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Query No. 1
My client is a road contractor doing work of four employers
at different sites. He cannot keep bifurication of total purchases. He has filed
the returns as per the rule 58 and by ratio method. One of the works is
sub-contract taken by him of Rs. 10,00,000/-. He wants to issue certificate in
Form No. 407 to his principal. It is not possible for him to work out the taxes
paid for this specific work. In fact, for this period there is refund as per
return.
Since purchases are more which are used for construction in
subsequent period.
My queries are as under –
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How to show taxable sales & taxes paid in this certificate
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Whether it is necessary to pay tax actually for this work
and for issuance of this certificate?
Please give me your precious opinion on the above-mentioned
queries raised to you Please do the needful.
Anmol Mane, Sangli
Reply
The taxable sales will be the turnover of such sub-contract
which you have shown in your returns. In other words, since you have discharged
liability under Rule 58, the turnover of sub-contract, after deduction of labour,
will be the turnover to be shown in Form 407.
Including above turnover in your return is sufficient to
issue the certificate. There is no need of actual payment, if the return
otherwise results in refund. You will be required to mention all returns in form
407 in which the turnover relating to the said sub-contract gets reflected.
Query No. 2
There are two queries pertaining to my new clients :—
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Kindly let me know the rate of tax on sauce, which is also
called as tomato ketchup. My client is under Exemption mode. Whether he will
get full set off on fuel, which is used in manufacturing operations.
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My second query is pertaining to taxation of builders,
developers which is levied from 20-6-2006.
It is clarified that tax will not be levied if agreement for
sale of flat is made after the flat is already constructed. However what will be
the status for advances received towards flat booking, because the person giving
an advance may at any stage be able to cancel the booking & advances has to be
refunded.
A - Whether the said advances will be taxed @ 5% and when
refunded can be reversed, just like goods return claim.
B - If the said advances is refunded beyond period of 6
months, whether credit will be available on the same.
C - At what stage it will be decided that the flat is fully
constructed.
I - Whether it will be after receiving completion certificate
from Municipal Corporation.
II - In many cases it is noticed that completion certificate
is not received because, other formalities has to be completed. In such
situation people move to the said flats and start using the said premises. What
is the status in such situation?
S. J. Magar
Reply
Without proper details about contents, Excise classification
etc., it will be difficult to reply query about rate of tax. However apparently
your item will be covered by entry C-107(11)(e) since it covers ‘sauce’. The tax
liability will be at 4%.
As per the VAT Scheme, Exempted unit do not get set off on
raw materials but get refund. As per Rule 79(2)(i) he will get full refund on
fuel purchases.
The issue about builder/developer cannot be answered unless
the facts and contents of Advance Agreement are known.
Query No. 3
My client is dealer of polyurethane foam covered by Central
Excise Tariff heading 3921.13.10. Vide Noti. No. VAT-1506/CR-83/Taxation-1 dated
30-9-2006 "Other plates, sheet, films, foils and strips of plastics" covered by
Central Excise Tariff heading 3921 is notified as industrial input liable to tax
@ 4% under Schedule Entry C-54. When any heading under Central Excise Tariff is
notified as industrial input, will the items falling under sub-headings and
tariff headings of said heading will also be notified? Thus in view of above
item falling under sub-heading 3921.13.10 will also be chargeable to 4% VAT.
Your response to the above query shall be highly appreciated.
Harshad L. Mehta
Reply
If the main heading of Central Excise is covered there is no
need to further notify sub-headings etc. Since heading 3921 is covered, in my
view, your item, though covered by sub-heading 3921.13.10, will also be covered
by entry C-54 and liable to tax @ 4%.
Query No. 4
My client is Trader/ Reseller of Packaging Materials. We are
purchasing some goods from Shahpur (bill enclosed for your reference) in which
party is charging vat on 60% of total purchase value. Previously the same party
was not charging any vat.
My query is
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Whether it is correct method?
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What will our tax liability in the above case when we are
going to sell the same goods in local? Whether to charge tax on total sales
value or on 40% and on profit margin?
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Whether we can claim for the set off of vat charged?
The same problem is also faced by me in the following two
cases.
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One client is doing trading of cement sheets. Cement sheets
are purchased from exempted unit. They are not charging any vat amount on
bill. E.C. stamp and declaration printed on Bill.
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Other client is reseller of electronics items. Electronics
items are directly purchased from company and also from some distributors.
