by and large, charging VAT at 4% even in case of works contracts treating the transactions as sales on the basis of the directives issued by their collective body. In such a case, whether employer should still deduct TDS on them treating them as works contract or the version of the printer should be accepted by him? This aspect also needs clarification.

In short, survey section needs to do a lot of homework and streamline their activity.

Trade Circular for NIL CST returns

Trade Circular No.52T of 2007 dt. 31-7-2007 was a result of repeated representations and requests made by the trade to have clarification on the issue whether CST returns need to be filed when there are no inter-State sales. It is a good gesture on the part of the Commr. of Sales Tax that he has followed the old circular of 1981 and granted the concession of not filing NIL returns. As already represented by STPAM, a clarification is needed on the point whether dealer gets this concession only up to the month when he effects inter-state sales or enjoys the concession in all the months where there are no inter-state sales. This ambiguity arises due to a sentence in the said circular; i.e., "This concession will be available to the dealer till he effects any sales in the course of inter-State trade or commerce."