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
4 May 2013
CA Deepak Thakkar
PHD & Associates
1

“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
4 May 2013
CA Deepak Thakkar
PHD & Associates
2
Mah. Act # 8 of 2013 wef 1 May 2013: Returns
Sr.#
Section
reference &
effective date
Gist of amendment
Remark / Issue
1
Sec. 20(4)(b) &
(c) amended
from 1 May 2013
If any discrepancy is pointed out
(b) in Vat Audit Report or
( c) in business audit,
then instead of revising return for a
particular period, dealer may file a
single revised return for entire year
Identifying
transaction &
period…not reqd;
Saving in interest
payability; Int from
21 Apr or 15 Jan or
15 Feb?; Non
*‘Revision only once’ continue;
2
Sec. 20(6)
amended from 1
May 2013
4 May 2013
Late fee of Rs. 5000 is payable in case
of late filing of VAT & CST Returns.
Whole or part of such late fee can be
waived, prospectively or
retrospectively, under certain
circumstances, issuing Notification
CA Deepak Thakkar
PHD & Associates
Builders &
Developers;
Retrospective
amendments; Late
Regn granted by
Dept then?
3
Mah. Act # 8 of 2013 wef 1 May 2013 : Assessment
Sr.# Section
reference &
effective date
Gist of amendment
Remark / Issue
3
If a Registered dealer fails to
file return, for any period,
within prescribed time then the
Commissioner may pass an
assessment order to the best
of his judgment without
issuing any notice. Such
ex-parte assessment order
shall stand cancelled
(automatically) as soon as the
dealer files return for the said
default period;
Dealer shall not
apply for
cancellation of
such unilateral
ex-parte
assessment
order;
Dept may assess
again under any
other provision
Sec. 23(1) first
proviso
amended from
1 May 2013
4 May 2013
CA Deepak Thakkar
PHD & Associates
4
Mah. Act # 8 of 2013 wef 1 May 2013 : Tax Payment
Sr.#
Section
reference &
effective date
Gist of amendment
4
Sec. 32A
inserted wef
1 May 2013
Tax liability finally pointed by Vat
Auditor and which is accepted by
the dealer, either fully or partly, will
be recovered by serving a demand
notice.
Remark / Issue
Expln: The dues of
Rs. 100 or less
shall not be
recovered by
Commissioner; This
Such payment is required to be
applies to Sec. 32 &
made within 30 days from the date 32A, i.e. such dues
of service of notice by the
may be as per
Commissioner;
return / order / audit
On such tax payable, interest is
report
also payable as provided u/s 30(2)
from 21 Apr or 15 Jan or 15 Feb or
dt of receipt of notice?;
4 May 2013
CA Deepak Thakkar
PHD & Associates
5
Mah. Act # 8 of 2013 wef 1 May 2013 : Exemptions
Sr.# Section
reference &
effective date
Gist of amendment
5
 Scheme of Taxation of Liquor: Presently ‘Wine’
Sec. 41(5)
amended from
1 May 2013
Remark / Issue
Notification # VAT 1511/ CR 57/
Tax-1 dt 30 Apr 2011 issued u/s
41(5)
to
grant
Exemption
to
Specified Registered Dealer of
tax on sales of Liquor, subject to
conditions notified:
 Sale of ‘wine’ also may be
taxed in the lines of ‘liquor’;
covered by Sch.
D-3A taxed
@20% as per Vat
system i.e. pay
vat on sales &
claim setoff on
its purchases;
Post amendment
wine & liquor
may get same
tax treatment;
Notification awaited;
4 May 2013
CA Deepak Thakkar
PHD & Associates
6
Mah. Act # 8 of 2013 wef 1 May 2013 : C/f of Refund
Sr.# Section
reference &
effective date
Gist of amendment
Remark / Issue
6
Refund of Rs. 5 lakhs or less,
in a year, for the period from
1 Apr 2012, may be, carried
forward to immediate
succeeding year for
adjustment against dues
payable.
If in next year there is refund
then? Default in appln 501?
Presently, refund
of Rs. 1 lakh or
less, is permitted
to be carried
forward to the
subsequent year,
by issuance of a
Trade Circular,
every year.
