Query No. 1
One of my clients is registered dealer under BST Act, read
with MVAT Act, 2002 from last 7 years. This is a proprietary concern engaged in
manufacturing. At the same time he also has another proprietary concern which is
also existing from last 5 years, where he is doing only labour jobs. (THIS FIRM
IS NOT REGISTERED UNDER SALES TAX). Two machines also has been purchased from RD
for doing labour jobs. For doing this labour jobs material is received from
various parties on 57 F 4 Excise Challan, Some consumables are also purchased.
For the above purpose separate accounts are maintained
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My query is whether both the turnover of two firms has to
be clubbed for VAT Audit purpose. If yes, whether labour charges turnover has
to be include in the VAT returns.
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If turnover is included whether retention for labour job
done is to be taken into accounts on account of consumables.
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Assessee has during the year transferred machinery used for
doing labour jobs to manufacturing concern. How the same has to be treated in
VAT returns. Whether RD, URD, etc.
Kindly give your views on above.
Subodh Magar
Reply
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The turnover of both the concerns will be required to be
clubbed for VAT purpose. However, if the labour charges are not in the nature
of works contract, the said turnover will not be required to be considered for
VAT audit limits.
As per amended Rule 20(2) labour charges will be required to be shown in the
returns.
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The retention will be required to be seen in light of Rule
53. In your case more attention should be given to Rule 53(6); i.e., about
proportion of sale receipts to gross receipts.
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When there is intra unit transfer, it does not amount to
sale/purchase and hence question of showing them in returns will not arise.
Query No. 2
Please reply my following queries.
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We have filed I.T. Return for the year 2005-06 with Audit
Report showing VAT Refund of Rs. 39,312/-. Now while preparing VAT Audit
Report, it is noticed that set off of Rs. 3,888/- was not allowed on the
purchases of chassis/spare of old goods vehicle.
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By showing opening stock of Rs. 3,00,000/- on 1-4-2005 we
have taken set off of Rs. 8,499/- and filed I.T. Return for the year 2005-06
with Audit Report. Now while preparing VAT Audit Report it is noticed that the
goods of Rs. 10,000/- was returned to suppliers in April 2005 which was
purchased in February, 2005.
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My client has taken Composition Scheme for 2005-06. But in
Jan 2006 he has made Oms purchases, and in February, 2006 his turnover
exceeded the limit of 50 lakhs whether he is Composition Dealers or VAT Dealer
for 2005-06 ?
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PSI unit not applied for TIN up to 31-10-2006. Now applied
for TIN on 1-11-2006.
Now how to prepare quarterly returns and with CQB or tax
working ?
Please explain, what position will be arised under I.T. Act &
VAT Act in above the queries and effects in entries in the books.
A. I. Hasmani
Reply
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In my opinion you will be required to pass corrective
reversal entries in current year.
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The set-off will get reduced. The effect of reduction in
set-off can be given in current year; i.e.,2006-07.
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On account of crossing turnover above Rs. 50 lakhs the
composition scheme will not get disturbed, except in case of new dealer. There
is nothing in the composition Notification that on exceeding turnover of Rs.
50 lakhs during current year the composition benefit will be lost. In other
words, for current year the composition benefit will remain applicable though
turnover exceeds Rs. 50 lakhs during the year. However, the dealer will not be
eligible for composition in succeeding year.
By effecting inter-State purchase, there is a breach of condition and the
dealer will be out of composition from beginning; i.e., from 1-4-2005. The
dealer will be required to compute his liability accordingly as regular VAT
dealer. There is nothing in the Notification to compute liability from date of
breach as such.
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If PSI unit has not applied TIN in given time it will
become unregistered dealer from 1-1-2006. Once the unit becomes URD the
benefit of Entitlement Certificate is lost automatically. TIN is obtained from
1-11-2006, so from 1-11-2006 the PSI unit will become registered dealer.
However there is no automatic restoration of Entitlement Certificate which
stood cancelled on 1-1-2006. In my opinion you should apply for Administrative
relief so that the TIN granted from 1-11-2006 is made effective from 1-1-2006.
If this is done the issue will get solved. If not, then you will be required
to approach the authority to get the Entitlement Certificate revalidated,
which may be revalidated from 1-11-2006.
Query No. 3
First of all I thank to the Association for being replying my
Queries now my query is as under:
That one of my clients, is a distributor of Liquid Glucose,
named M/s. Soni Essences & Dealers. According to his agreement with company, the
cheque book is signed and kept with company as the goods dispatched by the
company the cheques are realized against the goods supplied.
My client sells the Liquid Glucose to a Confectionery
Manufacturer, say, M/s. ABC, who wants to take the full set off of Excise Tax,
VAT etc. My client books the order with company, in the name of M/s. ABC and
bill is also drawn in the name of M/s. ABC through M/s. Soni Essence & Dealers
by the company goods are dispatched to M/s. ABC for which the company has taken
the cheques of M/s. Soni Essence & Dealers and M/s. ABC has given the cheques in
the name of company
My question is that on who’s account this purchase should be
taken; i.e., either in the name of M/s. Soni Essence or M/s. ABC ?
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If it is in the name of M/s. ABC then how to account this
entry whereas company had already taken the cheques of M/s. Soni Essence
against the goods dispatched to M/s. ABC.
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If it is in the name of M/s. Soni Essence but goods are
dispatched to M/s. ABC and it issue the cheques in the name of Company only
and not in the name of M/s. Soni Essence as it wants to take the full set off
against Excise Tax, VAT etc.
My request to the Association to send the reply as early as
possible as my client is waiting for my suggestion in this matter.
Doulat J. Rohra (STP)
Reply
The issue is being made complicated by the parties
themselves. sale is an agreement between two parties, so the contracting parties
should decide what they want to do. If company wants to sell directly to ABC,
then, Soni name should not be brought in on any of the documents; i.e., on sale
bills etc.. The payment should also be by ABC to company, accordingly.
In your case it appears that the sale by company is to Soni,
and from Soni to ABC. It is not clear how Soni and ABC both are making payment
to the company. I feel the facts require more clarification. However, as stated
above, you can decide the courses of action based on the relationship your
parties want to create amongst themselves.
