Indirect Tax Laws

1. Maharashtra value Added Tax (MVAT Act 2002) (Effective from 1st April 2005) (State Act: Goods Moving within the state of Maharashtra, Transaction covered under this Act 2. Central Sales Tax Act, 1956 (CST Act) (Central Act, common in whole of India) (Central Govt i.e Finance Minister of India amends this Act) (Goods Moving from one state to another state transaction covered under CST Act) 3. Central Excise Act 1944 ((It is a Central Act which is common in whole of india)

4. Customs Act 1962 (It is a Central Act which is common in whole of india)
5. Service Tax Act 1994 (Central Act) Constitution of India have given powers to all the states to Levy Taxes Collect Taxes Retain Taxes for the purpose of Meeting State Expenditures (Constitution of India Means President of India)

Taxes collected by Govt.are spent for following purposes.

- Defence of the country. - Maintaining law & order in the State. - Public Health of the Society. Excise Duty is the Single largest revenue for the country. - No Sorry word in the dictionary of Tax Laws. - Non payment of Taxes will attract payment.

1. Taxes
2. Interest and Penalty or imprisonment or Both Indirect Tax is a collectable Tax from Customers.

- Collection of Taxes is not compulsory, Payment of taxes to the authorities is compulsory.

- Since payment of Tax is compulsory, collection of Tax becomes necessary.

 What is VAT (Value Added Tax) state subject.

VAT is applicable on Sale of Goods which are Movable

Immovable goods are out of the ambit/purview of VAT (No Tax on immovable goods). Exports are also free from all Taxes. Definition of Sale 1. There must be a Buyer and a Seller 2. There must be physical transfer of Goods from Seller to Buyer 3. The sale must be for Value or Monetary Consideration 4. The Buyer and seller must be different Seller = ABC Buyer = XYZ It is sale 5. Barter Exchange : No sale, Hence no tax 6. Free samples : No sale, no monetary consideration hence no tax 7. Stock transfers from one state to another state to the same Entity (No sale, hence no tax)

1. Schedule A : Tax Free goods or 0% tax

Water, Milk, Curd, Butter milk, Electricity, Vegetable, Fruits, Garlic, Ginger, Firewood, Glass bangles, Human blood, Raw wool, Meat, Fish, National flag, Kumkum bindis, sindoor, Gandhi Topi, plants, idols of dieties, unprocessed salt, books and periodicals, lassi, chalk, charcoal, charkha, kerosene, Food grains, vegetables.
2. Schedule :B: 1% VAT

Gold, Silver, Diamonds, Pearls

3. Schedule C : 5% VAT Iron and steel goods, paper, plastic goods, cables, bricks, IT products, Medicine drugs, Electrodes, Coir, Crude oil, Edible Oil, Tractors, Hides and Skins, ICE, Imitation Jewellery, lime stones, Industrial Cables

4. Schedule D : 20%
i) Foreign Liquor 20% ii) Indian made Foreign Liquor 20% 5. Schedule E : 12.50% VAT Goods not covered above (under A, B, C, D. It will be covered under this schedule

Transactions covered under MVAT Act 2002

- Goods moving within the State of Maharashtra will be under MVAT Act, 2002
B INTRASTATE SALE Buyer C Buyer D Nashik Mumbai

Seller Mumbai
(Maharashtra)

Buyer

Pune

E Buyer Nagpur

Transactions covered under Central Sales Tax Act, 1956 (CST)

B Buyer C A Seller Mumbai (Maharashtra) Movement of goods from one state to another state is the sole criteria (Interstate Sales OMS Sales) Buyer D Buyer E Buyer F Buyer E Buyer USA Japan Bihar Uttar Pradesh Chennai (TN) Bangalore (Karnataka)

HOW VAT OPERATES IN INDIA

VAT is a Multi-point system of taxing the goods. Each & every sale will attract Tax & Tax paid on prior purchases will be fully refunded. Maharashtra Govt. gets Tax on value Added portion, Hence termed as Value Added Tax. VAT = OUTPUT TAX INPUT TAX. OUT PUT TAX is on SALE & INPUT TAX is on Purchases. Seller is suppose to pay VAT to the Authorities. Every seller is required to Raise VAT Invoice (Mandatory)

History of VAT (Global VAT) International VAT

(System of Indirect Taxation) The Value added Tax (VAT) was 1st introduced in France in 1954 It is the result of France and other members of European Economic community for simplification of commodity Taxes At present, more than 130 nations in the world have adopted VAT system for Indirect Taxation Except for America and India, most of the major countries are VAT compliant Including China, Pakistan, Bangladesh, Srilanka etc., All over the world VAT is payable on both Goods & Services. Excise duty, Sales Tax & Service Tax are merged into single VAT (only one tax). But in India all the above Taxes are charged separately having separate Acts All over the world in VAT nations, the seller of goods and service provides charge single VAT to the customers and avail full input tax credit/Setoff credit and differential Tax/VAT to the Govt

Definition of Dealer : Means a person who is engaged in the business of buying and selling goods in the state

Importer Manufacturer Trader, retailer, whole sellers, distributors, Clubs Societies Association of persons Auctioneers Local Authorities

Railways Customs department Port Trusts Central Government Insurance companies Banking and financial Institutions B Municipal Corporation

A is a importer

Importer

VAT + CST will be paid to Maharashtra Government

B is a trader
Seller/Trader

12.50%

Trader C

12.50%

Trader

C will claim full setoff/input tax paid to B D will claim full input Tax credit paid to C and so on

Manufacture

Manufacture

Registration of Dealers
Every person who is engaged in the business of buying and selling the goods in the state of Maharashtra are required to get registered under MVAT Act 2002 Every person who is not suppose to pay tax, only those who are doing regular business business of buying & selling goods.