Sec. 50(2);
‘Proviso’ added
from 1 May
2013
4 May 2013
CA Deepak Thakkar
PHD & Associates
7
Mah. Act # 8 of 2013 wef 1 May 2013 : Early Refund
Sr.# Section
reference &
effective date
7
Gist of amendment
Remark / Issue
Sec. 51(3)(a)(iii) Mega Units holding
amended from Identification Certificate under
Package Scheme of Incentives
1 May 2013
2001 & 2007, entitled to apply
for refund soon after filing
return / revised return
8
Sec. 51(3)(a)(vi)
inserted from 1
May 2013
Dealer, whose Interstate Sales
turnover in previous year is in
excess of 50% of his total
turnover, entitled to apply for
refund soon after filing return /
revised return
4 May 2013
CA Deepak Thakkar
PHD & Associates
Such provision in
clause (iv)
prevailed till
1 May 2011;
Refund appln for
PY or CY?
Or both?
8
Mah. Act # 8 of 2013 wef 1 May 2013 :
Authorised Representative for MVAT Proceedings
Sr.# Section
reference &
effective date
Gist of amendment
Remark / Issue
9
‘Company Secretary’ eligible to
appear before any authority,
including the Tribunal
Hitherto, relative
/ employee / CA /
STP / legal
practitioner /
Cost Accountant
are eligible;
LA reqd. for each
proceeding
Sec. 82(1)(b)
amended from
1 May 2013
4 May 2013
CA Deepak Thakkar
PHD & Associates
9
Mah. Act # 8 of 2013 wef 1 May 2013; Sch.Entry
Sr.# Schedule Entry Existing Entry
& effective date
10
Clause (b) of
Sch. Entry A-34
substituted,
retrospectively
from 1 April
2005
4 May 2013
Milk, i.e. animal milk in liquid
form is taxfree;
If served for consumption then
taxable;
Condensed milk is taxable;
Milk containing any ingredient
& sold under a brand name is
taxable
CA Deepak Thakkar
PHD & Associates
Amendment /
Remark / Issue
If milk contains
milk fat, milk
powder or solid
non fat then also it
is taxfree, since
1 Apr 2005
10
Mah. Act # 8 of 2013 wef 1 May 2013 : Definitions
Section
Sr. reference &
#
effective
date
Gist of amendment
Remark / Issue
11
Definition of ‘Motor Spirit’
u/s 2(15A):
means HSD oil, ATF Duty paid
& Bonded, Aviation Gasoline
Duty paid & Bonded and Petrol
and other notified products
Notification No. VAT 1506/CR135/Tax 1 Dt. 30 Nov 2006
amended on 15 Mar 2007
already covered the same for
tax reduction for Oil
Companies and exemption
for petrol pumps, issued u/s
41(4).
Sec. 2(15A)
amended
from 1 May
2013
*The word ‘and’ has been
substituted for ‘or’;
Technical amendment
Other products may be
notified in future.
4 May 2013
CA Deepak Thakkar
PHD & Associates
11
Mah. Act # 8 of 2013 wef 1 May 2013 : Definitions
Sr.# Section
reference &
effective date
Gist of amendment
Remark / Issue
12
Definition of ‘Petroleum
Products’ u/s 2(17A):
means superior kerosene
oil(SKO), LPG, furnace oil, LDO,
Naptha and LSHS and other
notified products.
Negative set off rule
54(b): No set off on
motor spirits unless
resold/interstate sale or
stock transfer/ Exports
[ Setoff granted on
HSD Oil in Gupta
Metallics & Power
Ltd. Vat Appeal # 55 &
56 of 2010 dt 21 Dec
2010 MSTT]
Sec. 2(17A)
amended
from 1 May
2013
*The word ‘and’ has been
substituted for ‘or’ ;
Technical amendment
Other products may be
notified in future.
4 May 2013
CA Deepak Thakkar
PHD & Associates
12
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
Sched
ule
Entry
Goods Description
A-2
Braille Watches
(components & Parts
thereof already specified in
Sch. Entry A-2)
A-4
(C)
Rice Bran
4 May 2013
Rate upto
31 Mar 13
Rate wef
1 Apr 13
Remark/
condition
12.5%
NIL
Notification
of aids &
implements
used by
Handicappe
d persons
expanded
5% under
Entry C49 from 1
Apr 2010
NIL
Sch. Entry C-49
deleted &
exclusion subclause (ii) from
A-4 (c)
removed
CA Deepak Thakkar
PHD & Associates
13
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
Sched
ule
Entry
Goods Description
A-9A
(a) Paddy, rice, wheat and pulses
in whole grain, split or broken
form
NIL
NIL till
31 March
2014
Taxfree when
sold from 1st
May 2006 to 31
Mar 2014
(Exemption
extended)
A-9A
(b) The flour of wheat & rice
including atta, maida, rawa and
suji whether sold singly or in
mixed form;
NIL
NIL till
31 March
2014
..do..
