Sales Tax Update
 

SYNOPSIS OF AMENDED RULES

The Government of Maharashtra has issued Notification dt. 8-9-2006 and amended the MVAT Rules 2005. The Commissioner of Sales Tax has issued Trade Circular No. 30 T, dated 10-10-2006 explaining the amendments made to the MVAT Rules. The gist of changes is as under:

1. It is provided that successor of business, due to death of Registered dealer (RD), will have apply for registration under the MVAT Act, within 60 days from the date of death of the registered Dealer. In other cases, the time limit of 30 days is applicable.
    

2. The Commissioner will issue the Hologram to each RD for his each place of business. The dealers are required to display the same at his each place of business.
    

3. Form No. 211 is now prescribed for obtaining the permission for filing separate returns for different places of business or different constituents.
    

4. It is also provided that in case of revised or fresh return, the dealer shall first make payment due as per such return, in bank and attach self attested copy of such challan with return and then file such return with the prescribed authority.
    

5. Rule 17 is amended from 8-9-2006 to changed the periodicity of filing of returns and due date thereof. The periodicity of filing of returns is provided in ANNEXURE 1.
    

6. Rule 20 is amended and now it is clarified that the return would be deemed to be complete and self-consistent only if all items in the return pertaining to gross receipt, turnover of sales/purchases, claim of set-off etc. are filled properly.
    

7. Form No. 316 has been provided as application for cancellation of ex parte assessment order.
    

8. TDS PROVISIONS

1. The time limit for payment of TDS amount is extended and now it is 21 days from end of the month in which tax is deducted or is deductible.
    

2. TDS amount is to be paid in new return cum challan; i.e., Form No. 405 instead of challan No. 210.
    

3. The requirement of filing of monthly statement in Form No. 403 with assessing authority is done away.

9. SET OFF RULES

1. Rule 51: Set off on opening stock

1. It is provided from 1-4-2005 that set-off under this Rule on opening stock is available without any regard to the provisions of retention or negative list mentioned in Rule 53 and Rule 54.
    

2. In relation to opening stock it is also provided that in case of processed goods, the set-off will not be disallowed if such process was not amounting to manufacture as per Rule 3 of the BST Act.
    

3. It is also provided from 1-4-2005 that set-off is also available in respect of opening stock of goods sent to branches etc. outside the State otherwise by way of sales.

2. Set off on current purchases

1. The amendment is made in rule 52 (1) (a), from 1-4-2005, to clarify that set off will be available in respect of Composition amount paid to the Works Contractor.
    

2. Explanation is added to rule 53(2)(a), from 1-4-2005, to clarify that the reduction of 4% is not applicable in case of manufacture of fabrics and sugar which is sold in the course of export u/s 5 of The Central Sales Tax Act, 1956.
    

3. Amendment to Rule 53(3)

1. It is clarified that in case of branch transfer of Schedule ‘B’ goods; i.e., bullion etc., the reduction should be made @ 1% of purchase price only.
    

2. It is also clarified that in case of branch transfer of medicines covered by Schedule Entry ‘C- 29’, the purchase price for reduction should be the actual purchase price and not the MRP.
    

3. It is also provided that there is no need to reduce the set off, if the goods dispatched to branches etc. are brought back to the State within 6 months from the date of dispatch, whether after processing or otherwise.

4. Amendment to Rule 53(4)

1. It is now provided that reduction of set-off in the hands of Works Contractor, who has opted for Composition, is applicable in relation to purchases of only those goods in which the property passes. In other words set off will not be reduced in respect of purchases of Capital goods and other purchases which are debited to profit and loss account. This amendment is effective from 8-9-2006.
    

2. It is further provided that in case of Construction Contract, where composition is payable @ 5%, the set off will be reduced by 4% of corresponding purchase price. This amendment is effective from 21-6-2006.

5. Amendment to Rule 53(6)

1. It is now provided under this Rule that if the receipt from sale of goods is less than 50% of gross receipts then set-off will be available only on goods, which are sold within 6 months from the date of purchase or branch transferred within 6 months. However in case of hotels and clubs, in addition to set off on goods sold as above, set off will be available on capital assets and consumables pertaining to kitchen and service of foods and drinks.
    

2. Under Explanation to rule 53(6), it is provided that gross receipts will include receipts pertaining to all activities carried out in Maharashtra, except branch transfer.
   
   These amendments are effective from 8-9-2006.

6. Amendment to Rule 53(7)
   
   It is explained that the actual sale price will not include tax collected separately and if tax is not collected separately then the price arrived at after taking reduction for tax element as per Rule 57 (1). This amendment is effective from 8-9-2006.

