Revised Rules – Sigh of relief

        Long awaited revised rules have finally been received. Although dated 8th September, 2006, they have been received by trading community as late as in 1st week of October, 2006. The representations made by STPAM and others have yielded some fruits and by and large, it can be said that the amended rules have fulfilled our expectations. The Government of Maharashtra and the Commissioner of Sales Tax deserve compliments for the same.

        The Commissioner of Sales Tax has issued a Trade Circular No.30T of 2006 dated 10-10-2006 in order to explain the amendments in the rules. The circular merely enumerates the amendments but does not explain the implications thereof at length. For example, the expression "Notwithstanding anything contained in rules 53 and 54, while assessing amount of tax………" added in rule 51 has certain implications. The reductions prescribed in rule 53 for stock transfers, manufacture of tax-free goods etc. will not apply to goods lying in opening stock as on
1-4-2005. The Trade Circular is expected to elaborate on such implications whereas it has become a trend to merely reproduce the amendments in the Trade Circular without deliberating on them. This trend definitely needs to be curbed.

        Although it is difficult to grasp all the implications of the revised rules at once, a striking point is noticed in the substituted rule 53(6). The said sub-rule seeks to apportion the set-off where gross receipts consist of sales at less than 50%. Only corresponding goods to such sales are eligible for set-off. The amended rule has added a condition that such goods must be sold within six months from the date of purchase. From the tenor of the newly worded sub-rule, it appears that set-off is available only in case of traded goods. It is impractical to think about such condition; i.e., sale within six months, in case of manufactured goods. The intention definitely cannot be such so as to exclude raw/packing materials corresponding to manufactured goods.

        Further, an exception has been carved out for capital goods used by hotels, clubs restaurants in relation to supply or service of food and drinks or used in kitchen etc. It is not clear whether capital goods such as machinery and fuel etc. are eligible for set-off in case of other dealers. Such goods can be considered as corresponding goods since they are essential for manufacture of goods to be sold. However, it is possible that they are simultaneously used for job works, processing etc. This issue needs to be addressed by way of a trade circular since financial implications can be very wide in such cases.

        Another immediate problem can arise in respect of filing of returns. The amended rule 17 requires the dealers having tax liability of Rs. 36,000/- or less during previous year to file six monthly return. Prior to amendment on 8-9-2006, such dealers having tax liability between Rs. 12,000/- and Rs. 36,000/- during previous year were required to file quarterly returns. They must have already filed the return for the quarter ended 30th June, 2006 by the time the revised rules are received. They are once again required to file a six monthly return for the period from April to September, 2006 on or before 21st October, 2006. Thus, there will be duplication of returns for the first quarter ended 30th June, 2006. The Commissioner of Sales Tax may allow such dealers to file quarterly return for the second quarter ended 30th September, 2006 to avoid such duplication. A clarification to that effect may be issued by the Sales Tax authorities at the earliest.

Rectifications in ‘C’ Forms