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“Mah. Tax Laws (Levy & Amendment) Act 2013” vide Mah. Act # 8 of 2013 dt 20 Apr 2013 (passing L.A. Bill # 11 of 2

J B Nagar CPE SCM of WIRC of ICAI Recent Amendments in MVAT, Setoff, Vat on Builders by CA Deepak Thakkar Senior Partner PHD & Associates, CAs Mumbai 10 April 2013. “Mah. Tax Laws (Levy & Amendment) Act 2013”

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“Mah. Tax Laws (Levy & Amendment) Act 2013” vide Mah. Act # 8 of 2013 dt 20 Apr 2013 (passing L.A. Bill # 11 of 2

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  1. J B Nagar CPE SCM of WIRC of ICAI Recent Amendments in MVAT, Setoff, Vat on BuildersbyCA Deepak ThakkarSenior PartnerPHD & Associates, CAsMumbai10 April 2013 CA Deepak Thakkar PHD & Associates

  2. “Mah. Tax Laws (Levy & Amendment) Act 2013” vide Mah. Act # 8 of 2013 dt 20 Apr 2013 (passing L.A. Bill # 11 of 2013 dt 5 Apr 2013) available on website on 4 May 2013 • Effective date: As notified by State Govt. & different dates may be appointed for different provisions; Sec. 2 to 13 & 15 i.e. all sections wef 1 May 2013 & Sec. 14 reg Sch. A-34(b) qua ‘milk..’ wef 1 Apr 2005 CA Deepak Thakkar PHD & Associates

  3. Mah. Act # 8 of 2013 wef 1 May 2013: Returns CA Deepak Thakkar PHD & Associates

  4. Mah. Act # 8 of 2013 wef 1 May 2013 : Assessment CA Deepak Thakkar PHD & Associates

  5. Mah. Act # 8 of 2013 wef 1 May 2013 : Tax Payment CA Deepak Thakkar PHD & Associates

  6. Mah. Act # 8 of 2013 wef 1 May 2013 : Exemptions CA Deepak Thakkar PHD & Associates

  7. Mah. Act # 8 of 2013 wef 1 May 2013 : C/f of Refund CA Deepak Thakkar PHD & Associates

  8. Mah. Act # 8 of 2013 wef 1 May 2013 : Early Refund CA Deepak Thakkar PHD & Associates

  9. Mah. Act # 8 of 2013 wef 1 May 2013 : Authorised Representative for MVAT Proceedings CA Deepak Thakkar PHD & Associates

  10. Mah. Act # 8 of 2013 wef 1 May 2013; Sch.Entry CA Deepak Thakkar PHD & Associates

  11. Mah. Act # 8 of 2013 wef 1 May 2013 : Definitions CA Deepak Thakkar PHD & Associates

  12. Mah. Act # 8 of 2013 wef 1 May 2013 : Definitions CA Deepak Thakkar PHD & Associates

  13. NotfnNo. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods made Taxfree or tax free period extended CA Deepak Thakkar PHD & Associates

  14. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods made Taxfree or tax free period extended CA Deepak Thakkar PHD & Associates

  15. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods made Taxfree or tax free period extended CA Deepak Thakkar PHD & Associates

  16. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods made Taxfree or tax free period extended CA Deepak Thakkar PHD & Associates

  17. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods made Taxfree or tax free period extended CA Deepak Thakkar PHD & Associates

  18. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods made Taxfree or tax free period extended CA Deepak Thakkar PHD & Associates

  19. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods whose tax rates have been increased CA Deepak Thakkar PHD & Associates

  20. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods whose tax rates have been maintained / reduced / increased CA Deepak Thakkar PHD & Associates

  21. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods whose tax rates have been maintained / reduced / increased CA Deepak Thakkar PHD & Associates

  22. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods whose tax rates have been increased CA Deepak Thakkar PHD & Associates

  23. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods whose tax rates have been increased CA Deepak Thakkar PHD & Associates

  24. Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn1 dt. 30 Mar 2013 effective from 1 April 2013:Goods whose tax rates have been increased CA Deepak Thakkar PHD & Associates