7. Insertion of Rule 53(7A)

Sub-rule (7A) is inserted in rule 53 from 8-9-2006. It is now provided that setoff on purchase of office equipments and furniture and fixture and treated as capital assets will be allowed after reducing 4% of purchase price. But if goods are given on lease then no reduction should be made. In other words set off in excess of 4% will be available on purchase of office equipment and furniture and fixture.

8. Rule 54 – Negative List
   
   Rule 54(a) is amended from 8-9-2006 to clarify that set off on purchase of motor vehicles being passenger vehicles and treated as capital assess will be disallowed and it will be allowed on purchase of goods vehicles as well as machineries mounted on chassis treated as capital assets. Prior to the amendment, the set-off on purchase of earth moving machineries being motor vehicles and treated as capital assets was denied, by using the term “not being goods vehicles” which was not intended. But now it is changed to “being passenger vehicles”, which makes it clear that set off will be disallowed only on purchase of passenger vehicles and will be allowed on purchase of other motor vehicles including goods as well as earth moving machineries like crane, excavators etc. mounted on chassis and defined as motor vehicles under The Motor Vehicles Act, 1988.

9. Rule 54(f) – Set off on intangible goods
   
   Rule 54 (f) is substituted from 8-9-2006 to allow set off is on purchases of SIM cards, Software in the hands of a dealer who is trading in it and Copyright only when it is resold within 12 months from the date of purchase.

10. Rule 54(g) – Set off on purchase of plant and machinery
    
    Rule 54(g) is substituted from 8-9-2006 to allow set off on purchase of plant and machinery by way of works contract resulting in immovable property.

11. Rule 54(h) – Set off on Purchase of building material
    
    Under rule 54(h) the set off on purchase of building material which are not sold and used in construction of immovable property is not allowed. This sub rule (h) is substituted from
    8-9-2006 to allow set off to the works contractor who are selling the goods. But set off will be disallowed in the hands of the dealer on purchase of goods used in erection of any immovable property other than plant and machinery.

12. Rule 54(i) – Set-off on purchase of liquor
    
    Rule 54 (i) is substituted from 8-9-2006 to disallow set off on purchase of liquor to the dealer who has opted for composition scheme as per section 42(2), which is to be notified.

13. Rule 54(j)
    
    Rule 54 (j) is added from 8-9-2006 to disallow set off on purchase of tarpaulin and mandap items to the dealer who has opted for composition under section 42(4).

14. Rule 54(k)
    
    Rule 54(k) is added from 8-9-2006 to disallow set off on purchase of capital assets on or after 1-4-2005 by a hotelier not pertaining to sale or service of food/drinks.

15. Rule 55 – Conditions for granting set off

1. Rule 55 (1) (a) is amended from 8-9-2006 to provide set off on purchase of goods during unregistered period when purchased on or after 1st April of relevant year in which registration is obtained but before the date of registration and such goods are sold/consumed after the date of registration.
    

2. By inserting Rule 55(7) from 1-4-2005, it is provided that in case of transfer of business, due to death or due to any other reasons, the transferee will be entitled to take credit of carried forward of excess set off of the transferor.

16. Rule 60 is substituted from 8-9-2006 relating to grant of refund providing new forms for application in 501, passing of order in Form 502 and refund order in 503 or 504 etc. Rule 61 relating to furnishing of bank guarantee is substituted from 8-9-2006 to:

1. specify the notified bank from which it is to be obtained,
    

2. reduce the period of bank guarantee from 37 to 36 months and
    

3. empower the Commissioner to fix the amount and period of it by issue of public notice.

10. REDUCTION OF SALE PRICE

Rule 57(2) provides for deduction of purchase price etc. when goods sold are purchased from exempted unit situated in backward area. Now onwards this deduction is available if the purchase invoice contains the specified declaration prescribed in rule 77(2A).

11. WORKS CONTRACT – TAXABLE QUANTUM

1. Rule 58 (1) is amended from 8-9-2006 to clarify that deduction from total contract value will be available for amount paid for labour and the words "where the labour and services done in relation to the goods is subsequent to the said transfer of property" are deleted.
    

2. In Rule 58 TABLE is amended from 1-4-2006 for allowing deduction from total contract value for determining sale price liable for sales tax as under:-

   i)	Annual maintenance contract:	40%
   ii)	For residuary contracts: (increased from 20%)	25%

3. In Rule 58 Note below the TABLE is substituted from 1-4-2005 to provide that the percentage given in the TABLE 58 should be applied on total contract value after deducting the quantum of the price on which sub-contractor has paid tax and the amount of any tax which is charged separately as per the terms of the contract

12. PAYMENT OF FEES

Rule 73 is amended from 8-9-2006 and fees for new registration application is increased from Rs. 100 to Rs. 500 and the application for permission to furnish separate returns (Form 211) will not attract any fees.