Turnover limit for Registration

Every dealer whose turnover of all sales or purchases exceeds the prescribed limit are required to obtain registration certificate knows as RC and will be termed as Registered Dealer RD Importer 1. Turnover limit of all sales or purchase exceeds Rs.1,00,000 in any financial year Manufacturer Same as above

Others
1. Turnover limit of all sales or purchase exceeds Rs.5,00,000 in any financial year

Registration formalities
1. Application form 101 2. Copy of partnership deed or memorandum and Articles of Association 3. Proof of Permanent Address 4. Copy of Rent Receipt

5. Antecedents of proprietor/partners/directors
6. Copy of rationing card of proprietor 7. Invoice copies of sales or purchase bills

8. Details of Bank Account

9. Income order if any 10.Two photographs

Voluntary Registration
Dealer who do not fulfill the T/o criteria can apply for voluntary registration without any deposit Whom to approach Maharashtra Vikrikar bhavan, Maigaon, Mumbai 1st floor To Whom : Registration Branch History of VAT

VAT is modern and progressive tax system. Over 130 countries are under VAT regime
India has decided to adopt VAT system from 1st April 2005 All states in India are under VALUE ADDED TAX regime

What types of Businesses are liable to VAT

1. Importers 2. Manufacturers 3. Distributors / Resellers 4. Whole sellers / Traders 5. Retailers

6. Works contractors
7. Lessors Only registered dealers are suppose to collect tax and pay tax. Unregistered dealer are not liable to pay VAT, nor they should/can collect tax VAT is applicable only to those who are doing regular business of buying and selling goods And Achieve the prescribed turnover limits of sales or purchases

Claiming of Credit Notes Refund

What is credit Note? It is an accounting document. It is an intimation to the buyer in respect of credit given to him When credit notes are issued? When goods are rejected (Sales return)

When price difference given to the buyer

How to claim VAT benefit on account of Credit Notes issued?

For goods rejections: Goods must be rejected within six months (beyond six months no benefit)
Price difference: There is no time limit for price difference. Seller can claim at any point with proper proof

Setoff / Input Tax Credit (MVAT ACT 02)

1. Setoff is benefit available to registered dealers only 2. Setoff is refund of VAT paid on Purchases 3. Setoff is granted to avoid double taxation

4. Setoff is granted only on purchases effected from Maharashtra state and MVAT is paid on such purchases
5. Setoff is granted the moment purchases are effected from Maharashtra suppliers 6. No on to one co-relation required with sale 7. Setoff is to be adjusted against VAT & CST liability only. Excess setoff can be carried forward in the subsequent months. 8. No setoff granted on purchases effected from outside Maharashtra purchases (i.e OMS or CST) 9. 100% exporters can apply for cash refund 10. Setoff can be claimed only based purchases Tax invoice. Normal invoice no setoff is granted. 11. Unregistered Dealers cannot claim Setoff

Set off is catagorised as : Set off on

1. Inputs 2. Capital Goods Inputs : All goods on which MVAT is paid on purchases effected from Maharashtra and such purchases are debited to profit and loss Account (they are not treated as Capital assets) 100% setoff is granted provided: 1. If goods sold in Maharashtra state 2. If goods are sold directly from Maharashtra to other state 3. Exports from Maharashtra Eg. If tax paid on purchases (12.50% full setoff available) Scenerio : If goods are 100% stock transferred to depots outside Maharashtra, setoff available will be in excess of 4% i.e. 12.50 4 = 8.50 setoff If goods are sold from Maharashtra and stock transferred then proportionate will be applicable Capital Goods : No retention. Full setoff available

Payment of Taxes (Return)

1. Every dealer who is registered under VAT ACT and Central Sales Tax Act is required to File VAT return and CST return in the prescribed form. VAT returns form 231 & CST form III E

2. Basis of filing Return and payment of Taxes

Monthly return Quarterly return

Half yearly return

Revised return Monthly return : Dealer whose annual Tax liability (MST+CST) has exceeded Rs. 1 Lakh in the previous year. Dealer is required to file monthly return on or before stipulated time (within 21 days from the month end). April 2005 to be filed on or before 21th May 2005. Delay in filing the return would attract interest @ 1.25 p.m.

 Quarterly Return: Dealer whose annual tax liability has exceeded Rs.12,000/- but below Rs.1 Lakh in the previous year is required to file quarterly return. April 05 to June 05 to be filed on or before July 25th. Half yearly return : Dealer whose liability is below Rs, 12,000/- in the previous year is required to file half yearly return. April to Sept 05 to be filed on or before 25th October 05 Revised Return: Any Dealer who has filed original return, through over sight omits any transaction, dealer can file revised return for the respective month. If payment is involved than dealer is required pay interest @ 1.25 p.m. from due date till the date of filing of revised return