  25. Tax Invoice for claim of Setoff on Purchases (Sec. 86) • ‘Tax Invoice’ is must to claim setoff; • Parameters of Tax Invoice: • Words “TAX INVOICE” in bold at the top or prominent place • Tax Invoice Number & Date. • Seller’s Name, Address, VAT TIN # (Effective Date) • Buyer’s Name & Address: VAT TIN # must from 1 May 2010 • Goods Description, Quantity, Rate & Net Amount. • ‘Tax’ amount must be shown separately. • Certificate of continuing RC, as prescribed u/r. 55. • Sign of Dealer / Authorized Person. • Preserve ‘Tax Invoice’ & Accounting records for next 8 years; and till final order passed if any proceedings initiated (Rule 68) (earlier it was for 6 years) CA Deepak Thakkar PHD & Associates

  26. Mahalaxmi Cotton Ginning Pressing & Oil Ind. Kolhapur & Ors vs. State of Mah. WP # 33 of 2012 dt 11 May 2012 (2012) 51 VST 1 (Bom) (Dr. D.Y. Chandrachud JJ & R.D. Dhanuka JJ)…Setoff allowability... • Supreme Court dismissed the SLP filed by Mahalaxmi Cotton • (SLP (Civil) # 10081 of 2013 dt 25 Feb 2013) • Timex Art Décor Pvt. Ltd. Vs St of Mah. WP# 8898 of 2012 dt 25 Mar 2013 Dr. D.Y. Chandrachud J & AA Sayed JJ): Whether & at what stage the State should carry out assessment of hawala dealers cannot be decided in this case; Petition dismissed • ------ • Issues Challenged in BHC by Petitioner/Dealer: • Constitutional validity of setoff Sec 48(5) of MVAT Act • If validity of Sec 48(5) upheld, then the words “actually paid” be read down to mean “ought to have been paid” • Challenge the Order of Assessment • Seeking mandamus to the State to recover tax from the vendor, of which setoff is claimed • Consequential Orders for Setoff & Refund CA Deepak Thakkar PHD & Associates 26

  27. Mahalaxmi Cotton Ginning Pressing & Oil Ind. Kolhapur & Ors vs. State of Mah. WP # 33 of 2012 dt 11 May 2012 (Bom) (Dr. D.Y. Chandrachud JJ & R.D. Dhanuka JJ)…Setoff allowability... • BHC’s Observations & Commitment by State: • At Para 50: During hearing, Court has been informed by the State that corrective action shall be taken to allow an additional claim of setoff to a claimant dealer even where it has been initially disallowed by the Dept. following steps are being taken to promote greater transparency & efficient handling of claims for setoff: • (a) At the end of each FY, Dept will reconcile data on its system & inform the Dealer about available setoff allowing claimant Dealer to seek additional claim of refund • (b) During FY 2012-13, Dept shall set up a Dealer Information System (DAS)(or DIS???) & Dealer ledger account showing status of tax collected & paid on web portal to facilitate process off grant of additional claim of setoff CA Deepak Thakkar PHD & Associates 27

  28. Mahalaxmi Cotton Ginning Pressing & Oil Ind. Kolhapur & Ors vs. State of Mah. …Setoff allowability... At Para 51: The State tendered Statement of Steps to be taken against defaulting sellers: (i)Dept will identify defaulters i.e. non payers, short payers or who did not disclose sales (ii) Setoff will be denied to purchasers where seller has defaulted by not filing return or not disclosing sales; in case of short filing, setoff will be granted pro-rata to tax paid (iii) Dept will recover tax from the Dealer who purchases from the defaulter; Dept will retain option of denying setoff & pursuing all sellers in the chain until recovery is ultimately made from any one of them(Para 51-2-d) at pg 66 & 67) CA Deepak Thakkar PHD & Associates 28

