April 20, 2006

To,

The Hon’ble Comm. of Sales Tax
Maharashtra State, Mumbai

Sub : Adjustment of refund under the VAT Return

Dear Sir,

On behalf of our several clients we seek your guidance on the following matter.

In view of Circular No. 2T of 2006 dt. 7-1-2006 and Circular No. 8T of 2006, in majority of the cases provisional refunds have been issued to the dealer as per returns filed by them for periods up to 28-2-06.

As per your honours’ instructions and aforesaid trade circulars, 90% of the refund claim in Form 501 is allowed to the dealer. This leaves balance refund of 10% not allowed as physical refund but remaining carried forward and to be adjusted.

In this circumstances, while filing the return in Form 221 for the period March 2006 or the other periods, such dealers adjust an amount equal to refund which is not granted till date (which is out of the amount claimed as refund as per Form 501).

We believe, such adjustment is correct as per the provisions of MVAT law. This letter is addressed to your honour to bring to your notice the practice followed in the trade.

We would appreciate a line in reply confirming the above.

Thanking you,

Yours sincerely,

 

April 20, 2006

To,

The Hon’ble Comm. of Sales Tax
Maharashtra State, Mumbai

Sub : Adjustment of refund carried forward in the Return of March 2006

Dear Sir,

On behalf of our several clients we seek your guidance on the following matter.

There are instances where refund under the MVAT Act is due to the dealer as per the returns filed for the year ending March 2006. Such refund was being carried forward and was adjusted against dues arising out of returns for the subsequent period(s) under the BST & CST Acts.

Under the VAT regime in view of rule 55(3) of MVAT Rules, 2005, such refund is not allowed to be carried forward to the next period but is required to be claimed as refund by making application in Form 501. In this respect box No.10C(b) of Form 221 and the instructions given for the same in the form clearly mentions that the refund in March return cannot be carried over in the subsequent year.

Section 50(2) of MVAT Act, 2002 reads as under:

"Section 50(2) Where any refund is due to any dealer according to the return or revised return furnished by him for any period, then subject to the other provisions of this Act including the provisions regarding provisional refunds such refund may provisionally be adjusted by him against the tax due and payable as per the returns or revised return furnished under section 20 for any subsequent period:

Provided that, the amount of tax or penalty, interest or sum forfeited or all of them due from, and payable by, the dealer on the date of such adjustment shall first be deducted from such refund before making the adjustment".

It is clear from the above that the dealer is allowed to adjust the refund against tax due & payable as per the returns or revised returns furnished u/s 20 for any subsequent period.

In view of this clear provision under the Act the form providing for not carrying over of the refund is incorrect.

We therefore have to request you to kindly issue appropriate instructions in the matter allowing to the dealer to adjust such refund against the liability for the subsequent period.

Please do the needful.

Thanking you,

Yours sincerely,

2-5-2006

To

Shri Ajay Deoras
Dy. Commissioner (Central Repository), Mumbai

Sub : Procedures for issuance of statutory forms

Ref : Your Fax message dated 27-4-2006

Dear Sir,

It is really a matter of pleasant surprise for me to have received response to my representation, in such a short period of time. I do appreciate the welcome change in the approach of the Department to problems faced by the taxpayers.

At the outset, I sincerely thank you for extending courtesy of calling on phone and sending a fax message, thereafter, explaining the new system of working adopted by the Dept. The only grievance was and is that the actual working of the system leaves much to be desired from the point of view of the taxpayers. Why the person approaching the Repository should be made to stand in queue, at four different places before, a receiving clerk, an officer, an inspector and again an officer? Why should there be so much crowding and long queues? Can there not be a system, where the people have not to stand in the queues repeatedly for long period of time. It is really very much tiring and time consuming exercise for a person approaching the Repository.

Besides, the staff members verifying the papers should be instructed properly so that they could guide the people, in the right spirit of accommodation and avoid returning them, on the flimsy excuse of their not having rubber stamps and original documents etc. Perhaps additional staff may be required to facilitate the work and to minimize the hardship of the taxpayers.

With regards,

Yours truly

Sd/-

(H. P. Bhuta)

To

Mr. H. P. Bhuta

Sub : Procedure for issuance of statutory forms

Ref : Your letter dated 17-4-2006

Gentleman,

With reference to the abovementioned subject, kindly recall my telephonic talk with yourself today. From the contents of the letter it is observed that in spite of changes for simplifying the procedure for issuance of forms, there is hardship and loss of time for obtaining the forms. It feels great to see that the department receives the feedback for the changed system so that there is scope for improvement for the deficiencies. Your suggestions for improvement are always welcome. We always try to improve upon our deficiencies.

