829, 8th floor, Vikrikar Bhavan,
Mazgaon, Mumbai .. 400 010.
TRADE CIRCULAR.
To
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No.VAT/ AMD-1008/IB/ADM-06 Mumbai Dt : 15.11.2008.
Sub: Maharashtra Value Added Tax [2nd Amendment] Rules 2008.
Ref: Government Notification No. VAT-1508/C.R.-69/ Taxation-1 dt. 10th November, 2008.
Gentlemen/Sir/Madam,
The Maharashtra Value Added Tax Rules 2005 have been amended by the Maharashtra Value Added Tax (2nd Amendment) Rules 2008. The required Notification has been published in the Gazette dated the 10th November 2008. The salient features of the amendments are briefly explained below:-
Except as otherwise provided, the amendment rules come into effect on the 1st of November 2008.
1. Amendment of Rule 11 :
Rule 11 of the Maharashtra Value Added Tax Rules (Principal Rules) deals with cancellation of the Certificate of Registration. Certain technical amendments have been made to the rule.
2. Amendment of Rule 16 :
Rule 16 deals with the declaration to be made under Section 19. By the present amendment, a new sub-rule, namely sub-Rule (3), has been added to Rule 16. The new sub-rule provides that if a dealer is holding a registration certificate as on the 1st August 2007 and has not furnished his PAN under Income Tax to the Sales Tax Department, he shall furnish it before the 31st January 2009. If the dealer has not obtained PAN so far, he shall obtain PAN and furnish it before the 31st January 2009.
3. Insertion of Rule 17A:
Rule 17 has already been amended to provide for electronic filing of returns. It is desirable to extend the new procedure for applications, declarations, annexures, appeal memoranda, audit reports and other statutory applications etc. Accordingly a new rule namely 17A is introduced. The new rule provides that the Commissioner may notify the classes of dealers, the nature of application and the date on which the electronic filing shall be applicable. It is intended that during the space of next few months the procedure of electronic filing shall be extended to cover the largest possible class of dealers and almost all of the applications etc. required to be made to the Department.
4. Amendment of Rule 19:
Rule 19 provides for an application in Form 211 to obtain permission to submit separate returns in respect of different constituents of business or difference place of business. The provision for filing a separate return is being deleted; hence, this rule has been deleted retrospectively with effect from 14th March 2008.
5. Amendment of Rule 37:
Rule 37 deals with supply of the copy of the order passed in appeal. The amendment provides that the appellate authority shall send one copy of the order to the officer against whose order, the appeal is filed and where the order is passed in Second Appeal, one additional copy shall be sent to the officer whose order forms the subject of the proceedings before the first appellate authority.
6. Amendment of Rule 45:
Rule 45 deals with method of payment. Sub-rule (6) of the rule deals with instalments granted to a dealer. The existing rules provided for monthly instalment for a period not exceeding one year. The expression 'one year' meant a 'financial year'. The sub-rule has now been amended to provide that the instalments shall not cover a period exceeding 12 months.
7. Amendment of Rule 48:
The Rule 48 deals with notices for the purposes of Section 33. An existing mistake in the Rule has been amended. It is now clarified by way of amendment that the notice for the bank attachment shall be in the form 318. If a dealer is proposing to file an appeal, then he may make an application in form 314 as provided in section 33.
8. Amendment of Rule 53:
Several different amendments have been made to Rule 53. This rule deals with reduction in the quantum of set-off.
(a)(i) The first amendment is to sub-rule (2). The reduction in set-off provided under this sub-rule is now directly linked to the prevailing rate of Central Sales Tax under Section 8(1) of the Central Sales Tax Act. In other words, it will not be necessary to amend the rule every time the rate of Central Sales Tax is reduced by the Central Government. The amendment is effective from the 1st April 2007. Similar amendments have been made to sub-rule (3) and the newly introduced sub-rule (7B) and sub-rule (10).
(a)(ii) One more amendment has been made to sub-rule (2). The existing clause (a) of sub-rule (2) provided that if sugar and textiles are exported out of India, then no reduction in set-off under this sub-rule shall be made. It is now provided by way of amendment that if any tax free goods specified in Schedule A [including sugar and tobacco] are exported out of India, then a similar concession shall be granted and no reduction from set-off shall be made.