  29. Mahalaxmi Cotton ..dt 11 May 2012 (Bom)…Setoff allowability... • BHC’s Observations & Commitment by State: • At Para 51(3): The State tendered Statement of Steps to be taken against defaulting sellers: • (iv) Full machinery will be invoked against defaulters & after final recovery, in whole or part, refund will be given to claimants to the extent of recovery in pro-rata to all who were denied setoff, after end of FY. • At Para 51(4): Dept will give refund without any application since it will reconcile tax payments & inform dealer of recovery from defaulter concerned & then grant refund • At Para 51(5): details of defaulters will be uploaded on website & purchasers who are denied setoff will be given names of concerned defaulters • At Para 51(6): The above steps do not apply to Hawala transactions, in which case no setoff will be granted • At Para 51(7): Purchasers are not prevented from adopting such remedies as are available in Law against the defaulters CA Deepak Thakkar PHD & Associates 29

  30. Mahalaxmi Cotton ..dt 11 May 2012 (Bom)…Setoff allowability • Conclusion at Para 52: Case highlights complexity of the issue with which the Legislature & tax administrators are grappled with • BHC’s Decision at Para 53 & 54: • Constitutional validity of Sec 48(5) is upheld • Limitation period of 18 months to file Refund application u/s 51(7) is valid; (Sachins Impex vs St of Mah.WP# 10816 of 2012 dt 22 Mar 2013 Dr. D.Y. Chandrachud J & AA Sayed JJ; Assessing Officer directed to expedite completion of assessment) • Right to obtain setoff subject to prescribed conditions is lawful • Assurance placed before the Court by the State Revenue of the steps to recover tax from defaulting seller; State Govt & Sales Tax Authorities shall abide by the Assurance & Statement recorded in this judgment • Order of Assessment is subject to remedy of Appeal to pursue remedy available in Law • Trade Circular # 8T dt 21 June 2012: Explains matching of data of buyer & seller, confirmation about tax paid into Treasury, etc before grant of setoff / refund; • Matching Data for FY 2012-13 available online?Auditor’s duty?? CA Deepak Thakkar PHD & Associates 30

  31. Documentary evidence to prove genuineness of purchases… • History & background of Buyer • Buyer is a RD since long, filing Returns, paying taxes & assessed regularly under BST Law & MVAT Law • Purchases effected in regular course of business from Supplier, either directly or through agent • Supplier is RD having TIN (Check on Website) • Received goods (Challan/Stock records) • Received “Tax Invoices” as per Law • Purchase transaction recorded in books of A/c • Payment made vide a/c payee cheque/payorder/ DD • 9. Bank statements reveal debit of such payments • Ledger A/c of supplier reflects all transactions CA Deepak Thakkar PHD & Associates 31

  32. …Documentary evidence to prove genuineness of purchases • 11. Setoff is claimed as per MVAT Law, supported by Docs; if disallowed, it means double taxation, hence invalid. • 12. Under Mvat Law, no provision / machinery to ascertain payment of tax on each transaction / goods, by either supplier or supplier of supplier • 13. Confirmation, Returns, Challan from Supplier, if available • 14. Not committed any offence under MVAT Law / IPC • 15. Principle to levy Vat / Tax be followed; Onus on Dept. • 16. Check List of suspicious dealers who has issued false bills without delivery of goods, put up on Dept Website by DC Vigilance A-1, 8th Floor, Mazgaon, Mumbai; • Dated May 2012, giving Name & TIN of such dealers • 17. Obtain Certificate of Tax Clearance / Dues, for Self as well as from Supplier (u/r 43 & 44 r/w sec. 32(8) in Form 415 & 416 on application in Form 414 of MVAT) CA Deepak Thakkar PHD & Associates 32

  33. Survey of URD (Un-Registered Dealers (Sec. 66) Survey Dept given powers by Commr Purpose to identify URD General notice to a class of dealers or Special notice to a particular dealer for furnishing data of sales or purchases Commr may call for details & particulars of Services provided by Public Utilities, Banks & Financial Institutions Survey results may be published such that it does not disclose identity of any particular URD Survey proceedings in case of a particular URD ends at a point of knowledge that said URD is not liable for registration or he gets registration CA Deepak Thakkar PHD & Associates 33

