J B Nagar CPE SCM of WIRC of

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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

n § “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 Gist of amendment & effective date 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 *‘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 Remark / Issue Identifying transaction & period…not reqd; Saving in interest payability; Int from 21 Apr or 15 Jan or 15 Feb? ; Non 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 Remark / Issue 4 Expln: The dues of Rs. 100 or less shall not be recovered by Commissioner; This applies to Sec. 32 & Such payment is required to be 32 A, i. e. such dues made within 30 days from the date may be as per of service of notice by the return / order / audit Commissioner; report Sec. 32 A inserted Tax liability finally pointed by Vat wef Auditor and which is accepted by 1 May 2013 the dealer, either fully or partly, will be recovered by serving a demand notice. On such tax payable, interest is 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 Ø Scheme of Taxation of Liquor: Sec. 41(5) amended from 1 May 2013 Remark / Issue Presently ‘Wine’ covered by Sch. Notification # VAT 1511/ CR 57/ D-3 A taxed Tax-1 dt 30 Apr 2011 issued u/s @20% as per Vat 41(5) to grant Exemption to system i. e. pay vat on sales & Specified Registered Dealer of claim setoff on tax on sales of Liquor, subject to its purchases; Post amendment conditions notified: wine & liquor Ø Sale of ‘wine’ also may be may get same taxed in the lines of ‘liquor’; 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) Dealer, whose Interstate Sales inserted from 1 turnover in previous year is in May 2013 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(15 A): means HSD oil, ATF Duty paid & Bonded, Aviation Gasoline Duty paid & Bonded and Petrol and other notified products Notification No. VAT 1506/CR 135/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(15 A) 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 12 Gist of amendment Remark / Issue Definition of ‘Petroleum Sec. 2(17 A) amended from Products’ u/s 2(17 A): means superior kerosene 1 May 2013 Negative set off rule 54(b): No set off on motor spirits unless oil(SKO), LPG, furnace oil, LDO, resold/interstate sale or Naptha and LSHS and other stock transfer/ Exports notified products. [ Setoff granted on HSD Oil in Gupta *The word ‘and’ has been Metallics & Power Ltd. substituted for ‘or’ ; Technical amendment Vat Appeal # 55 & 56 of 2010 dt 21 Dec Other products may be 2010 MSTT] notified in future. 4 May 2013 CA Deepak Thakkar PHD & Associates 12

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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 12. 5% (components & Parts thereof already specified in Sch. Entry A-2) NIL Notification of aids & implements used by Handicappe d persons expanded A-4 (C) Rice Bran NIL Sch. Entry C-49 deleted & exclusion subclause (ii) from A-4 (c) removed 4 May 2013 Rate upto 31 Mar 13 5% under Entry C 49 from 1 Apr 2010 Rate wef 1 Apr 13 CA Deepak Thakkar PHD & Associates Remark/ condition 13

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 dt. 30 Mar 2013 effective from 1 April 2013: Goods made Taxfree or tax free period extended Sched ule Entry Goods Description A-9 A (a) Paddy, rice, wheat and pulses in whole grain, split or broken form NIL till Taxfree when 31 March sold from 1 st 2014 May 2006 to 31 Mar 2014 (Exemption extended) A-9 A (b) The flour of wheat & rice including atta, maida, rawa and suji whether sold singly or in mixed form; NIL till . . do. . 31 March 2014 A-9 A (c) The flour of pulses including besan when sold singly and not mixed with flour of other pulses or cereals NIL till . . do. . 31 March 2014 4 May 2013 Rate upto 31 Mar 13 Rate wef 1 Apr 13 CA Deepak Thakkar PHD & Associates Remark/ condition 14

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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-27 A Hand Pumps used for pumping water 5% under Entry C 42 NIL Sch. Entry C-42 deleted which read as “Hand Pumps, Parts & Fittings” & New Entry A-27 A inserted. A-36(1) Judicial. Non-judicial stamp papers, Court fee stamps paper when sold by Govt. Treasuries or Authorised Treasuries were Vendors 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)/ Taxn 1 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 1 st May 2006 to 31 st March 2014 (Exemption extended) A-51 (ii) Gur 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 till 31 March 2014 . . do. . 4 May 2013 CA Deepak Thakkar PHD & Associates 16

