While presenting the Budget for 2011-12 the Finance Minister of Maharashtra proposed certain amendments in the MVAT Act, 2002. Accordingly, L. A. Bill No. XVII of 2011, dated 8-4-2011 was introduced in the Assembly. The said Bill has become law namely, Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2011 (Mah. Act. No. XV of 2011) dated 21-4-2011. The amendments have come into operation from 1-5-2011 as Notification to that effect is issued bearing no. VAT.1511/CR-63/ Taxation 1 dated 28-4-2011. The important changes brought in by the above Amendment Act can be briefly noted as under:
1. Amendments in respect of Voluntary Registration:
As on today, the Registration under Voluntary Registration Scheme (VRS) is granted on the basis of advance payment of Rs.25,000. The said amount is adjustable against the liability which may be payable in the returns to be filed after registration.
However, now as per amendment in section 16(2) of the MVAT Act, 2002, the advance payment of Rs.25,000 will be treated as Security Deposit with the Government. It will not be allowed to be adjusted against liability. It will be refunded back after certain period, if there is no breach of any of the conditions which are laid down in this regard. As per newly inserted section 16(2A) of the MVAT Act, 2002, the Government can prescribe conditions for refund of deposit. The said conditions are prescribed by way of Rule 60A.
As per Rule 60A, it is the dealer who has to apply for refund of deposit. The application of refund can be made after 36 months from the end of month in which registration is granted but before 48 months from the said month. In case of cancellation of Registration Certificate (RC) before above period of 36 months, the application is to be made within six months from such date of cancellation. The application is to be made to registration authority and such authority should grant the refund within 90 days from receipt of application, subject to the dealer filing all returns as well as paying taxes as per the said returns.
2. Revised returns:
It is obligatory upon the dealers to file correct and complete returns by prescribed time. There are a number of events which may require correction in the original return or earlier revised returns. Therefore, the law permits dealers to file revised returns. This gives him opportunity of clearing himself of any charge of concealment or to prefer an additional claim, if any.
Up till now, there were no restrictions on the number of revised returns which can be filed by the dealers. In other words, a dealer could file more than one revised returns to correct the mistakes committed in the original returns or earlier revised returns.
However, now by the amendment a tab is put on the number of revised returns which can be filed by a dealer. As per section 20(4)(a), (b) and (c), there are three kinds of revised returns. A revised return can be filed suo motu or it can be to give the effect to VAT audit findings or it can be to give effect to findings of the business audit. The amendment seeks to allow only one revised return in each of the above categories. Though the amendment provides as above, a view can be taken that the dealer can file more than one revised returns to put up his position and in course of assessment such returns are also expected to be considered.
A dealer will now have to be very careful about filing revised return. He has to be certain that all the corrections are included in the particular one revised return. Allowing more than one revised return could not have caused any difficulty to the Department, but the curtailment will certainly cause great difficulty to the trading community.
It may be mentioned that in the category of suo motu revised return, the time limit was nine months from the end of concerned period/year. It is now enhanced to ten months.
This is an amendment about procedural law and the Department will take a view that the restriction operates from 1-5-2011. Therefore even for the returns for period prior to the above effective date, the restriction will be applied and accordingly after the above effective date the dealer may be permitted to file only one revised return relating to the said prior period.
3. No appeal against order levying interest:
The trend of amendments appears to be against the dealer community. The Government has debarred dealers from getting justice in case of levy of interest. The appeals against interest leviable u/s.30(2) and 30(4) are already prohibited by an amendment in 2010. However, appeals against interest u/s.30(1) (interest on URD) and 30(3) (differential dues) were allowed. Now section 26(5) is amended, whereby clause (c), which gave power to the Appellate Authority to deal with interest orders is deleted. Indirectly, the appeals will not be maintainable against the above interest u/s.30(1) and 30(3). Thus, one more beneficial provision is being done away with to the detriment of the dealer community. There will not be an opportunity to get justice in case of wrong levy.
It may be noted that appeals against orders levying interest u/s.30(1) and 30(3) themselves are not debarred. Therefore, it is possible to argue that the said appeals can be filed and the Appellate Authority can decide the matter under clause (d) of section 26(5) which covers appeal against any other order. Therefore, it appears that the dealers can still take an opportunity u/s.26(5)(d).
4. New taxation scheme for liquors:
Uptill now the liquors were taxed as per normal VAT chain. Every dealer was getting set-off and was liable to tax on sales.
Now from 1-5-2011 the system is changed. Wine is continued to be taxed as per the old system. Change is brought in taxation of IMFL, foreign liquors and country liquors by issue of Notification dated 30-4-2011 as per newly inserted section 41(5). The brief features of the new system can be noted as under:
(a) Manufacturer of liquors holding licence in PLL, BR-L and CL-I will be liable to tax @ 50% of sale price subject to limit of tax amount calculated as per Formula MRP x 25/125. They will be required to mention MRP on sale bills.
(b) Wholesalers holding licence in FL I, CL II will be exempt from tax if liquor is purchased from registered dealer in Maharashtra. No set-off is available to a wholesaler. If wholesaler has imported liquor from other State/country he will be required to discharge tax liability like a manufacture i.e., 50% of sale prices subject to limit of tax calculated as per formula MRP x 25/125.
(c) Retailer holding licence in FL IT, FL-BR-H, CL/ FL/TOD-III and CL-III will also be exempt from tax if liquor is purchased from registered dealers in Maharashtra. No set-off to them.