A-9A
(c) The flour of pulses including
besan when sold singly and not
mixed with flour of other pulses or
cereals
NIL
NIL till
31 March
2014
..do..
4 May 2013
Rate upto
31 Mar 13
CA Deepak Thakkar
PHD & Associates
Rate wef
1 Apr 13
Remark/
condition
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
Schedule
Entry
Goods Description
Rate upto 31 Mar
13
Rate wef
1 Apr 13
A-27A
Hand Pumps used for
pumping water
5% under Entry C42
NIL
Sch. Entry C-42 deleted
which read as “Hand
Pumps, Parts & Fittings” &
New Entry A-27A inserted.
A-36(1)
Judicial. Non-judicial stamp
papers, Court fee stamps
when sold by Govt.
Treasuries or Authorised
Vendors
Non-judicial stamp
paper when sold
by Govt.
Treasuries were
taxfree u/e A-36
NIL
Sch. Entry A-36 substituted
& recasted from 1 April
2013
A-36(2)
Postal items like
envelopes, post cards, etc.
when sold by Govt.
NIL u/e A-36
NIL
..do..
A-36(3)
Philatelic material such as
Postal Stamps, Postal
Envelop, Postal Stationery,
Pigeonogram, Rocketgram
and First Day Cover.
5% u/e C-76 as
Printed Material
NIL
..do..
4 May 2013
CA Deepak Thakkar
PHD & Associates
Remark/ condition
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
Schedule
Entry
Goods Description
A-51
(i) Papad except when
served for
consumption
Rate upto
31 Mar 13
NIL
Rate wef
1 Apr 13
NIL till 31
March 2014
Remark/ condition
Taxfree when sold
from 1st May 2006 to
31st March
2014 (Exemption
extended)
A-51
(ii) Gur
NIL
NIL till 31
March 2014
..do..
A-51
iii) Chillies, turmeric
and tamarind whole,
powdered or
separated but
excluding Chilly seed
and tamarind seed
when sold in
separated form;
NIL
NIL till 31
March 2014
..do..
4 May 2013
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
Schedule
Entry
Goods Description
A-51
iv) Coriander seeds,
Fenugreek and Parsley
(Suva) whole or
powdered;
NIL
A-51
v) Coconut in shell and
separated kernel of
coconut, other than copra
NIL
NIL till
31 March 2014
..do..
A-51
vi) Solapuri chaddars;
NIL
NIL till
31 March 2014
..do..
A-51
vii) Towels;
NIL
NIL till
31 March 2014
..do..
A-51
viii) Wet dates,
NIL
NIL till
31 March 2014
..do..
4 May 2013
Rate upto
31 Mar 13
Rate wef
1 Apr 13
NIL till
31 March 2014
Remark/ condition
Taxfree when sold from 1st
May 2006 to 31st March
2014 (Exemption 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
Schedule
Entry
Goods Description
A-59
Raisins & Currants
Rate upto
31 Mar 13
NIL
Rate wef
Apr 13
NIL till
31 March
2014
1
Remark/ condition
Taxfree when sold
from 1 June 2010
to 31 March
2014 (Exemption
extended)
A-62
4 May 2013
Water Meters sold
to local bodies
12.5%
CA Deepak Thakkar
PHD & Associates
NIL
Water meters sold
to other persons still
taxable @ 12.5%
18
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
Schedule
Entry
Goods Description
B-1
Articles made of Precious
Metals of fineness 50% or
more, whether or not
containing Diamond,
Pearls, Precious Stones,
… (i.e. Jewellery &
articles of precious metal)
Gold, Silver, Platinum,
Osmium, Palladium,
Rhodium, Ruthenium, and
alloys thereof
1%
1.10% upto
31 March 2014
1%
1.10% upto
31 March 2014
Diamonds
1%
1.10% upto
31 March 2014
B-2
B-3
Rate upto
31 Mar 13
Rate wef
1 Apr 13
(Notfn No. VAT 1513/CR
46(7)/ Taxn1 dt. 4 April
2013
4 May 2013
CA Deepak Thakkar
PHD & Associates
Remark/ condition
(a) Rate enhanced only for
2013-14;
(b) Embroidery or Zari
material u/e. C-105;
Industrial goods & tools
u/e. C-53A taxable @ 5%
(a) Rate enhanced only
for 2013-14;
(a) Rate enhanced only
for 2013-14;
(b) Pearls, precious
stones… continue @
1% u/e. B-3
(c) Imitation Jewellery,
beads, hairpins & its
parts & components
continue@ 1% u/e B-4
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 maintained / reduced / increased
Schedule
Entry
Goods Description
Rate upto 31
Mar 13
C- 108(1)
(b)
Tea in leaf or powder form
including instant tea.