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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 till 31 March 2014 . . do. . A-51 vi) Solapuri chaddars; NIL till 31 March 2014 . . do. . A-51 vii) Towels; NIL till 31 March 2014 . . do. . A-51 viii) Wet dates, NIL till 31 March 2014 . . do. . 4 May 2013 Rate upto 31 Mar 13 Rate wef 1 Apr 13 Remark/ condition Taxfree when sold from 1 st NIL till May 2006 to 31 st March 31 March 2014 (Exemption extended) CA Deepak Thakkar PHD & Associates 17

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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 Rate wef Mar 13 Apr 13 NIL 1 Remark/ condition NIL till Taxfree when sold 31 March from 1 June 2010 2014 to 31 March 2014 (Exemption extended) A-62 4 May 2013 Water Meters sold to local bodies 12. 5% NIL CA Deepak Thakkar PHD & Associates Water meters sold to other persons still taxable @ 12. 5% 18

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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% Diamonds 1% B-2 B-3 (Notfn No. VAT 1513/CR 46(7)/ Taxn 1 dt. 4 April 2013 4 May 2013 Rate upto 31 Mar 13 1% Rate wef 1 Apr 13 Remark/ condition 1. 10% upto (a) Rate enhanced only for 31 March 2014 2013 -14; (b) Embroidery or Zari material u/e. C-105; Industrial goods & tools u/e. C-53 A taxable @ 5% 1. 10% upto (a) Rate enhanced only 31 March 2014 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 CA Deepak Thakkar PHD & Associates 19

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 dt. 30 Mar 2013 effective from 1 April 2013: Goods whose tax rates have been maintained / reduced / increased Schedule Entry Goods Description C- 108(1) (b) Tea in leaf or powder form 5% from 5% upto 31 Mar (a) 5% continued for 1 more including instant tea. 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-31 A Excavators covered under CETH 8429 5200 & are not liable for Registration under the Motor Vehicles Act, 1988 Industrial goods & tools made of Diamond, Gold, Silver, Platinum, Osmium, Palladium, Rhodium, Ruthenium, and alloys thereof, if any C-53 A 4 May 2013 Rate upto 31 Mar 13 Rate wef 1 Apr 13 Remark/ condition 12. 5% 5% New Sch. Entry C-31 A inserted 1% u/e B-1 5% New Sch. Entry C-53 A inserted CA Deepak Thakkar PHD & Associates 20

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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 products inserted from 1 Apr 2013 It covers coated textile fabrics , tyre cord fabric, etc…. Refer Notification; 5% on Certain Notified products covered by CETH 5309 to 6006 5% Notfn No. CST 1413/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 40 th 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)/ Taxn 1 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-45 A 12. 5% CETH 2401 covers such products; Sch. Entry A-45 A 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% No change 4 May 2013 Rate upto 31 Rate wef Mar 13 1 Apr 13 20% Remark/ condition CA Deepak Thakkar PHD & Associates 22

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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 non- alcoholic beverages & soups are prepared 4 May 2013 Rate upto 31 Rate wef Mar 13 1 Apr 13 5% u/e. C 107(11)(g) 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%) CA Deepak Thakkar PHD & Associates 23

Notfn No. VAT 1513/CR 46(1 to 6)/ Taxn 1 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 E-1 Medicinal products capable of being used as Cosmetics or Shampoos Section 42 for Composi tion Scheme Dealers in second hand motor vehicle eligible for composition scheme, expanded to include ‘Tractors’ 4 May 2013 Rate wef Apr 13 1 Remark/ condition 12. 5% 5% u/e C-29(a) Bricks & roofing tiles continue @ 5% u/e. C 3 12. 5% Mosquito repellents continue @ 12. 5%; Drugs continue @ 5% u/e. C-29(a) Composition @ 12. 5% on 15% of Sale Price of Vehicle. CA Deepak Thakkar PHD & Associates Dealer shall apply in Form-5 & be certified by J. C. of ST; to fulfil all conditions of Notification 24

