Indirect Taxes

The date for filling Form 704 is again extended to 27th July, 2007. Consequently the date for filling revised return is again extended to 31st Aug., 2007 vide Circular No. 49 T dt. 30-6-2007.

MRP goods now under VAT

Drugs and medicine enjoyed special treatment under Vat. Earlier the sales tax was payable only by the manufacturer by virtue of series of circulars. By an Ordinance dt. 30th June, 2007 the position is reversed .The drugs and medicines will be taxed like other goods at all stages w.e.f. 1-7-2007. In a note released by the State Government it is stated that the dealers will get setoff @ 3.5% in respect of stock of medicine as on
30-6-2007, The amendments to rule are awaited.

Important Circulars: (Cir. No. 30 T of 2007 dt. 3-4-2007)

Adm. Relief in respect of sale and lease of "Copyright" of "Cinematographic films including video films" under The Bombay Sales Tax Act, 1959 and The Lease Tax Act, 1985. On request of the Cinematograph Exhibitors’ Association of India the State Government had issued two Govt. Resolutions referred at Sr. Nos. 1 and 2, dt. 21-5-2005. It was intended to grant administrative relief for the period from 1-5-2000 to 31-3-2005 in respect of sale under the Bombay Sales Tax Act, 1959 as well as lease under the Lease Tax Act, 1985. However, there was an ambiguity in the words as appearing in the Govt. Resolution mentioned at Sr. No. 1, because of which the administrative relief under Bombay Sales Tax Act, 1959 was not available. Also, it was mandatory under the said Government Resolutions to obtain a registration under the Maharashtra Value Added Tax Act, 2002 before 30th September, 2005 in order to avail of the administrative relief. The said date was extended to 31st October, 2006 by the Govt. Resolution dt. 16-10-2006. The various Cinematographic Associations then represented to the Government: (a) to extend the date of obtaining registration under the Maharashtra Value Added Tax Act, 2002, so that all genuine dealers can take the benefit of the administrative relief. (b) to specifically provide for the administrative relief under the Bombay Sales Tax Act, 1959 till 31-3-2005 on par with the administrative relief under Lease Tax Act, which was unintendedly denied due to lack of clarity in the earlier Govt. Resolution. Considering the above request of the Association, the Government has now, in suppression of the earlier Govt. Resolutions issued on 21st May, 2005, 16th October, 2006 and 20th March, 2007 has issued Govt. Resolution dt. 29th March, 2007.

The salient features of the Govt. Resolution are as follows:–

(a) The tax which would have been levied for the period from 1-5-2000 to
31-3-2005 in respect of sale or lease of copyrights of cinematographic films including video films under the Bombay Sales Tax Act, 1959 or under the Lease Tax Act, 1985 shall not be recovered for the said period, as an administrative relief.

(b) Interest and penalty on the above tax shall also be not recovered and shall be treated as administrative relief for the above period. However, all those cases wherein tax, interest or penalty has already been collected or paid by the dealer entirely or in part, the administrative relief shall be granted only to the extent of the uncollected
or unpaid tax, interest or penalty as the case may be (whichever is less). In any case, the administrative relief shall not be granted in respect of any amount paid prior to the issue of the above Govt. Resolution dt. 29th March, 2007.

(c) In order to be eligible to avail of the benefits of this administrative relief, the dealer must obtain a registration certificate under the Maharashtra Value Added Tax Act, 2002 on or before 30th April, 2007.

The conditions for availing of this administrative relief are as given in the circular. It may be noted that the dealers are liable to pay VAT from 1st April, 2005 onwards under the provisions of the Maharashtra Value Added Tax Act, 2002 and administrative relief does not extend in respect of any period ending on or after 1st April, 2005.

Extension of time limit for assessment under Profession Tax Act and the Motor Spirit Taxation Act.