5% from
5% upto 31 Mar (a) 5% continued for 1 more
1 Apr 2010 to
2014
year;
31 Mar 2013
(b) coffee beans & seeds,
cocoa pod, green tea
leaf and chicory
continue @5% u/e. C-23
C-31A
Excavators covered under
CETH 8429 5200 & are
not liable for Registration
under the Motor Vehicles
Act, 1988
12.5%
5%
New Sch. Entry C-31A
inserted
C-53A
Industrial goods & tools
made of Diamond, Gold,
Silver, Platinum, Osmium,
Palladium, Rhodium,
Ruthenium, and alloys
thereof, if any
1% u/e B-1
5%
New Sch. Entry C-53A
inserted
4 May 2013
Rate wef
1 Apr 13
CA Deepak Thakkar
PHD & Associates
Remark/ condition
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
Sch.
Entry
Goods Description
Rate upto
31 Mar 12
Rate wef 1
Apr 13
Remark/ condition
C-101(a)
“Textile articles for industrial
use” specified in Entry 9 of
Notification which are
covered by CETH 5901,
5902 & 5903
Varieties of textile & textile
articles as notified is
expanded & also modified
w.r.t. CETH 5901, 5902,
5903, 5907
5% on Certain
Notified products
covered by CETH 5802,
5804, 5806, 5905 &
5906
5% on Certain
Notified products
covered by CETH 5309
to 6006
5% on certain
products
inserted from
1 Apr 2013
It covers coated textile
fabrics , tyre cord fabric,
etc…. Refer
Notification;
5%
Notfn No. CST1413/CR
48/ Taxation 1 dt 30
March 2013 exempts
Interstate Sale of
Furnishing fabric to
dealer or non-dealer…
(Form ‘C’ not needed?
Budget Speech vs Sec.
8(5) of CST Act)
12.5%
5%
Notification listing 39
entries, added 40th
Entry
C-101(b)
C-107(8)
4 May 2013
Automated Implantable
Cardiac Defibrillators
(AICD) added in the list of
notified medical devices &
implants.
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 increased
Schedule
Entry
Goods Description
E-1
Unmanufactured tobacco
whether sold under brand
name or not
NIL u/e
A-45A
12.5%
CETH 2401 covers such
products; Sch. Entry A-45A
deleted & D-12 substituted
from 1 Apr 13
E-1
Beedi
5% u/e.
C-12(b)
12.5%
Beedi leaves continue @ 5%
u/e C-12(a)
D-14
Cigar & Cigarettes
20% u/e
D-12
25%
Sch. Entry D-12 recasted &
D-14 inserted.
D-12
Tobacco, manufactured
tobacco and products
thereof (other than Beedi,
unmanufactured tobacco,
Cigar & Cigarettes)
20%
20%
No change
4 May 2013
Rate upto
31 Mar 13
Rate wef
1 Apr 13
CA Deepak Thakkar
PHD & Associates
Remark/ condition
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
Schedule
Entry
Goods Description
E-1
Powders, tablets, cubes,
crystals and other solids or
liquids from which nonalcoholic beverages &
soups are prepared
4 May 2013
Rate upto
31 Mar 13
Rate wef
1 Apr 13
5% u/e.C107(11)(g)
CA Deepak Thakkar
PHD & Associates
12.5%
Remark/ condition
Processed, semi-processed or
semi-cooked fruits and
vegetables
including fruit jams, jelly,
pickle, sauce, porridge,
marmalade, cottage
cheese (paneer), honey,
preserved fruits, fruit squash,
fruit paste, fruit drink,
fruit juice, vegetable juice,
squashes, syrups, cordials,
whether or not sold in frozen
state or in sealed container
continue @5% u/e.
C-107(11)(e)
(if served for consumption then
@12.5%)
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
Schedule
Entry
Goods Description
Rate upto 31
Mar 13
E-1
Paver blocks
5% u/e. C-3
12.5%
Bricks & roofing tiles
continue @ 5% u/e. C3
E-1
Medicinal products
capable of being used as
Cosmetics or Shampoos
5% u/e
C-29(a)
12.5%
Mosquito repellents
continue @ 12.5%;
Drugs continue @ 5%
u/e.
