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INTRICACIES IN MVAT AUDIT BY CA JANAK VAGHANI
Format of Audit Report v. SA 700 Standard of Auditing (SA 700) issued by ICAI requires Auditor to give audit report in prescribed format in SA The IT and MVAT Audit Report Prescribed under the acts Do not permit any Modifications ICAI Announcement dated 29 th July 2013 permits Auditor to give audit report in prescribed audit report by the statute
Complete Audit Report Amendment in Section 61 of MVAT ACT from 1. 5. 2011 Penalty for knowingly furnishing incomplete audit report The Term “complete report” as per Explanation II only if all the items, certification, tables, schedules and annexures are filled appropriately and are arithmetically self-consistent Otherwise it is incomplete audit report subject to penalty
Complete Audit Report The VAT Auditor should take utmost care in filling various schedules and annexure in form 704 All applicable schedules and annexure should be properly filled Only then applicable schedules and annexure should be selected in Part-I Proper representation from the dealer should be obtained for non receipt of any required details
Certificate as per Clause (d) In new form 704 in part I clause (d) and table 7 are introduced from 23 -08 -2013 Accordingly the vat auditor is required to certify “on the basis of an information available on the website of department, the period under audit involves no issue in case of this dealer in which a decision against the State Government or the Commissioner was delivered by the Tribunal and the Reference and/or Appeal therein is pending before appropriate forum except detailed in table 7 herein below, if applicable. ”
Certificate as per Clause (d) In Table 7 following particulars are to be given; Sr. No. Reference/ Appeal No Name of Dealer It is not required to give details of issue involved thereunder If more than one issue is referred out of which only one is applicable then what? When subsequently decision is given by the HC/SC in the same matter or in any other matter under the MVAT act or under other State acts should the vat auditor report it?
Certificate as per Clause (d) Details to be given only on the basis of information available on the web site of the department Purpose of department may not serve in some cases When vat audit report is furnished before uploading data on the site or reference or appeal is filed after furnishing of audit report What about cases of dealers not required to furnish audit reports or who have not furnished audit reports? Whether it applies to references/appeals filed under the earlier acts? Whether it applies to writ petitions filed by the department?
ANNEXURES J-1 AND J-2 Annexures J-1 and J-2 provides details of Customer/Supplier wise sales and purchases These details are to be given TIN wise where tax is charged separately in bill and sold to / purchased from registered dealer Sales /Purchase to/from URD to be shown in Row 5001 Surprisingly Row 5001 in J-2 amount of tax charged separately is required to be shown To show it if tax is charged separately in bill otherwise to show nil under that column. Where tax in not charged in tax invoice to mentioned in last row 5002 In j-1 the amount of such sale should be shown net of tax amount to tally with amount of taxable sale
Annexures J-1 and J-2 Details of sales and purchases should be given in annexures J-1 and J-2 After deducting amount for goods returns or Giving effect to any Debit Note or credit notes If as a result of credit note the amount of sales or purchases results in minus figures then It is not validated in Annexure J-1/J-2 How to report?
Annexures J-1/J-2 In Annexures J-2 TIN wise details to be given even no set-off is claimed by the dealer In Annexure E in section 2 new row is added for details of taxable goods from registered dealer for which no set-off is claimed Many dealers have not kept required details for such purchases on which no set-off is claimed The vat auditor to give appropriate discloser to this effect
Issue of Proper Tax Invoice The amendment in section 86 of MVAT Act Requiring selling dealer to mention TIN from 1. 5. 2010 The Vat Auditor to certify in clause (l) of Part I “The tax invoices in respect of sales are in conformity with the provisions of law” The VAT Auditor should verify issue of tax invoices whether it contains TIN of purchasing dealer or not To give appropriate remarks or comments for any deviations against clause (l)in Part I
Proper Tax Invoice Ø The Commissioner of Sales Tax has clarified the amendment to section 86 of MVAT Act by Trade Circular No 17 T of 2010, Ø Accordingly, if in tax invoice the TIN of purchasing dealer is not mentioned then it is not a valid tax invoice as such no set-off will be allowed Ø In clause (h) of Part I the VAT Auditor is require to certify that “The setoff is worked out only on the basis of tax invoices in respect of the purchases” Ø The VAT Auditor should verify tax invoices for purchase of goods on which set-off is claimed whether it contains TIN of the claimant dealer Ø To give appropriate remarks or comments for any deviations against clause (h) in Part I
Revised Returns As per amended section 20 (4) of the MVAT Act from 1. 5. 2011 the dealer can file revised return only once in each of following circumstances: - On his own within 10 months from the end of year for which it relates -As per advise of VAT Auditor within one month from the end of the prescribed period for furnishing of vat audit report -As per advise of any Departmental Authority in any proceedings within one month -Now as per amended section single annual return can be filed to give effect to advise given by the vat auditor or by the department
Revised Returns The receipt of goods from outside the State as well as C form purchases should be properly shown in periodical returns as inter-Stock transfer as the case may be inter-State purchase otherwise the department is not issuing the dealer required F/C forms The department should consider this single annual return for issue of Forms.
Letter of Submission The dealer is expected to give details of VAT/CST paid based on his acceptance of VAT Auditor’s Recommendations. The time limit for submission for letter of submission is one month from the due date of furnishing of vat audit report And time limit for submission of letter of Submission is 10 days The department should extend the time limit for submission of letter to one month from the due date for submission of vat audit report
Direct Recovery of Tax –Section 32 A provides for recovery of any amount of tax Payable as advised by the vat auditor and Accepted by the dealer but not paid Therefore the vat auditor should took utmost care in giving final report and advise to pay tax It is advisable to take prior approval of dealer before uploading on the site Like wise care should be taken while submitting letter of submission
Direct Recovery of Tax –Section 32 A The vat auditor is not required to advise to pay tax on account of: Differential amount of tax payable for want of C/F forms etc. Any issue mentioned in table 7 For pending TDS Certificates in view of provision of section 31(9)which provides that -Where tax is deductible at source by any employer, - the person making the said supply shall not be called upon to pay tax himself -to the extent to which the tax has been deducted in respect of the said supply