Tax Invoice for claim of Setoff on Purchases (Sec. 86) Ø ‘Tax Invoice’ is must to claim setoff; Ø 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 29 29

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 § § Trade Circular # 8 T 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? ? 4 May 2013 CA Deepak Thakkar PHD & Associates 30 30

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 4 May 2013 CA Deepak Thakkar PHD & Associates 31 31

…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 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, 8 th 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) 4 May 2013 CA Deepak Thakkar PHD & Associates 32 32

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 4 May 2013 CA Deepak Thakkar PHD & Associates 33 33

Vat on Builders & Developers…. . n Sale of Unit after completion of Construction: Not taxable n Works Contract vs Contract for Right in immovable property during construction phase n SC ruling in K Raheja’s case under Karnataka VAT Act (5 -5 -2005) 141 STC 298 n Amendment to the MVAT Act – effective 20 June 2006 n Trade circular No 12 T of 7 February 2007: K. Raheja Decision applicable in Maharashtra -trigger point of controversy n MCHI Challenged Constitutional validity of amendment & Circular n 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? n n 4 May 2013 CA Deepak Thakkar PHD & Associates 34

…. Vat on Builders & Developers…. . n n n 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# 14 T dt 6 Aug 2012); SC directed to pay Tax & extended dates till 31 Oct 2012 Trade Cir # 18 T 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? 4 May 2013 CA Deepak Thakkar PHD & Associates 35

Composition Scheme for Construction Contracts 5% Scheme for new construction contracts w. e. f 20 June 2006 n n n 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(7 A) 1% Scheme for sale of flats w. e. f. 1 April 2010 n Flats, dwellings, buildings or premises transferred with interest in land vide agreements, during construction w. e. f. 1 April 2010 n Benefit of this scheme can be availed only by Registered dealers for agreements registered on or after 1 April 2010 n Composition sum=1% of Agreement Value or SDV, whichever is higher, payable upfront on registration of document n No setoff n All agreements registered from 1 Apr 2010 will have to be mandatorily governed by this scheme n No Tax on sale of flats, etc. after completion of construction 4 May 2013 CA Deepak Thakkar PHD & Associates 36

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 n n 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 4 May 2013 CA Deepak Thakkar PHD & Associates 37

Issues for Construction Industry, post BHC & SC ruling n 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 n Registration: Whether to obtain registration? Tax collection & Setoff: only by RD Trade Cir # 14 T dt 6 Aug 2012 for Grant of ADM Relief to Developers: n n ¨ ¨ ¨ ¨ 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 2 f & 2 g) Upload all Returns alongwith tax (interest & Penalty stayed by SC) (Para 2 k); 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 # IMC 10. 07/Adm Relief/URD/Adm-4/B-1020 dt 18 Apr 2007 (Para 2 f). Return periodicity: Quarterly (Para 2 i); Return Form 233 (Para 2 j) CA Deepak Thakkar 4 May 2013 PHD & Associates 38

Issues for Construction Industry, post SC & BHC ruling ¨ ¨ ¨ Penalty for late/Non-Regn u/s 29(2 A) wef 1 May 2012 @ sum = tax payable, will not be attracted (Para 2 L) Dept will initiate penal actions if regn is not obtained & returns not filed (Para 2 n) 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? ? n Tax Computation: as per Vat Provisions & Composition Schemes n 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) 4 May 2013 CA Deepak Thakkar PHD & Associates 39

Issues for Construction Industry, post SC & BHC ruling n n n 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 # 1 T dt. 4 Jan 2013 n 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)) n 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 4 May 2013 CA Deepak Thakkar PHD & Associates 40

Issues for Land Value Deduction u/r 58(1 A) n n n n 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 1 st Jan every year which is applicable to agreements registered in that calendar year 4 May 2013 CA Deepak Thakkar PHD & Associates 41

CA Deepak Thakkar deepak@phd-ca. com 022 -2682 0083 98202 98225 4 May 2013 CA Deepak Thakkar PHD & Associates 42

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