C-29(a)
Section
42 for
Composi
tion
Scheme
Dealers in second
hand motor vehicle
eligible for composition
scheme, expanded to
include ‘Tractors’
Composition
@ 12.5% on
15% of Sale
Price of
Vehicle.
Dealer shall apply in
Form-5 & be certified
by J.C. of ST; to fulfil
all conditions of
Notification
4 May 2013
Rate wef
Apr 13
CA Deepak Thakkar
PHD & Associates
1
Remark/ condition
24
Tax Invoice for claim of Setoff on Purchases (Sec. 86)

‘Tax Invoice’ is must to claim setoff;

Parameters of Tax Invoice:
1.
Words “TAX INVOICE” in bold at the top or prominent place
2.
Tax Invoice Number & Date.
3.
Seller’s Name, Address, VAT TIN # (Effective Date)
4.
Buyer’s Name & Address: VAT TIN # must from 1 May 2010
5.
Goods Description, Quantity, Rate & Net Amount.
6.
‘Tax’ amount must be shown separately.
7.
Certificate of continuing RC, as prescribed u/r. 55.
8.
Sign of Dealer / Authorized Person.
9.
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)
4 May 2013
CA Deepak Thakkar
PHD & Associates
25
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:
1. Constitutional validity of setoff Sec 48(5) of MVAT Act
2. If validity of Sec 48(5) upheld, then the words “actually paid”
be read down to mean “ought to have been paid”
3. Challenge the Order of Assessment
4. Seeking mandamus to the State to recover tax from the
vendor, of which setoff is claimed
5. Consequential Orders for Setoff & Refund
4 May 2013
CA Deepak Thakkar
PHD & Associates
26
26
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
4 May 2013
CA Deepak Thakkar
PHD & Associates
27
27
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)
4 May 2013
CA Deepak Thakkar
PHD & Associates
28
28
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
4 May 2013
CA Deepak Thakkar
PHD & Associates
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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:
(1) Constitutional validity of Sec 48(5) is upheld
(2) 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)
(3) Right to obtain setoff subject to prescribed conditions is lawful
(4) 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
(5) Order of Assessment is subject to remedy of Appeal to pursue remedy
available in Law
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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??
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Documentary evidence to prove genuineness of purchases…
1. History & background of Buyer
2. Buyer is a RD since long, filing Returns, paying
taxes & assessed regularly under BST Law &
MVAT Law
3. Purchases effected in regular course of business
from Supplier, either directly or through agent
4. Supplier is RD having TIN (Check on Website)
5. Received goods (Challan/Stock records)
6. Received “Tax Invoices” as per Law
7. Purchase transaction recorded in books of A/c
8. Payment made vide a/c payee cheque/payorder/
DD
9. Bank statements reveal debit of such payments
10. Ledger A/c of supplier reflects all transactions
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…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)
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Survey of URD (Un-Registered Dealers (Sec. 66)
1. Survey Dept given powers by Commr
2. Purpose to identify URD
3. General notice to a class of dealers or Special
notice to a particular dealer for furnishing data
of sales or purchases
4. Commr may call for details & particulars of
Services provided by Public Utilities, Banks &
Financial Institutions
5. Survey results may be published such that it
does not disclose identity of any particular URD
6. 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
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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
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SC ruling in K Raheja’s case under Karnataka VAT Act
(5-5-2005) 141 STC 298
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Amendment to the MVAT Act – effective 20 June 2006
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Trade circular No 12T of 7 February 2007: K.Raheja Decision applicable in
Maharashtra -trigger point of controversy
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MCHI Challenged Constitutional validity of amendment & Circular
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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?
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….Vat on Builders & Developers…..
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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?
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Composition Scheme for Construction Contracts
5% Scheme for new construction contracts w.e.f 20 June 2006
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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
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All agreements registered from 1 Apr 2010 will have to be
mandatorily governed by this scheme
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No Tax on sale of flats, etc. after completion of construction
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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
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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
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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:
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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: QuarterlyCA(Para
Return Form 233 (Para 2j)
Deepak2i);
Thakkar
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Issues for Construction Industry, post SC & BHC ruling
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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??
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Tax Computation: as per Vat Provisions & Composition Schemes
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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)
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Issues for Construction Industry, post SC & BHC ruling
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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’): said due date
extended till 15 Jan 2013 vide Trade Circular # 1T dt. 4 Jan
2013
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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))
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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
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Issues for Land Value Deduction u/r 58(1A)
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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
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CA Deepak Thakkar
deepak@phd-ca.com
022-2682 0083
98202 98225
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