13. BACKWARD AREA UNITS

The following changes are made in respect of backward area’s unit:–

1. In Rule 78, clause (b) is substituted from 1-4-2005 and it is provided that the CQB in relation to inter-State sales shall be calculated as per rates that would have been payable as if the dealer was not holding the Certificate of Entitlement. Thus, the CQB calculation will have to be made as per rate of CST applicable subject to production of Form C/D etc.
    

2. In Rule 78 Explanation-V is added from 1-4-2005 and it is provided that backward area’s units enjoying Sales Tax Exemption benefit under the 1988 and 1993 Schemes can also enjoy the sales tax exemption benefit in respect of sales of DEPB, which are earned by exporting the goods manufactured in the said backward unit.
    

3. Rules 79(1) and (4) are amended from 1-4-2005 to exclude the dealers holding entitlement certificate under the Package Scheme of Incentives for Tourism Projects – 1999 from benefit of refund available to other units.
    

4. Sub-rule (2) of rule 79 is substituted from 1-4-2005 to grant refund to the extent of retention of 4% of set-off in case of purchase of fuel, sale of tax free goods and stock transfer. After this amendment the eligible units situated in backward area is entitled to additional refund @ 4% of purchase price of taxable goods;–

– used as fuel,
– used in the manufacture of tax free goods,
– used in manufacture of taxable goods which are transferred to branch or place of agent situated outside the State.

It is further provided that in case of purchase of goods covered by Schedule B attracting rate of tax 1% refund of tax shall be granted @ 1% only.

5. Clause (a) in Rule 80 is amended from 1-4-2005 the definition of raw material eligible for refund is widened to include material required for manufacture of newspaper and packing material used for sale of such news paper.
    

6. Clause (b) is added in Rule 80, in relation to backward area units enjoying sale tax benefits, to define the expression manufacture to include following processes as manufacturing process:

1. Ginning of seed cotton in order to separate seed and cotton lint;

2. Conversion of ginned cotton to baled cotton;

3. Preparing butter from cream;

4. Preparing ghee from butter.

7. Clauses (f ) and (g) are added to Rule 81 from 8-9-2006 to provide for filing of returns with concerned registering authorities having jurisdiction over the place of business of the dealer situated in backward area. Such dealers other than dealers holding Certificate of Entitlement under Power Generation Promotion Policy, 1998, will have to file return covering the sales and purchases pertaining to deferment of tax or exemption, as the case may be and separate return for transactions not eligible for deferment or the exemption.
    

8. Rule 84 for calculating the NPV has been replaced from 1-4-2005.

14. NEW MODE OF SERVICE OF ORDERS ETC.

Rule is amended from 8-9-2006 and it provided that in addition to the existing mode of service of orders etc. it can be made by following modes:

1. By sending a scanned copy of the order or notice by e-mail,
    

2. By sending a copy of the order or notice by a courier agency appointed by the Commissioner for this purpose.

15. RATE OF INTEREST

Rule 88 is amended from 8-9-2006 to provide, for the purposes of clause (b) of sub-section (6) of section 51 of MVAT Act, rate of interest of one and quarter per cent for each month or part thereof on recovery of excess grant of refund.

16. MODIFICATION/SUBSTITUTIONS/ADDITIONS OF VARIOUS FORMS

Following changes are made to various forms:-

Form No.	Pertains to	Changes
101	Application for registration	Substituted
103	Application for cancellation	Amended
105	Declaration of manager	Amended
210	Challan	Amended
211	Application for separate return	Added
212	Defect memo	Amended
316	Application for cancellation of ex parte assessment order	Added
317	Order – For cancellation of ex parte order	Added
318	Notice for payment of tax etc.	Added
401 & 403	Application for TAN & Yearly TDS Return	Deleted
402	TDS Certificate	Amended
405	Return cum challan for TDS Payment	Substituted
410	Application for issue of no deduction of TDS	Substituted
411	Order for non deduction of TDS	Substituted
412	Notice for forfeiture	Amended
413	Application for Refund	Amended
417	Order sanctioning instalments	Added
418	Intimation u/s 32(6)	Added
419	Refund order for forfeiture	Added
420	Form of intimation u/s 29(10)	Added
501	Application for refund sec. 51	Substituted
502	Order sanctioning refund	Substituted
505	Interest payment order u/s 53	Substituted
506	Refund adjustment order	Added
602	Notice u/s 63	Substituted

ANNEXURE-I

CHART FOR FILING OF RETURNS

Note :

1. Tax liability means total of sales tax payable under the MVAT Act and Central Sales Tax Act after deducting set-off.
    

2. Entitlement to refund means net refund payable to registered dealer after adjusting amount of set-off against tax payable under the MVAT Act and Central Sales Tax Act
    

3. The amended provisions for filing of returns will apply from the period of return starting from 1-10-2006. Refer Trade Circular No. 31 T, dated 16-10-2006.