The Bombay Sales of Motor Spirit Taxation Act, 1958 and the Maharashtra State Tax on Professions, Trade, Callings and Employments Act, 1975 were amended with effect from the 1st July, 2004 with a view to introducing time barring for assessments.  The amendments had provided that under the Motor Spirit Taxation Act where all the statements pertaining to any year ending on or before the 31st March, 2004 are filed before the 30th September, 2004 then, no order of assessment in respect of the said year shall be made on or after the 1st April, 2007.  Section 7 of the Profession Tax Act was also amended at that time wherein it was provided that where all the returns pertaining to any year ending on or before the 31st March, 2004 are filed before the 30th September, 2004, no order of assessment in respect of the said year shall be made on or after the 1st April, 2007.

By the Amendment Act VI/2007, it is now provided that the respective assessments under Profession Tax Act and the Bombay Sales of Motor Spirit Taxation Act in respect of periods ending on or before the 31st March, 2004 may be made on or before the 31st March, 2008.

This is regarding Sale/Lease of ‘Copyright’ of Cinematographic films including video films. The Bombay Sales Tax Act,1959 was amended to provide for the levy of tax @ 4% on the sales of copyrights.  Similarly, the Lease Act was amended to provide for the levy of tax @ 4% on the lease of copyrights.  Now, the State of Maharashtra has shifted to the ‘value added’ taxation system.  With the introduction of the Maharashtra Value Added Tax Act, 2002 w.e.f. 1-4-2005, the erstwhile Bombay Sales Tax Act, 1959 as well as the Lease Act stand repealed. Hence, these transactions would now attract VAT.

Broadly speaking, the film industry is functioning on 4 types of agreements as follows :–

i)  Licence on outright basis

Licence of exhibition granted on outright basis for a specific period authorizes the distributor to release the picture in the contracted territory and retain with himself all the realizations of the film, irrespective of its fate.  The producer is not responsible to give any compensation in case of any  failure of the film or ask for any account or demand any share from the income, if the film succeeds at the box office during the contracted period.

ii) Licence on minimum guarantee basis

In respect of the licence agreement on minimum guarantee basis for a specific period, the distributor is entitled to release and exhibit the film in the contracted territory and in the first instance, recover his investments from the realizations of the film and also recover his settled ratio of commission – generally 20% to 25% – and after these recoupments,  share further realizations in the ratio of 50:50 between the producer and the distributor.  Further in case of licence on minimum guarantee, the rights are given for a period of two to three years and these rights may also be reissued after the initial period of agreement expires.

iii)  Licence on part minimum guarantee and part refundable advance basis

When the licence is granted to the distributor on part minimum guarantee and part refundable advance basis, the producer is liable to refund the refundable advance amount, if within a fixed period, the film does not fetch the total amount of minimum guarantee amount and refundable advance amount.

iv)  Licence on purely refundable advance basis

If the licence is on purely refundable advance basis, the producer is liable to refund the unrecouped refundable advance in the given period as mentioned in the agreement.

A representation was made by The Film & Television Producers Guild of India Ltd. regarding the applicability of VAT on the film and television industry. The clarification is issued in pursuance of the various queries posed by them in this circular. The views may not be acceptable to all they are the views of Commissioner of Sales Tax.  The detail circular may be referred by the concerned persons

The content of this circular are given in the previous ITR.

Corrigendum to the Notification of ‘Motor Spirit’ and ‘Petroleum Products’. The Notification dt. 30th Nov 2006 listed Motor Spirits’ and Other Petroleum Products’, together. In response to the Queries  it was clarified by the Trade Circular No. VAT/Notifications/1006/110/Adm-3, dated 15-3-2007 that the products at Sr. Nos. 1 to 6 in the said Notification are Motor Spirits and the products at Sr. Nos. 7 to 12 are ‘Other Petroleum Products’.  It was also clarified that this clarification will stand till the corrigendum is published.

The State Government has now issued a Corrigendum Notification dated the 15th March, 2007.  This Corrigendum Notification makes it clear that the products at Sr. Nos. 1 to 6 in the notification dated 30th November 2006 are Motor Spirits and the products at Sr. Nos. 7 to 12 are ‘Other Petroleum Products’.