  34. Vat on Builders & Developers….. Sale of Unit after completion of Construction: Not taxable Works Contract vs Contract for Right in immovable property during construction phase SC ruling in K Raheja’s case under Karnataka VAT Act (5-5-2005) 141 STC 298 Amendment to the MVAT Act – effective 20 June 2006 Trade circular No 12T of 7 February 2007: K.Raheja Decision applicable in Maharashtra -trigger point of controversy MCHI Challenged Constitutional validity of amendment & Circular BHC ruling in MCHI & Ors (10-4-2012) 51 VST 168 - Constitutional validity upheld; Assessing Officer to decide taxability Determination of SP of Goods involved in Works Contract Formula under Rule 58 of MVAT Rules vs Charging Provisions Consequences of Failure of Computation Mechanism Is Rule 58 Directory or Mandatory? CA Deepak Thakkar PHD & Associates

  35. ….Vat on Builders & Developers….. CA Deepak Thakkar PHD & Associates • Cost Benefit Analysis for Construction Industry- Option to pay tax as per Vat Provisions or Composition Scheme @ 5% • Composition Sch. @ 1% on agreements regd. after 1 Apr 2010 • Issues for Construction Industry post MCHI ruling by BHC – Registration, Tax Computation, Returns, Interest, Penalty, Vat Audit, Vat TDS, Refunds, etc • Grant of Regn & Adm Relief to Developers (Trade Cir# 14T dt 6 Aug 2012); SC directed to pay Tax & extended dates till 31 Oct 2012 • Trade Cir # 18T dt 26 Sept 12 clarifying non-admissibility of Cost + Profit method & filing of online Annexure – BHC uphelds Circular; Further challenged at SC? • SC LB reheard the matter in L&T & K.Raheja case in Mar 2013; Decision expected shortly; MCHI matter?

  36. Composition Scheme for Construction Contracts CA Deepak Thakkar PHD & Associates 5% Scheme for new construction contracts w.e.f 20 June 2006 New Construction Contracts notified by Govt. e.g. buildings, roads, bridges, dams, etc. for tax @ 5% of total contract value Setoff on materials available, in excess of 4% of the Purchase Price (Rule 53(4)(b)) Setoff on capital assets available subject to Rule 53(6) & Rule 53(7A) 1% Scheme for sale of flats w.e.f. 1 April 2010 Flats, dwellings, buildings or premises transferred with interest in land vide agreements, during construction w.e.f. 1 April 2010 Benefit of this scheme can be availed only by Registered dealers for agreements registered on or after 1 April 2010 Composition sum=1% of Agreement Value or SDV, whichever is higher, payable upfront on registration of document No setoff All agreements registered from 1 Apr 2010 will have to be mandatorily governed by this scheme No Tax on sale of flats, etc. after completion of construction

  37. Composition Scheme – Cost Benefit Analysis The tax positions discussed hereunder is without prejudice to the proposition that the tax levy may fail wholly or partially in certain circumstances discussed in previous slides Where substantial work has been sub-contracted by a developer, the composition scheme would prove to be fatal/costly, more so, when the agreement value is higher, of the property located in developed area on account of high cost of land. Since in the composition scheme, no deduction is available for the cost of the land, it would not be preferred over value determined under Rule 58. Where substantial work has been completed prior to sale of property, the composition scheme will be a costly affair However, in a given case where actual liability pursuant to Rule 58 computation is significantly higher, then the composition scheme can be opted Under Vat option, full setoff; Under Composition option, either reduced setoff or no setoff CA Deepak Thakkar PHD & Associates