(b) Sub-rule (4) deals with the set-off available to a Works Contractor. An amendment has been made to make it clear that the claimant dealer mentioned in the sub-rule includes not only the contractor but also a sub-contractor, where the principal contractor has opted for composition of tax.
(c) The existing sub-rule (6) has been substituted. The substituted sub-rule is now in two parts. The first part deals with Hotels and Clubs which are not under composition scheme. The second part deals with those dealers whose business is not a Hotel or a Restaurant. As far as Hotels and Clubs are concerned, if their receipts by way of the sales are less than 50% of the gross receipts then, they will be entitled to claim set-off on the purchases corresponding to food and drinks which are served, supplied, sold or resold. The Hotels and Clubs will also be entitled to claim set-off on the purchases of capital assets and consumables pertaining to kitchen and the sale, service or supplies of food and drinks.
There are dealers other than Hotels and Clubs whose receipts by way of sale are less than 50% of the gross receipts. These dealers will be entitled to claim set-off on those purchases effected in a year where, the corresponding goods are sold or resold or branch transferred within six months of the date of purchase. If a dealer of this type is a manufacturer of goods who is not principally engaged in doing job work or labour work, then he shall be entitled to claim set-off on his purchases of plant and machinery which are treated by him as capital assets, parts, components and accessories of these capital assets and purchases of consumable stores and packing material. The set-off under this sub-rule will be available only in respect of a period of three years starting from the end of the year containing the date of effect of the certificate of registration.
(d)(i) Sub-rule (7) which deals with reduction of set-off in the case of liquor vendors has been amended retrospectively with effect from 1st April 2005 to make it clear that the sub-rule does not apply to Indian Navel Canteen Service and the Canteen Store Department.
(d)(ii) Another amendment has been made to this rule with effect from the 4th July 2008. In Maharashtra, the MRP of liquor used to be exclusive of sales tax. The State Excise rules have been amended with effect from the 4th July 2008 so as to make the MRP of liquor inclusive of sales tax and amendment is accordingly made in this sub-rule to give effect to the changes made in the State Excise rule.
(d)(iii) Sub-rule (7B) has been amended. The existing sub-rule (7B) has been substituted with effect from the 31st October 2007. The existing sub-rule deals with the Electricity Transmission Companies and the Electricity Distribution Companies. Now Electricity Generating Companies have also been added to this sub-rule. It is now provided by way of amendment that the set-off in respect of all purchases used in the generation, transmission or distribution of electricity shall be reduced save as otherwise provided in sub-rule (1), the reduction shall be calculated by applying the prevailing rate of CST under section 8(1) of the CST Act to the purchase price of the goods on which set-off is claimed.
(e)(i) A new sub-rule, namely sub-rule (9) has been added. This rule is in two parts.
Paragraph (a) of sub-rule (9) provides a definition of the expression, "corresponding goods" as the expression occurs in sub-rule (1), Clause (a) of sub-rule (2) and in sub-rule (3). The sub-rule now provides that the expression, "corresponding goods" will not include consumable stores, capital assets, part and accessories of capital assets and goods used as fuel. The expression will include the goods which are resold or branch transferred or are used in relation to the manufacture of goods sold or dispatched and which are contained in the goods so sold or dispatched. The packing material used alongwith the goods will also be covered under the expression, "corresponding goods".
(e)(ii) Clause (b) of the newly inserted sub-rule (9) provides for certain methods of working. It is provided that for the purposes of sub-rule (2) where it is not possible to ascertain the purchase price by reference to the books of accounts, the ratio of the sale price of the taxable goods and tax free goods shall be adopted. If there be no sale price, then the ratio of the value of taxable goods and tax free goods shall be adopted.
It is further provided that for the purposes of sub-rule (3) in respect of branch transferred goods, the value inclusive of any duty of excise shall be adopted.
