Updates on MVAT Laws
with special emphasis on
builders & developers
Presentation by
CA Rajat Talati, Mumbai
on 14.10.2012
rajat@talatico.com
organised by
J. B. Nagar CPE Study Circle of WIRC
Agenda
• Recent amendments to Maharashtra
Value Added Tax Act, 2005
• Recent amendments to Profession Tax
Act - Maharashtra State
• Taxation of builders & developers
CA Rajat B. Talati, Mumbai
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Amendments
Maharashtra Value Added Tax Act,
2005
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Purchase Tax
• Sec 6A & 6B - Purchase tax @ 5% on cotton
and oil seeds purchased from URD
– URD includes persons -farmers.
– PT u/s 6B on purchases of oil seeds effective from
1.5.12
– PT u/s 6A on URD purchase of cotton not made
effective
• Registration compulsory when purchase
turnover exceeds 5 lacs.
– Prescribed limits would also include TO liable to PT
– Sec 4(5A)
– Till such time exemption from PT –Sec 3(2)
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Purchase Tax (cont...)
• The purchase tax is payable in the following
circumstances:
– Oil seeds so purchased are dispatched by way of
stock transfer to places outside the states within India
or
– Oil seeds so purchased are used in manufacture of
– taxable goods and the goods so manufactured are
transferred outside the state within India as stock transfer
or
– tax free goods
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Purchase Tax (cont...)
• The rate of purchase tax is equal to the vat
applicable to sale of oil seed i.e. 5% (current
rate)
• Purchase tax payable in the month when the
contingencies occur
• Purchase tax paid would also qualify for set off,
subject to rule 53 & 54
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Purchase Tax (cont...)
• Is it that purchases from RD & URD put at
par?
- it would be appropriate to make purchases from
registered dealer on payment of vat wherever there
is some reduction in the ITC/ set off
• Is it liable to stk of URD seeds on 30.4.12?
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Tax Collection at Source
• Sec 31A – TCS - by
– Persons who auctions right to excavates and
– Or who is in temporary possession over
goods that may be notified
• Rate to be notified
• Form 421 to be issued by auctioneer/ person
• TCS allowed to be adjusted against tax liability of
buyer
• Notification yet to be issued
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Textile processors
• Sec 8(3C) –exemption from VAT on value of
material transferred in execution of WC effective
15.8.2007 to textile processors
– Amendment in ADE wef 8.4.11
– Amendment to MVAT act effective 1.5.2012
provides –reference to ADE as it stood before
Finance Act 2011
– Thus w.e.f. 1.5.12 – textile processors –
exempted
– Therefore taxable bet 8.4.11 to 30.4.12
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Penalty provisions
• Non- Registration in time –Sec 29(2A)
– Penalty equal to amt of tax payable
– Builders developers??
• Saved in view of Admn relief scheme [14T/2012]
• Late fees of Rs. 5000/- on late filing of
returns w.e.f. 1.8.2012.
– Penalty u/s 29(8) deleted
– Late retns filed upto 31.7.12 penalty
applicable
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Others
• Appeal stay - on 3rd adjournment / fails to attend
– stay to be vacated subject to payment of 15% of
disputed amt or Rs. 15 cr whichever is less
– Order of additional part payment is non-appealable
order
• Period for maintenance of sales invoice
increased from 3 to 8 yrs (retrospective) and
other books of a/cs remains 8 yrs.
• Dealers not subjected to VAT audit are now
supposed to file Annexure J1 & J2 by 29th June
2012 for the year 2011-12.
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Others (cont..)
• First return of a dealer is defined to be quarterly.
• Natural Gas –defined as fuel –u/r 53(1)
retention-3%
• Stock Transfer retention- retention u/r 53(3) -4%
• Tax if paid by the claimant dealer & to give credit
for the total value of collection certificate
received is included in Rule 55 (1), (1b), (3).
• Submission of Audit report proponed to 30th
November.
• Dealers of PSI can avail ITC on purchases other
than raw materials.
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Taxation of Furnishing fabrics
[FF]
• Sch entry – C- 101(a) – Fabric & Sugar –as
defined under Sec14 of the CST Act
• Sch Entry C- 101(b)- varieties of textilesnotified
• Both attract VAT @ 5% wef 1.5.2011
• T.O. of sales of FF not included in retailer’s
composition. So no composition qua that T.O.
of sales
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Taxation of Furnishing fabrics
(cont..)
• Sale of notified FF -exempt – accept at last point
– Unless sale made for consumption
• How to determine – sale for consumption?
• Trade cir- 16T/25.9.12
– Sales to tin holders – treated as not for consumption –
exercise due diligence
– If sold to RD with knowledge- mention –sold for
consumption on Tax Invoice
– If sold to URD –onus on seller to prove not for
consumption
• Inter –state sale of notified FF -taxable
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Dealers in FF
• Obtain Registration under MVAT & CST
Acts
– If TO of sales exceeded Rs 5 L + purchase /
sales of taxable goods > 10K before 31.8.12 –
ref sec 3(4)
• Apply within 30 days of 5.9.2012
• Otherwise apply within 30days of exceeding limits
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Hawala Purchases
• Disallowance of ITC
– Circular transactions
– Accommodation bills
– Affidavit by Hawala operators
– Beneficiary
• Any way out?
– Counter affidavit
– No goods – no tax
– Fight out legally – do not file revised return but file appeal
• BHC – WP – 48(5) cases
– Mahalaxmi Cotton
– Assmt + other promises
by State
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Amendments to Profession Tax
Act,1975
• E-payment mandatory for all profession tax registered
dealer.
