By G. G. Goyal | Chartered Accountant
C. B. Thakar | Advocate
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Introduction
Amendments are effected in the MVAT Act, 2002 and the MVAT Rules, 2005 as a consequence to budget proposals for the year 2012-13. Though there are a number of amendments, few important amendments, having a wide effect are noted below.
Amendments in MVAT Act, 2002
(a) Levy of purchase tax and consequential changes
Under the MVAT Act, 2002, up till today there was no scheme for levy of purchase tax. However, now the same has been introduced by inserting section 6A, and section 6B in the MVAT Act, 2002. As per section 6A purchase tax is provided on cotton, purchased from unregistered dealer and which is branch-transferred out side the state or used in manufacture of tax-free goods or taxable goods, where such manufactured goods are branch-transferred out side the state. As per section 6B, purchase tax is provided on oil seeds in the same circumstances, as discussed in relation to cotton as above.
The rate of purchase tax will be the same as mentioned in the schedule i.e., as applicable on the sale of above goods from time to time. The purchase tax provision of section 6B has come into effect from 1-5-2012 and the provision of section 6A will come into force as and when a date is notified for the said purpose.
The purchase tax so levied will be eligible for set-off as per the scheme of set-off.
Consequential amendments have also been made in section 3(2), 3(4) and s.s 3(5A) has been newly inserted. This is to provide liability for registration based on purchase turnover, which is liable to purchase tax as per the above sections 6A and 6B.
(b) Late fee for delayed filing of return
S.s (6) has been inserted in section 20 of the MVAT Act, 2002, whereby late fee of Rs.5000 is prescribed in case of delayed filing of return. It may be remembered that at present, there is section 29(8) providing for levy of penalty in case of delayed filing of return. However, in case of Vasu Enterprises (Writ petition No. 1451 of 2011, dated 8-9-2011) Bombay High Court held that penalty u/s.29(8) cannot be levied without hearing opportunity. This would require the Sales Tax Department to issue show-cause notice in each case and to pass a speaking order. It appears that, to avoid above exercise, this concept of late fee has been introduced. The said late fee amount will be required to be paid before the delayed return is uploaded. The provision has not come into effect till today, but will be brought into operation by issue of Notification. The penalty provision of section 29(8) will also become inoperative from such date.
The above provision shows harsh approach of the Department towards dealers. There can be several reasons for delay. Some of them will be beyond the control of the dealer. Under the above circumstances, levying mandatory late fee of Rs.5000 is not justified. Further, a dealer may not be liable to pay tax but will be liable to pay late fee, simply because the return is delayed. The constitutional validity of such levy is also debatable as there cannot be said to be ‘quid pro quo’ for providing such a fees.
(c) Mandatory part payment
As per present appeal provisions, in section 26 of the MVAT Act, 2002, the litigant dealer is entitled to get stay order upon filing appeal. The Appellate Authority has discretionary power to fix suitable amount of part payment as a condition for grant of stay. Now a new proviso has been added in section 26(6). By this proviso, it is provided that if the matter has been adjourned on 3 occasions on the request of the appellant or the appellant has failed to attend on 3 occasions, then the part payment should become 15% of the disputed dues or Rs.15 crore, whichever is less. Thus, the appellant will be required to make good the difference between earlier part payment and amount calculated as above. If such payment is not made, then the stay will come to an end and the disputed demand will be open for recovery. Thus, one more strict provision has been introduced.
The above provision will not apply to appeals under the BST Act, 1959. However, for VAT appeals the dealers will be required to be more attentive. It can also be noted that when the appeal is being adjourned, it should be carefully seen whether the adjournment is on behest of the appellant or on account of the Department. The factual position should get recorded accordingly in proceeding sheet, to avoid unnecessary counting of number of adjournments.
(d) Appeals to High Court
As per section 27, appeals can be filed before the Bombay High Court out of order passed by the MST Tribunal. Now, by insertion of section 26A, it is provided that the Commissioner will have power to notify monetary limit for filing appeals before the Bombay High Court. The provision is similar to such provision under the Income-tax Act. It is clarified that such non-filing of appeals due to monetary limits, will not prejudice subsequent cases. This provision is effective from 1-5-2012.
(e) Penalty for remaining unregistered
Section 29(2A) has been inserted in the MVAT Act, 2002 from 1-5-2012, by which penalty is provided for remaining unregistered dealer. The said penalty can apply for unregistered period after the date of coming into effect of above section i.e., 1-5-2012. The said penalty is 100% of the amount of tax payable during unregistered period. However, it will be discretionary qua levy as well as qua quantum in view of judgment of the Bombay High Court in case of Ankit International (46 VST 1).
(f) Tax collection at source (TCS)
A novel concept of TCS has been introduced in the MVAT Act, 2002 by insertion of section 31A.
TCS has been provided in the following two eventualities:
(i) When right for excavation of sand is auctioned. The notified person, auctioning the right will be liable to collect TCS.
(ii) The other eventuality is that the notified person having temporary possession or control over the goods, will be required to collect TCS.
Though, the provision has come into effect, the actual Notification notifying the persons and rate of TCS has still not been issued, therefore the provision is practically still not effective.
It can be seen that there is no provision for lesser collection or no collection, etc. Therefore, even if the buyer, from whom TCS is to be effected, is not liable to pay tax, still will be required to pay the TCS. Therefore, the provision can be claimed to be unconstitutional.
Certain important changes in MVAT Rules, 2005 Important changes have been effected by Notification dated 1-6-2012.
(a) Returns for unregistered period
As per section 20(1) registered dealers are liable to file returns i.e., returns are required to be filed from effective date of registration. However, now for unregistered period also returns are provided. For this purpose Rule 18(1) has been substituted. As per the said sub-rule, quarterly returns are prescribed for unregistered period and the last return from start of the quarter till date of registration. Thereafter the returns will be as a registered dealer. Of course, the returns for unregistered period can be filed only after getting registration.
The above provision appears to be not in consonance with provisions of section 20(1). However, for the sake of compliance, dealers will be required to file the returns for unregistered period also. It is expected that no late fee will be applicable in such case.
(b) Set-off on natural gas
In Rule 53, sub-rule (1A) has been inserted. By this new sub-rule 3% reduction is provided in respect of calculation of set-off on purchase of natural gas. This reduction will apply in the specified circumstances given in the rule. The language of the rule is not very clear. It appears that except where the natural gas is resold, the reduction will apply.
(c) Reduction in respect of branch transfer [Rule 53(3)]
Vide Notification dated 31-3-2012 the rate of reduction in case of branch transfer [rule 53(3)] has been enhanced from 2% to 4%. This is effective from 1-4-2012.
(d) Due date for submission of audit report in Form 704 (Rule 66)
Rule 66 has been amended so as to provide that audit report (Form 704) shall be submitted within eight months from the end of financial year. Earlier the due date for submission was within 10 months. (Thus the audit report for financial year 2011-12 will be required to be submitted by 30th November 2012.)
(e) Preservation of books of account, registers, etc. (Rule 68)
The books of account and other records, as required to be preserved u/r 68, will have to be preserved now for eight years from the expiry of financial year to which they relate. (Earlier these records were required to be preserved for a period of six years.)
Conclusion
There are many other amendments like changes in rate of tax, rules regarding forms for TCS, etc. However, for sake of brevity all these are not discussed here.