(f) Another sub-rule, namely, sub-rule (10) has also been added. This sub-rule deals with the dealers who are engaged in the processing of textiles. The new sub-rules provides that on purchases of capital assets of dealers, engaged in the processing of textiles, normal set-off would be available as per the rules. However, as regards the purchases in respect of which property is transferred during processing and the packing material used for packing of the textiles, the set off will be reduced. The reduction will be calculated by applying the prevailing rate of CST under section 8(1) of the CST Act, to the purchase price of the goods in respect of which set-off is claimed.
9. Amendment of Rule 61:
Rule 61 deals with Bank Guarantees. The rule is amended by adding a proviso. It is provided that a non-resident dealer may furnish a guarantee from any branch of a Bank considered as Government Treasury even if the branch is situated outside the State of Maharashtra.
10. Amendment of Rule 65:
Rule 65 deals with the report of audit under Section 61. The rule is now amended so as to delete the reference to filing the copy of the audit report in an electronically readable CD ROM.
11. Amendment of Rule 68:
Rule 68 deals with preservation of books of accounts. Two amendments have been made to this rule.
By the first amendment, the period for preservation of books of accounts has been increased from five years to six years. By the second amendment, it is provided that where any proceedings have been initiated in respect of any registered dealer within the period of six years, then the dealer shall preserve the books of accounts beyond the said period of six years till the final order is passed in respect of the said proceedings.
12. Amendment of Rule 78:
Rule 78, which deals with calculation of cumulative quantum of benefits has been amended by adding a new clause (c) to sub-rule (2). It is now provided that any refund granted to the Exemption unit under the PSI scheme under sub-rule (2) of rule 79, shall also be counted for calculating the cumulative quantum of benefits. The amendment is retrospective with effect from 1st April 2005.
13. Amendment of Rule 79:
Two amendments have been made to rule 79 which deals with refund of tax to eligible units under the Package Scheme.
By the first amendment, the reduction in refund provided under sub-rule (2) is now directly linked to the prevailing rate of CST under section 8(1) of the CST Act, 1956. This amendment is retrospective and takes effect from the 1st April 2007.
By another amendment to this rule, the existing sub-rule (3) has been retrospectively substituted with effect from the 8th September 2006. The amendment provides that a unit under exemption or, as the case may be, deferral, which has claimed refund under sub-rule (2) shall reduce, in each return period, an amount equal to the refund under sub-rule (2), from the balance monetary ceiling available to it at the beginning of the return period and shall file returns or, as the case may be, revised return indicating such reduction. This provision comes into effect from the 1st April 2005.
14. Amendment of Rule 87:
Rule 87 deals with service of notices and orders. The rule had already been amended to provide for service by a courier agency. One or two consequential amendments are now made.
15. Deletion of Form 211:
Form 211 appended to the rules provided for an application for filing separate returns. As the provision for a separate return is being deleted, the Form 211 is also being deleted.
16. Substitution of Form 315:
Form 315 appended to the rules contains the notice for assessment under section 23(6) of the Act. The Form is now substituted to align it with the contents of the section.
17. Amendment of Form 406 and Form 407:
The Certificates to be given by the principal and the agent to each other are in Form 406 and 407. The Forms of these certificates are amended. In case of a works contract, the certificates will have to specify the particulars of the work contract and the fact whether the principal/agent has opted for composition of tax under section 42(3).
18. Substitution of Form 704:
Form 704 which is the Form for report of audit under section 61, is now substituted. The new Form shall be applicable in respect of the year 2007-2008. A notification will shortly be issued under the newly inserted rule 17A, requiring electronic filing of the Form 704. Till that time, the new Form 704 may be filed as a hard copy. As in many instances the reports of the audit have already been filed these reports will be accepted. However, all audit reports to be filed after 14th November 2008 should be in the new Form 704.
19. This circular cannot be made use of for legal interpretation of provisions of law, as it is clarificatory in nature. If any member of the trade has any doubt, he may refer the matter to this office for further clarification.
20. You are requested to bring the contents of this circular to the notice of all the members of your association.
Yours faithfully,
(Sanjay Bhatia)
Commissioner of Sales Tax
Maharashtra State, Mumbai