Cir. 38T of 2007 dt. 9-5-2007

Amendments in the Central Sales Tax Act, 1956.                                                      

The Central Sales Tax Act, 1956 has been amended by The Taxation Laws (Amendment) Act, 2007 (Act No. 16 of 2007).  The Amendment Act has come into effect from the 1st April 2007.  A Trade Circular dated the 30th March, 2007 (Trade Circular No. 28T of 2007) has been issued explaining the effect of the amendments.  After the circular was issued, certain queries have been received regarding the scope of the amendments.  The queries are answered in this circular. It is now clarified that if an inter-State sale is made to:–

(a)   a person other than a dealer or

(b)   an unregistered dealer or

(c) a registered dealer who has not issued the declaration in Form ‘C’

then, the applicable rate of CST shall be the VAT rate applicable in the State of the selling dealer.  In other words, if the local rates of tax applicable to any commodity are NIL, 1%, 4% or 12.5% and the commodities are sold inter-State without ‘C’ Form, then the applicable rates of tax under CST will be NIL, 1%, 4% and 12.5% respectively.

The next query is regarding the effect of the amendments on section 8(5) of the CST Act.  It may be noted that section 8(5) will apply only when the purchasing dealer issues a declaration in Form C.  But the rates prescribed by any Notification issued under section 8(5) will not apply if the purchasing dealer has not issued the declaration in Form "C".  This has been the correct position since 2002.  This position remains unchanged.

This is regarding Grant of Registration Certificates.                                                      

The Sales Tax Department had undertaken an exercise of grant of fresh registration certificates as provided under section 17 of the Maharashtra Value Added Tax Act (MVAT Act).  All registered dealers who were holding valid registration certificates as on the 1st December, 2005 were required to obtain in lieu of the existing certificate of registration, a fresh certificate of registration as provided in that section.  The existing certificates of registration were cancelled with effect from the 1st April, 2006 and fresh certificates have since been issued. The registration certificates of those dealers who did not apply for grant of fresh certificate of registration before 31st December, 2005 were cancelled with effect from the 1st January 2006.

A number of dealers had applied for grant of registration certificate under section 16 of the MVAT Act  during the period 1st December, 2005 to 31st March, 2006. At the time of application, these applicants were provided with a Pin Code based registration certificate number which they could use for their transactions of sales. The applicants were also informed the date of effect of registration as fixed in accordance with section 16 of the said Act read with Rule 8 of the Maharashtra Value Added Tax Rules, 2005.  The regular TIN certificates of registration will soon be issued to the applicants who have so applied during the period, the 1st December, 2005 to 31st March, 2006.  The date of effect of registration printed on the certificate will be the same as communicated to the applicants earlier.  However, the old style Pin Code based certificate numbers earlier communicated to the applicants will not be printed on these certificates. Instead, the new TIN will be printed in the place provided on the certificate for the registration certificate number.  The new TIN for these respective dealers can be viewed on the website –  www.vat.maharashtra.gov.in

It is likely that some of such dealers in their transactions with other dealers would have used the old registration certificate numbers communicated to them earlier.  It is now clarified that the use of such old style pin code based number on invoices and other documents would be considered as legitimate and regular in the hands of the seller and the purchaser for all purposes including collection of tax and claim of set-off.  Tax Payers Identification Number (TIN) have come into operation from 1st April, 2006 which were also displayed on web-site from April 2006.  Use of PIN code based MVAT/CST Registration Number in Returns, Tax Invoice and other statutory forms must be discontinued by 31st May, 2007 and if used after the said date, i.e., 31st May, 2007, they will be liable for penalty.  In case any dealer has not received any registration certificate bearing TIN by
31st July, 2007, they should contact respective registering authority or view it on the website.

