UNDERSTANDING MVAT By CMA DILIP M. BATHIJA Practising Cost Accountant - Mb : /

HOW & WHEN MVAT STARTED?  The MVAT Act came into effect from  The BST Act, Works contract Act, Lease Act, & Bombay motor sprit taxation Act merged into MVAT Act.

BASIC OBJECTIVES OF VAT  Uniformity in rates of Taxation.  No declaration Forms.  Full setoff.  Larger tax base.  Self Policing.

How system of Taxation works under MVAT Act  A sells Goods to B  Basic price 100/-  5 % VAT 5/-  Total 105/-  B Sells Goods to C  B’s Purchase price 105/-  Sales price 130/-  5 % 6.50  Total  VAT on sales 6.50  Input credit 5/-  Balance VAT payable 1.50  Value Addition 30/-  5 % on Value addition 1.50   C sells Goods to D  C’s Purchase price  Sales price 170/-  5 % 8.50  Total  VAT on sales 8.50  Input credit 6.50  Balance VAT payable 2  Value Addition 40/-  5 % on Value addition 2/-

BASIC CONCEPTS  Importer  Set-off  GTO  URD  Composition schemes

Registration 1. Normal Registration based on Turnover.  Importer- Total T.O. to exceed Rs.1,00,000/-  Taxable goods Rs.10,000/-.  Others-Total T.O. to exceed Rs.10,00,000/-  Taxable goods Rs.10,000/-.  Registration Fees Rs.500/- 2. Voluntary Registration.  No condition of Turnover  Registration fees Rs.5000/-  Deposit Rs.25000/-

Registration process Documents required for Registration. 1. Proof of constitution of Business. 2. Proof of place of Business. 3. Copy of PAN Card. 4. Proof of Residential Address. Passport, Driving licenses, Election card, Property card, Electricity bill, (any two). 5. Two Photos. 6. One cancelled cheque. 7. Letter of Authority.

Category of Person Residential proofPAN cardPhoto ProprietorYes Partnership firmN.A.YesN.A. PartnersYes Applicant partner HUFN.A.YesN.A. KartaYes CompanyN.A.YesN.A. DirectorsYesNot requiredReqd., if Pvt. Ltd. Co. Authorised signatory Yes Reqd., if Pvt. Ltd. Co.

Registration process 1. Application to be made within 30 days in Form Documents verification on the Called day. 3. Allotment of TIN number. 4. Dealer’s enrolment after registration. 5. Advisory Visit.

Knowing Rate of Tax  Schedule A- Tax free goods  Schedule B- Silver, Gold, Precious metals etc. Tax rate 1 %.  Schedule C- Industrial materials etc. Tax rate 5%.  Schedule D-Liquor, Motor spirits etc. Tax rate 20% or above.  Schedule E- Residuary schedule Tax rate 12.5 %

Amendment in R.C. required 1. Change in the Name of business. 2. Change in constitution of Firm without dissolution. 3. Change in trustee of any trust. 4. Change in Karta of HUF. 5. Conversion of Pvt Ltd. company to Public Ltd. company. 6. New products to be purchased from outside state. 7. Opening or closing of any place of additional Business, or shifting of place of business. Intimation to be given within 60 days.

Preparation for filing returns  Sale summary to be prepared as follows: Net sale VAT Net sale VAT OMS CST Total 12.5% 12.5 % 5 % 5 % sale basic 2 %  Purchase summary to be prepared as follows: Net amt. VAT Net amt. VAT OMS CST Total 12.5% 12.5 % 5 % 5 % basic 2 %  Set-off calculation Total tax on purchase Less: tax on negative list as per rule 54. Less: Reduction under rule 53 Available set-off Tax payable on sales Less: Available set-off Balance tax payable

Filing of Returns 1. Type of Forms  Form 231- All VAT dealers other than specified below.  Form 232- Composition dealers.  Form 233- Those in the Business of Works contract, Leasing & Partly composition dealers.  Form 234- PSI dealers.  Form 235- Notified Oil Companies.  Form III E- CST Return.

2. Periodicity of filing of Returns. 1. First year - Quarterly returns. 2. Subsequent year – Depending on previous year’s tax liability as given below:  Tax liability > 10 lakhs or Monthly Refund > 1 Cr.  Tax liability upto 1Lakh or Half yearly Refund upto 10 Lakhs  Tax liability between Lakhs or Quarterly Refund Between 10 Lakhs - 1 Cr.