(d) Hotel, bars, restaurants and clubs (3-star and below):
Bars, restaurants and clubs holding licence in FL-III or FL-IV or E with grading of 3-star and below will be required to pay tax at 5% on the actual sale price of liquor which is purchased from registered dealers within the State and on which tax is paid or has become payable at earlier stage.
They can collect tax separately. No set-off is available on purchases.
(e) Hotels, bars, restaurants and clubs (4-star and above):
Hotels, bars and restaurants with grading of 4-star and above will be required to pay tax at 20% of their actual sale price, if the liquor is purchased from registered dealers within the State and on which tax is paid or has become payable at earlier stage.
If liquor is imported from other States or from outside the country, then in addition to 20% as above, they will be required to pay tax at Schedule rate subject to the limit of MRP x 25/125 of such liquor sold.
They can collect tax in the sale bills. No set-off is available on purchases of liquor.
(f) Taxation of stock as on 30-4-2011:
The tax on sale of liquors in stock as on 30-4-2011 will be as per the new system, discussed above i.e., at 50% of sale price limited to calculation made as per formula of MRP x 25/125. Hotels/ bars, in addition to the above, will be required to pay 5% or 20% as the case may be. In this case set-off will remain available on stock subject to submission of stock statement.
All the dealers, except manufacturers, shall furnish a statement of closing stock of goods mentioned in Entry 1, 2 and 3 of Schedule D to the MVAT Act, 2002 as on 30th April, 2011, in the Proforma appended to the Notification by 31st May, 2011.
5. Refunds — Unwarranted and unreasonable curtailment:
Section 51 of the MVAT Act deals with refunds as per returns. Few important changes can be noted as under:
(a) At present there is time limit on the Department to call for additional information. That could be called within one month of filing of the application.
However the time limit of one month is deleted by present amendment to section 51(2)(a). The result is that the Department will have open ground to call for additional information at any time.
(b) Refund to newly registered dealer:
Clause 51(2)(b) provides that the newly registered dealer can apply for refund after expiry of one year from the end of first year. This provision is sought to be deleted with the effect that they will be able to claim the refund on expiry of year, as any other normal dealer. This can be said to be beneficial to the newly registered dealers.
(c) Inter-state seller — Removal from preferred category:
With a view to give early refunds to the dealers involved in inter-state sales, they were put in preferred category by way of section 51(3)(a)(iv) . Therefore, these dealers could file refund applications as per return period and had not to wait till the end of full year. Now this category is removed with the result that such dealers will be required to claim refunds after the end of year. This will delay refund claims for them.
(d) Exporter — Defined:
Preferred category u/s.51(3)(a) includes exporter. They can file refund application as per the return period. However, the term ‘Exporter’ was not defined and hence a dealer having one export transaction could also file application as exporter. This liberal provision is now sought to be tight-ened. The term ‘Exporter’ is defined by inserting the following explanation.
“Explanation — For the purposes of sub-clause (i), the expression ‘Exporter’ shall mean a registered dealer whose turnover of exports during such period as may be prescribed, is not less than such percentage of the total turnover of his sales as may be prescribed in this behalf.”
The said percentage is prescribed by insertion of Rule 55A(3). According to the said Rule, if export turnover is not less then 50% in previous year or in concerned return period, then the dealer will be considered to be exporter.
(e) Bank guarantee:
Section 51(3)(b) provides for requirement of bank guarantee for granting refund. It also gave power to call for additional information. The clause for calling additional information is deleted and calling for bank guarantee is retained.
(f) Period for grant of refund — Extended:
Section 51(4) provides time limit for grant of refund. At present the limit is six months from the month of receipt of refund application. The said limit is extended to 18 months from the end of the month in which application is received. At present the dealer can get interest u/s.53(1) for delay in grant of refund after expiry of the above time limit of six months. Now this can take place after 18 months. Thus more time to retain the dealer’s money without interest.
The proviso to section 51(4) provides time limit for disposal of applications pending at present. It is sought to be provided that the applications filed up to 31-3-2011 for period up to 31-3-2010 will be disposed of by 30-9-2011. The applications filed up to 31-3 -2011 for period from 1-4-2010 to 31-3-2011 will be disposed of by 30-6-2012.
(g) Time limit for filing refund application — Section 53(7):
As per section 53(7) refund application can be filed within three years from the end of concerned year. Now the time limit is reduced to 18 months. Thus one more curtailment of the dealer’s right. Whereas time for grant of refunds by the Department is enhanced to 18 months from six months, the time limit for dealer is curtailed. This cannot be said to be a fair treatment. There will be many adverse effects on dealers.
The above provision will apply from 2009-10 and the refund applications for 2009-2010 will be required to be filed before 30-9-2011.
6. VAT Audit report — heavy ‘weight’ on dealers:
VAT Audit provision is becoming more and more stringent for dealers. Up till now there is penalty for late filing of report, to be calculated at 0.1% of turnover.
Now section 61(1) is amended to provide that the audit report should be ‘complete’ report.
By Explanation it is provided that the audit report will be deemed to be complete, if all items, certifications, tables, schedules and annexures are filed appropriately and are arithmetically self-consistent. If the report is found to be incomplete, then dealer will be subject to penalty at 0.1% of turnover, as per section 61(2A).
7. Prosecution for false tax invoice:
Sub-sections (1A)(i) and (ii) are inserted in section 74 to provide punishment by way of imprisonment for two years for issuing/producing false tax invoice to defraud revenue. The provision is extended to person who abates aforesaid offence.
In addition to above, there are changes in rate of taxes, few changes in composition schemes, etc. The same are not referred to here for sake of brevity.
