A bunch of amendments in MVAT Rules have been received
although informed to the trade only after a wide gap. The amendments are made
on 31st October, 2007 but amended set-off rules 53 and 54 have been made
effective only from 1-4-2007. The retrospective effect has caused certain
practical problems.
First of all, we must admit with delight that the State has
heeded to the plea of the trade that retention in set-off should be in line
with the reducing rate of C.S.T. which is applicable where declaration in form
C is produced. Otherwise, it would be wiser to buy the inputs from other
States depriving our own State from the development of trade and industry.
The said retention is thus reduced from 4% to 3% on fuel,
inputs used in manufacture of tax free goods, corresponding inputs used in the
goods despatched to branches of the dealer etc. which is effective from
1-4-2007. The dealers are therefore, required to file revised returns for the
month from April 2007 to September 2007 in order to claim additional set-off
arising out of reduced retention amount. It is a big exercise by itself. The
resultant refund can be adjusted against the tax liability for the current
month or thereafter in the same financial year as per the provisions of the
Act. The Commr. of Sales Tax can suggest a shorter and practical way of
claiming this refund such as adjustment of additional set-off in the current
month directly. He can definitely allow such concessions in his authority like
it was done in Trade Circular No. 26T of 2006 dated 18-9-2006 to allow
revision of only March return to adjust any discrepancies in the audit report.
Secondly, this was an opportunity to set right the mistake
of disallowing set-off on electrical installations which are capitalised until
the amendment dt. 8-9-2006 was made to allow such set-off on electrical
installations outright. The plausible reason being that electrical
installations which are treated as capital assets are normally used for
manufacturing activity. Most of the cases, they are clubbed together in plant
and machinery block of the assets. It can never be the legislative intention
to disallow the set-off on the capital asset which is closely connected with
manufacturing activity. This was not done even in B.S.T. era and could not
have been intended in broad based input credit policy under VAT. This mistake
was rectified vide amendments made on 8-9-2006 which removed this disability
clause 54[i] from the rules and introduced rule 53[7A] to allow full set-off
on electrical installations, though by implication.
The present set-off amendments, however, perpetuates the
said mistake by insertion of clause [i] in rule 54 disallowing set-off on
electrical installations for the period from 1-4-2005 to 7th September, 2006.
The effect of the said amendment is not palatable and does not indicate the
true legislative intentions.
This especially ought not have been done in view of the
fact that the last date for audit report for the years 2005-06 and 2006-07 has
been extended till 31-12-2007. The dealers could have taken the benefit of
additional set-off on electrical installations if clarificatory amendment was
made to allow such set-off instead of the present disabling provision.
The eligible units under any package scheme of incentives
except under Tourism Projects, 1999 are entitled to refund of the Vat paid on
the ‘raw materials’ as defined in Rule 80. The amendment dt. 8-9-2006 further
allowed refund to the extent of retention amount specified in set-off rules.
However, this concession was granted only to exemption units and not deferral
units. The present amendment has extended the said concession even to deferral
units. However, there is a hitch in claiming such refund since exemption units
have been asked to reduce their CQB to that extent and deferral units are
directed to treat the said refund as deferred tax amount repayable after
specified period. The benefits have been given from 1-4-2005 and the dealers
are required to file revised returns for all the periods thereafter till date.
First of all, what is the need to grant such partial
benefits especially with burdensome conditions? The policy of the State
Government has always been to promote industry in backward area. The modes of
concessions may be exemption or deferral but both types of units should be
entitled to the same amount of benefits. We had pointed out the partiality
made in favour of only exemption units when Rule 79 was amended on 8-9-2006.
Now the present amendment has granted the benefits to both types of units but
with great reservations.
In any event, the Commr. of Sales Tax should suggest some
shorter route to claim the refund and to adjust the CQB or deferral benefits
without having to revise all 30 returns so far filed.
The present amendment in rule 66 has extended the last date
for filing audit report to ten months instead of eight months from the end of
the year. Thus, the last date would be 31st January following the financial
year to which the report relates. The rule deals with procedural aspect of
filing the audit report and would apply to any audit report prescribed u/s. 61
filed after the amendment dt. 31-10-2007 irrespective of the year to which it
relates. Of course, the relevance is lost for F.Y. 2005-06 but it is still
relevant for the year 2006-07. The Commr. of Sales Tax has issued Trade
Circular No. 66 T of 2007 dt. 31-10-2007 extending the last date to 31st
December, 2007 both for 2005-06 and 2006-07. In such scenario, whether
dealers can presume the last date as 31st January, 2008 for the audit report
for F.Y. 2006-07? The Commr. of Sales Tax may urgently clarify this issue.