Due dates for payment of Tax  Monthly 21 days from the end of Month.  Quarterly 21 days from the end of Quarter.  Half yearly 30 days from the end of half year.  Return to be uploaded within 10 days from the end of due date.

Return filing – other important points 1. No CST return to be filed, if there is no OMS sale. 2. All tax payments to be made by E- payment, in MTR-6 challan. 3. All returns to be E-filed. 4. Annexures J-1 & J-2 to be filed with regular returns. 5. Revised return can be filed within prescribed time.

Recent developments in VAT - I 1.Computerised Desk Audit (CDA) for i. Audit parameters Set off from non genuine suppliers Set off from TINS not in department’s data base Set off from registration cancelled suppliers Set off from suppliers who are non return filers for the complete year. set off from suppliers who are composition dealers Set off from suppliers not showing taxable sales in returns Excess set off due to mismatch of J2 of buyer with J1 of supplier Amt. payable as per VAT audit report. ii. CDA compliance system available on the website, communication to the dealer in Form 604 A. iii. Payment of due tax & interest, and filing of revised annual return. iv. Compliance to the CDA to be filed on the website before 3rd sept.2014 v. Communication of case closer in Form 605.

Recent developments in VAT - II 2. Concession in late fees due to delay in filing of Returns. i. If return is filed within 30 days from the expiry of due date, late fees Rs.2000/- only ii. If delay is beyond 30 days late fees payable Rs.5000/- iii. For defaults relating to returns of old periods upto February 2014 returns can be filed by paying late fee of Rs.1000/- per return scheme available upto 30th sept, 2014.

Audits 1. Business Audit This Audit is done by the dept. 2. Audit U/s 61 by CA/CMA i. If turnover of Sales plus OMS branch transfers, or if turnover of Purchases exceeds Rs. 1 Cr. Audit applicable ii. Last date for Audit report filing 15 January of next year. iii. Penalty for non filing of Audit report, 0.1 % of total sales. iv. Audit report to be filed in Form no. 704

Preparing VAT Audit programme Factors to be considered: 1. Turnover of client. 2. Number of Business locations. 3. Number of sales & Purchase transactions. 4. Composition of Sales. 5. Periodicity of filing returns.

Areas to be covered in VAT Audit 1. Sales. 2. Purchases. 3. Set-off availed. 4. Tax Payments & Interest for delay, if any. 5. Deductions claimed. 6. Declarations received. 7. TDS Compliances. 8. Reconciliation of turnover of sales & purchase as per returns with Trading, P & L Account. 9. Asset purchases and Sales.

TDS under VAT - I 1. Applicable to payments made for Works contracts. 2. Rate of TDS: 2 % if contractor is RD, 5 % if URD. 3. No deduction if aggregate amt in a year is less than Rs. 5 lakhs, in case of Co-op Hsg. Soc.,this limit is Rs.10 lakhs. 4. Deduction on the date of payment or credit whichever is earlier. 5. No need to obtain tax deduction Account number % per month for late payment. 7. TDS payment by 21 st of next month. 8. TDS certificate to be issued in Form No E TDS return in Form 424 to be filed. 10. Register to be maintain in Form No Annual TDS return to be filed in Form No 405 within 3 months from the end of year.

TDS under VAT – II 12. Who has to deduct TDS: i. Company registered under the Companies Act. ii. A registered dealer under MVAT Act. iii. Trusts iv. Co-op. Housing Society registered under MCS Act. V. Societies registered under Societies Act. vi. Insurance or Finance corporation or Company & Bank included in the second schedule to the RBI Act & any scheduled Bank. Vii. A Local authority. viii. All industrial, Commercial or Trading undertakings, Company or corporations of Central/State govt. & Port trust. ix. Central or State Government.

Basic conditions for availing Set-off 1. Purchase invoice must be in the form of Tax Invoice. 2. Tax charged separately. 3. Record of Purchases to be maintained. 4. Tax must have been paid into the Govt. treasury by supplier of goods.

1.This presentation is prepared for CEP organised by WIRC- ICAI on 23 rd August, It is prepared on the basis of laws prevalent at the time of making presentation. 3.Given the constraints of space & time, it explains in a summarised manner the important points relating to matters covered in the presentation. 4.One should refer the provisions of relevant laws for proper interpretation and understanding.

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