UNDERSTANDING MVAT

By CMA DILIP M. BATHIJA

Practising Cost Accountant

Email- dilip_bathija@rediffmail.com

Mb : 8600697765/ 9422478735

HOW & WHEN MVAT STARTED?

The MVAT Act came into effect from 1-4-

2005.

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/- VAT @ 5 % 6.50 Total 136.50 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 136.50 Sales price 170/- VAT @ 5 % 8.50 Total 178.50 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

Registration1. 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 proof

PAN card Photo

Proprietor Yes Yes Yes

Partnership firm

N.A. Yes N.A.

Partners Yes Yes Applicant partner

HUF N.A. Yes N.A.

Karta Yes Yes Yes

Company N.A. Yes N.A.

Directors Yes Not required Reqd., if Pvt. Ltd. Co.

Authorised signatory

Yes Yes Reqd., if Pvt. Ltd. Co.

Registration process

1. Application to be made within 30 days in Form 101.

2. 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 1 - 10 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 - I1.Computerised Desk Audit (CDA) for 2011-12. 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.

Audits1. 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 - I1. 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.

6. Interest @ 1.25% per month for late payment.

7. TDS payment by 21st of next month.

8. TDS certificate to be issued in Form No. 402

9. E TDS return in Form 424 to be filed.

10. Register to be maintain in Form No. 404.

11. Annual TDS return to be filed in Form No 405 within 3 months from the end of year.

TDS under VAT – II12. 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 23rd August, 2014.

2. 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.

Thank You