• Mandatory to make E-payment of professional tax before
filling of the return.
• The period of limitation for remaining un-enrolled under
Profession Tax Act is restricted to 8 years .
• Late filing of returns is to attract late fees of Rs.1000/- for
returns [w.e.f. 1.8.2012].
• Revised return can be filed before notice of assessment
or expiry of 6 months from the end of the year;
whichever is earlier.
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Taxation of builders &
developers
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Overview – Brief history
• Levy of tax – how for legal ?
– Tax on immovable property
• MOFA Act
• SC – K Raheja Development Corporation
• Karnataka v/s Maharashtra
– Difference in agreements
• Insertion of definition of w/c under MVAT
Act
• Trade Circular no.12T of 2007
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Overview – Brief history (cont..)
•
•
•
•
Challenge by MCHI
Interim stay by BHC – 7.12.2007
Final judgment upholding levy – 10.4.2012
Intervening period
– Builders not forced for registration
– MCHI members to file quarterly information
statement
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VAT Liability – builders & developers
- Administrative relief
• Trade Circular no.14T/2012 dt.6.8.12
• Administrative relief will be allowed to the
builder / developer for a period exceeding
5 yrs i.e. their registration certificate would
be made effective from 20.6.2006
[wherever reqd]
– Application for registration is to be made
before 16.8.12 [ now extended to 15.10.12]
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VAT Liability – builders & developers
- Administrative relief
– Application for Administrative relief is to
be made before 31.8.12 [now 31.10.12]
along with
• Proof of filling returns for all past periods
[quarterly]
• Pay Tax & interest + late fee (Rs. 5000/- for each
qtr) – attach challan
• Pay composition amount of Rs. 5000/- for the
entire period of delay
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VAT Liability – builders & developers
- Administrative relief
• In such a case penalty u/s 29(2A) would not be
levied - the penalty is otherwise leviable for not
getting registered in time- penalty leviable at equal to
amt of tax payable
• Get the accounts audited u/s 61 by a Chartered
accountant get upload the audit report in Form 704 for
all the past periods by 30.11.2012
– If audit reports are so filed, penalty u/s 61(2) – for
late filling of audit report- would not be attracted
VAT Liability
– builders & developers- Administrative relief
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Liability – builders & developers Administrative relief
– If applications for registration and the admn relief
is not made before the dates given, then the
compounding amount would be calculated as
under
• Rs. 5000 + 0.5% of the gross sales tax [i.e. before
deduction of ITC] for each month of the delay. Thus for a
delay of say, 5 yrs, it would be Rs. 5000/- + (0.5% *60) =
Rs. 5000/- + 30% of the gross tax payable.
• Penalty u/s 29(2A) at 100% of the tax payable would be
levied.
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Post BHC decision
• Most of builders & developers not registered
under MVAT Act – Applications made
• SLP in SC & interim decision dt. 29.8.12
– Extended the date of payment of tax to
31.10.12
– Interest / penalty not to be paid now.
– Those who are yet not registered, may get
their registration by 15.10.12
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Departmental approach
• FAQ’s along with circular no. 14T / 2012
• FAQ’s on website [first uploaded on 27.8.12]
• Circular no.17T/2012 – informing about SLP
before SC
• Circular no.18T/2012 – various options /
methods for discharge of tax liability by
builders.
– Cost plus GP method not acceptable
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Builders’ plight
• Questions the very levy of tax on sale of flats / shops
etc
Without prejudice
• Different methods of calculation not suitable to
developers
• Cost plus GP method results in least tax liability.
• To file return with annexures?
– Is rule amended?
– Can admin relief denied?
• what if there is short / excess payment as per return?
– Would admin relief denied?
– What about refund?
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Buyers’ point of view
• Is this levy payable by him as per agreement?
• What is the basis of calculation
• Is ITC deductable from gross liability of the dealer?
If yes, should he pass on that to buyer?
• Is interest / penalty also payable?
• What about indemnity / BG / FD or escrow amount
paid?
– When is that encashable / payable
– What if liability found payable is less / more than the BG / FD /
escrow deposit?
• Should I really pay?
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Auditors’ dilema
• Orders for Admn relief still not passed
– Should the dealer be treated as RD
– Returns filed as per one of the methods / cost + GP
method
• Any observations?
– All methods have issues in implementations
– Audit report form
• For 06-07 & 07-08 – old form?
– Manual filing ? Where?
– Certain particulars not required in new formats
• For 08-09 onwards in latest format
– With all annexures?
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Issues
Cost + GP method
• Conceptually acceptable
– Circular 17T/2012 dt.26.9.12 denies this as a legitimate
method
– Clarification to contractors - Some assessment
completed based on this method
• % of GP
• How to compute
– Sq. ft. sold after OC
– Sq. ft. – agreement registered after 1.4.10
– Before 20.6.06
– Under construction
– Progressive ‘under construction’ calculation
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Issues
• Land cost deduction [ for Rule 58(1) & it’s proviso]
– How to calculate?
– Cost v/s ready recknor
– Should it be the same for all flats / should it change
every year?
– TDR/ premium paid to MCGB?
• Rule 58(1) –deductions for exps on
– Marketing, interest, depreciation & other cost
– Solicitor fees, general Admn cost etc
• Sub-contractor’s payment
– If RD – form 407 / 408 not received?
– If tax not separately charged & if 407 / 408 not received
– URD – sub-contractor
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Any Queries
????
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