First of all, kindly approach me directly if you face any problem in obtaining the forms. You are also requested to let me know the details of the dealers for whom you received form late.

As far as the changed procedure for issuance is concerned let me tell you that the department as such is getting reorganized on functional basis. In the long term the concept of assessing officer will no longer be there. Because of functional reorganization the process of issuance of forms is also being done on centralized basis. Under the revised procedure all the dealers in Mumbai have to approach the Central repository for obtaining the forms under CST Act. Unlike the past system, since the issuing officer is not sure about the genuineness of the person appearing before him the system has inbuilt checks for verifying the same. Unlike the past system the person has to first approach the inward clerk to know his assigned officer. After approaching the assigned officer the person has to attend before the assigned inspector for verification of the documents. Once the verification is done the person is required to contact the officer on the appointed date and time for obtaining the forms. However, it is seen that in many of the cases the dealers insist that the forms need to be given on the same day, in such cases the person even offers to fill details himself on the forms. During the verification it is expected that the inspector will ask for original copy of the declaration and certificate forms only and check the certified true copies from the dealer in respect of other documents.

To improve the system the instructions board and phone numbers of the helpdesk officers are put up outside the repository section. To overcome the problem of errors in filing the application forms and issuance of the forms, recently the facility of applying for forms online is made available. Now the dealers can log on to the website of the department www.vat.maharashtra.gov.in and apply for forms online. Those who apply online will be issued the printed forms and thus this will help more those dealers who apply for more than 25 forms.

Hope that you will appreciate our efforts to improve and simplify the system. However, kindly feel free to make positive suggestions.

Ajay Deoras

Dy. Commissioner, (Central Repository), Mumbai

Ph. 022-23790309

M. Ranawat
B.Com., LL.B. (Gen) F.C.A.

Office : 107-B/108, Sagar Shopping Centre, 76, J. P. Road, Andheri (West), Mumbai – 400 058
Phone : 2677 3676/2677 5507 • Telefax : 2677 5965 • Resi : 2628 6842

To,

The Hon'ble Commissioner
of Sales Tax (Maharashtra),
8th Floor, Vikrikar Bhavan,
Mazgaon, Mumbai - 400 010

Respected Sir,

Sub : Clarification for reduction in set off u/r. 53(3) of the MVAT Rules-2005.

With reference to above you are requested to please give the clarification on the following issue related to set off Rules.

The object of the VAT Scheme is to allow input credit (Set off) on goods, raw materials, packing materials and expenses debited to P & L A/c. and also on Fixed Assets subject to certain conditions laid down in MVAT Act & Rules.

One of our clients is manufacturing gold ornaments. The dealer
purchased gold bar from local registered dealer who charge 1% VAT separately in Tax Invoice.

Thereafter the gold bar send for jobwork - for mfg. of gold ornaments to branch office situated outside the state. After manufacturing the gold ornaments from branch office, the same is received back to Mumbai office for export or local sales.

Lastly the manufactured goods are exported & partly goods are sold locally by collecting 1% VAT separately in the Tax Invoice.

Rule 53(3) of the MVAT Rules provide that if the claimant dealer despatches any taxable goods, outside the state in India, not by reason of sale, to his own place of business or of his agent or to his principle, then 4% of the purchase price of the corresponding taxable goods, shall be reduced and deducted from the set off otherwise available in respect of said purchases.

However under earlier set off rules 41D of the B.S.T. Rules, 1959 it was clarified that raw materials should be used in Mfg. of taxable goods in the State of Maharashtra and there was also provision for reduction of 3% of Purchase Price for the purpose of set off under the said Rules.

However the intention of the legislature is not to have discrimination between two parties for the set off purpose in case of jobwork wherein under one case the dealer who is doing jobwork from other dealer outside the State there is no reduction, in set off under the said rule and in another case the dealer who sends the goods for jobwork to other state to one’s own branch or agent then 4% reduction u/r. 53(3) may apply.

From the above your honour will realise the hardship suffered by the dealers who despatch the goods for jobwork to their H.O. or branch or agent outside state due to unjustificable provision of set off rule 53(3) of MVAT Rules, 2005.

Accordingly Rule 53(3) requires clarification, so that the dealer who transfer the goods to his own place or agent outside the state for jobwork is allowed set off without reduction.

We hope that your honour shall consider our request sympathetically and come out with suitable amendment/clarification in respect of Rule 53(3) of MVAT Rules, 2005.

Thanking you,

Yours faithfully,

For Ranawat & Co.
Chartered Accountants

Sd/-
(J. M. Ranawat)
Proprietor