  38. Issues for Construction Industry, post BHC & SC ruling • Promotors & Builders Asso. filed SLP # 17738 & 17709 of 2012 and MCHI filed SLP (Civil) #21934 of 2012 dt 4 July 2012 before SC; Tagged with L&T (K Raheja’s) matter for LB hearing by SC!! Interim relief by SC: Regn before 16 Oct 2012 & Pay only Tax before 31 Oct 2012 • Registration: Whether to obtain registration? • Tax collection & Setoff: only by RD • Trade Cir # 14T dt 6 Aug 2012 for Grant of ADM Relief to Developers: • Regn Application till (6 Aug) 16 Oct 2012 & attend on next day • No pre-regn visit to POB of Developers & grant regn on same date • Delay for regn beyond 5 yrs will not be treated as an attempt to evade tax • File Returns, pay Tax for URD period & apply for ADM Relief till (31 Aug) 31 Oct 2012; JC shall grant & pass Adm Relief Order in 2 days without hearing dealer (Para 2f & 2g) • Upload all Returns alongwith tax (interest & Penalty stayed by SC) (Para 2k); Late fee Rs. 5,000 per return payable? • Compounding fee for all URD periods at Rs. 5,000 only; Normal Compounding fee Rs. 5,000 + 0.5% of Gross Sales Tax Liability arising during URD period, for each month of delay in Regn. (Office Order # IMC10.07/Adm Relief/URD/Adm-4/B-1020 dt 18 Apr 2007 (Para 2f). • Return periodicity: Quarterly (Para 2i); Return Form 233 (Para 2j) CA Deepak Thakkar PHD & Associates

  39. Issues for Construction Industry, post SC & BHC ruling • Penalty for late/Non-Regn u/s 29(2A) wef 1 May 2012 @ sum = tax payable, will not be attracted (Para 2L) • Dept will initiate penal actions if regn is not obtained & returns not filed (Para 2n) • FAQ raised & replied by Dept; 16 FAQs; Booking dt (Allotment Letter) qua Agreement dt; • Tax levied when Installment due or received, whichever earlier (FAQ # 2/7/9) • Mere advances from buyers, without executing agreement for sale? Reply: “There is no tax liability”. (FAQ 13) • Method of tax payment cannot be changed till completion of a particular Project (FAQ 15); Project vs Contract?? • Tax Computation: as per Vat Provisions & Composition Schemes • Returns: Option of Vat or Composition, once selected & return filed, cannot be changed by revising returns ( NCC SMC Unity (JV) Vat SA # 127 of 2010 dt 4 Feb 2012, MSTT, B-I) CA Deepak Thakkar PHD & Associates

  40. Issues for Construction Industry, post SC & BHC ruling Interest @ 1.25% p.m & Additional Interest @ 25% of addl tax payable after receipt of Intimation in Form 604 issued u/s 63(7) (FAQ#12/16) Late Fees: Rs. 5,000 per return u/s 20(6) effective from 1 Aug 2012 Vat Audit: Penalty for late/Non-audit, u/s 61(2) @ sum = 0.1% of Total Sales; To avoid said penalty upload Vat Audit Report for all periods upto FY 2011-12 by 30 Nov 2012 (Para 2’o’): saiddue date extended till 15 Jan 2013 vide Trade Circular # 1T dt. 4 Jan 2013 Vat TDS: by Contractee @ 2% if Contractor is RD, else @ 5% of Total CV (@4% upto 31 Mar 2012); Quantum of such TDS shall not exceed quantum of tax payable towards such WC (s.31(b)(i)) Refunds: To Contractor or Contractee? Online application in form e-501 within 18 mths (3 yrs, upto 30 Apr 2011) from end of relevant yr CA Deepak Thakkar PHD & Associates

  41. Issues for Land Value Deduction u/r 58(1A) Cost of land shall be determined as per Guidelines to Stamp Duty Ready Reckoner (SDRR) Cost if zero, still deduction available? Cost, if more than value as per SDRR, allowable? SDRR Land rate given per square mtr, whether to apply directly to area of each unit or area of plot & then to apply to each unit proportionately? SDRR Land rate given for FSI 1:1 which shall be enhanced by 40% if TDR loaded on said land TDR cost can be added to land cost? Corpus fund, rent, etc given to existing occupants in redevelopment project can be added to land cost? SDRR Land rate is issued as on 1st Jan every year which is applicable to agreements registered in that calendar year CA Deepak Thakkar PHD & Associates

  42. CA Deepak Thakkardeepak@phd-ca.com022-2682 008398202 98225 CA Deepak Thakkar PHD & Associates

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