Company is not charging any vat mentioning that Exempted Unit with declaration
printed on Bill and E.C. No. Some distributors are charging marginal Vat
mentioning that "GOODS MANUFACTURED BY EXEMPTED UNIT".
At present we are charging vat on profit margin only.
Whether it is correct method? OR What will our tax liability
in the above case when we are selling the same goods in local?
Whether we can claim set off of vat charged which is marginal
shown separately in invoice?
Dealer is Manufacturer of readymade garments. In the year
2004-05, Dealer had purchased motor car for Rs. 5,60,000 Approximately (not a
Good Vehicle) Tax was paid Rs. 60,000. Dealer using car for the purpose of
moving the "Pallas"(cutting of cloths) from own Factory to another factory for
the purpose of stitching and embroidery. Generally the final product which is
sold in the market is ranging from Rs. 700 to Rs. 1500 in terms of value.
I am enclosing herewith extract of Rule 41D in which it is
mentioned that set off is available on goods which are required for carrying
materials, during the process of manufacture, from one place to or unit to
another place or unit.
My query is
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Whether dealer is eligible for the set off under Rule 41D
or not ?
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If yes, what will be the conditions?
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If no, on what ground dealer is not avail set off?
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Can you know any Judgments in favour of the allowance of
set off ?
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What will be the liability in case dealer sale this car at
present? Whether set off can be taken in case it is not avail and/or eligible
in the year of purchase ?
Girish Maru
Reply
(i) Though full facts are not available it appears that
your vending party may be under partial exemption mode as backward area
unit. The correctness of method cannot be opined unless the facts of vendor
are known.
If the 40% goods are under exemption, on your
corresponding 40% sales, you can pay VAT on differential value as per Rule
57(2). You can take set off of VAT charged.
In case the goods are originally manufactured in exempted
unit you are actually liable to pay tax on your profit margin. However you
have to follow Rule 57(2). If no VAT is charged in purchase invoice then you
can charge VAT on your profit margin in your invoice. However in case where
some VAT is charged by your vendor, you will be required to charge VAT on
total of margins, i.e., your profit as well as on the amount of margin on
which your vendor has charged VAT in his invoice. You will get set off of
VAT charged by your vendor and thus ultimately you will be discharging VAT
on your profit. The formula given in Rule 57(2) be applied properly to
arrive at chargeable amount.
(ii) For getting set off under Rules 41D it is necessary
to prove use of goods in manufacture of goods for sale. This is a factual
position to be proved by you. You can refer to judgment in case of Waman
Hari Pethe (S.A. 734/735 of 92 dt. 12-8-1994) for useful guidance about
use of vehicle in manufacturing process.
If you sale the car at present then you will be liable to
tax without any set off availability.
Query No. 5
The dealer-assessee runs a hotel wherein food is cooked and
is served. He also runs a permit room & beer bar in the same precincts.
Taxability has been correctly determined by him and accordingly taxes have been
paid out. No separate tax collection is effected. Assessment order in respect of
the period from 1-4-2002 to 31-3-2003 is likely to be resulted in excess
payments.
Please get us intimated as to whether refund can be granted
to him or not.
P. B. Admane
Reply
The refund is normally required to be given unless proved
that there was reimbursement of higher amount. While filing returns if the
dealer has paid taxes considering certain G.P. etc. and ultimately the
calculations as per actual G.P. defer, the Tribunal has held that refund is
required to be given and Section 43(3) does not apply. A reference can be made
to judgment in case of Posh Pharma Sales S.A. 785 of 2002 dt.6-1-2007. Therefore
on finding of facts the refund should be given.
Query No. 6
My client deals in embroidered handicraft items like Toran,
hanging letter holders, ghagra choli, dhoti kurtas, rope bags etc and also items
like small oxidized fancy boxes, Bajoth, small cloths and ornaments for God,
things like coconut etc done in pearls, gift purses, wall pieces, embroidered
cushion covers etc. He gets all these items directly from the artists who make
them from outside Maharashtra.
Kindly let me know as to what shall be his position in
Maharashtra and whether he is liable to take VAT TIN and CST TIN and whether he
is liable to pay tax. He does not pay any tax on purchases as he directly gets
them from the artists and it is notified as tax free in Gujarat. Sales are of 15
lakhs.
Kindly let me know my clients position as soon as possible
with Circulars/Notification.
Rajiv Javeri
Reply
Irrespective of the different sources of purchase, in your
case it clearly appears that you are effecting sale of above goods as dealer.
You are squarely covered by the provisions of MVAT Act and accordingly required
to get registered and discharge the tax liability.
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