Circular No. 44T of 2007  dt. 14-6-2007

For submission of soft copy of ‘Statement of Requirement’ for issuance of statutory forms (C/F/H/EI/EII) under the Central Sales Tax Act, 1956. w.e.f. from 16th January, 2006. Under this process central repositories were set up at all locations of the Department  having Registration branch. Accordingly, above referred trade circular No. 4T of 2006 dated 9-1-2006 was issued to explain the procedure for issuance of statutory forms. As a move towards e-governance, the facility of online filing of application for issuance of forms has also been introduced at all locations of Central Repositories of the State vide trade circular No. 17T of 2006
dt. 28-6-2006. This facility helped a lot to dealers as it has simplified the whole process of issuance of statutory forms by making it time efficient, hassle-free and dealer friendly.

To further simplify the manual process of issuance of forms it is decided to request the dealers to submit the ‘Statement of Requirement’ in soft copy in Excel format. Thus, after verifying the details in the soft copy of 'Statement of Requirement’ submitted by the dealer, the concerned Sales Tax Inspector would print the required number and type of statutory forms, sign and hand over the same to the concerned dealer. This would save the time taken by the clerk to fill in the details of ‘Statement of Requirement’ in the requested statutory forms.

The dealer applying manually to get  statutory forms is henceforth required to submit separately a soft copy of ‘Statement of Requirement’ along with hard copy of the application. It may be noted that the dealer has to submit the same hard copy of application as he usually submits to the Central Repository along with the requirements mentioned in the above referred Circular No. 4T of 2006.

This is regarding Revised Return for the year 2005-06 filed after 30-11-2006.  It is now clarified that the revised returns  filed upto 30th June 2007 in the cases where audit report u/s 61 is submitted will be treated as valid returns  and audit report can take into consideration all revised return filed up to the date of audit.  Revised returns filed up to 31st July, 2007  on the basis of Audit report will also be considered valid.

The State Government has issued a notification No. VAT.1505/CR-192/Taxation 1, dated 19th April, 2007, in suppression of the earlier notification No. VAT-1505/CR-192/Taxation-1 dated the 30th December, 2006, and has withdrawn the concession earlier given towards purchases by the to Central and State Government. The concession given by notification No. VAT-1505/C.R.192/Taxation-1, dated 28th July 2006 & Notification No. VAT.1505/CR-192/Taxation 1, dated 30th December 2006 to other purchasing organizations continued.

The condition at serial No. (iii) in the notification dated 19th April, 2007 provided that the purchasing organization referred  to in column (2) of the said notification shall be certified  by Commissioner on application and the said certificate shall be liable for cancellation on breach of any of the conditions.

Some queries were received in view of the said conditions as to whether the purchasing organisation which has already received certificate as per earlier notification will be required to obtain a fresh certificate under the amended notification.

It is now clarified that all purchasing organisations who have obtained certificate as per provision of earlier notification will be required to obtain a fresh certificate under the amended notification. Where an organisation was holding  a certificate under the old notification, the new certificate under the amended notification will be issued with effect from 1st May, 2007.

The effective date for notified Construction Contracts.

Section 42 of the Maharashtra Value Added Tax Act, 2002 was amended with effect from 20-6-2006.  The amendment provided that the composition rate for Construction Contracts will be @ 5%.  The amendment also provided that Construction Contracts will mean such contracts as are notified by the State Government.

The Government Notification listing the Construction Contracts was issued w.e.f. the 30th November, 2006.  Meanwhile, the Maharashtra Value Added Tax rules were amended w.e.f. the 8th September, 2006.  The amendment to the rules provided that where a dealer undertakes Construction Contracts then there will be a reduction in the set off available to the dealer.  The issue now is whether the 5% rate will apply to the Construction Contracts executed between the 20th June, 2006 and 30th November, 2006. 

After taking into consideration the above circumstances the Government have taken a following decision.

"If, in the period starting from 20th June, 2006 to 30th November, 2006 any Works Contract sales have taken place and these contracts are subsequently notified as Construction Contracts w.e.f. 30th November 2006 then in the intervening period from 20th June, 2006 to 30th November, 2006 these sales will be taxed @5%, subject to reduction in set-off as provided in the rules."

If the dealers concerned have acted differently than above they may file revised return for the relevant periods.