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UNDERSTANDING MVAT
By CMA DILIP M. BATHIJA
Practising Cost Accountant
Email- [email protected]
Mb : 8600697765/ 9422478735
HOW & WHEN MVAT
STARTED?
The MVAT Act came into effect from 1-4-

2005.
The BST Act, Works contract Act, Lease

Act, & Bombay motor sprit taxation Act
merged into MVAT Act.
BASIC OBJECTIVES OF VAT
Uniformity in rates of Taxation.
 No declaration Forms.
 Full setoff.
 Larger tax base.
 Self Policing.

How system of Taxation works under
MVAT Act

A sells Goods to B

Basic price

5 % VAT

Total


C sells Goods to D
100/-

C’s Purchase price
136.50
5/-

Sales price
170/-
105/-

VAT @ 5 %
B Sells Goods to C

Total
8.50
178.50

B’s Purchase price
105/-

VAT on sales
8.50

Sales price
130/-

Input credit
6.50

VAT @ 5 %

Balance VAT payable
2

Total

VAT on sales
6.50

Value Addition

Input credit
5/-

5 % on Value addition

Balance VAT payable
1.50

Value Addition
30/-

5 % on Value addition
1.50
6.50
136.50
40/2/-
BASIC CONCEPTS
Importer
 Set-off
 GTO
 URD
 Composition schemes

Registration
1. Normal Registration based on Turnover.
 Importer- Total T.O. to exceed Rs.1,00,000/ Taxable goods Rs.10,000/-.
 Others-Total T.O. to exceed Rs.10,00,000/
Taxable goods Rs.10,000/-.

Registration Fees Rs.500/-
2. Voluntary Registration.

No condition of Turnover

Registration fees Rs.5000/
Deposit Rs.25000/-
Registration process
Documents required for Registration.
1. Proof of constitution of Business.
2. Proof of place of Business.
3. Copy of PAN Card.
4. Proof of Residential Address.
Passport, Driving licenses, Election card,
Property card, Electricity bill, (any two).
5. Two Photos.
6. One cancelled cheque.
7. Letter of Authority.
Category of
Person
Residential proof
PAN card
Photo
Proprietor
Yes
Yes
Yes
Partnership firm
N.A.
Yes
N.A.
Partners
Yes
Yes
Applicant partner
HUF
N.A.
Yes
N.A.
Karta
Yes
Yes
Yes
Company
N.A.
Yes
N.A.
Directors
Yes
Not required
Reqd., if Pvt. Ltd.
Co.
Authorised
signatory
Yes
Yes
Reqd., if Pvt. Ltd.
Co.
Registration process
1. Application to be made within 30
days in Form 101.
2. Documents verification on the Called
day.
3. Allotment of TIN number.
4. Dealer’s enrolment after registration.
5. Advisory Visit.
Knowing Rate of Tax





Schedule A- Tax free goods
Schedule B- Silver, Gold, Precious metals
etc. Tax rate 1 %.
Schedule C- Industrial materials etc. Tax
rate 5%.
Schedule D-Liquor, Motor spirits etc. Tax
rate 20% or above.
Schedule E- Residuary schedule Tax rate
12.5 %
Amendment in R.C. required
1. Change in the Name of business.
2. Change in constitution of Firm without dissolution.
3. Change in trustee of any trust.
4. Change in Karta of HUF.
5. Conversion of Pvt Ltd. company to Public Ltd.
company.
6. New products to be purchased from outside state.
7. Opening or closing of any place of additional Business,
or shifting of place of business.
Intimation to be given within 60 days.
Preparation for filing returns

Sale summary to be prepared as follows:
Net sale
12.5%

Net sale
5%
VAT
5%
OMS
sale basic
CST
2%
Total
Purchase summary to be prepared as follows:
Net amt.
12.5%

VAT
12.5 %
VAT
12.5 %
Net amt.
5%
VAT
5%
Set-off calculation
Total tax on purchase
Less: tax on negative list as per rule 54.
Less: Reduction under rule 53
Available set-off
Tax payable on sales
Less: Available set-off
Balance tax payable
OMS
basic
CST
2%
Total
Filing of Returns
1. Type of Forms

Form 231- All VAT dealers other than specified below.

Form 232- Composition dealers.

Form 233- Those in the Business of Works contract,
Leasing & Partly composition dealers.

Form 234- PSI dealers.

Form 235- Notified Oil Companies.

Form III E- CST Return.
2. Periodicity of filing of Returns.
1. First year - Quarterly returns.
2. Subsequent year – Depending on previous year’s
tax liability as given below:
 Tax liability > 10 lakhs or
Monthly
Refund > 1 Cr.

Tax liability upto 1Lakh or
Half yearly
Refund upto 10 Lakhs

Tax liability between 1 - 10 Lakhs or
Refund Between 10 Lakhs - 1 Cr.
Quarterly
Due dates for payment of Tax




Monthly
21 days from the end of Month.
Quarterly
21 days from the end of Quarter.
Half yearly
30 days from the end of half year.
Return to be uploaded within 10 days from the
end of due date.
Return filing – other important
points
1. No CST return to be filed, if there is no
OMS sale.
2. All tax payments to be made by Epayment, in MTR-6 challan.
3. All returns to be E-filed.
4. Annexures J-1 & J-2 to be filed with
regular returns.
5. Revised return can be filed within
prescribed time.
Recent developments in VAT - I
1.Computerised Desk Audit (CDA) for 2011-12.
i. Audit parameters
Set off from non genuine suppliers
Set off from TINS not in department’s data base
Set off from registration cancelled suppliers
Set off from suppliers who are non return filers for the complete
year.
set off from suppliers who are composition dealers
Set off from suppliers not showing taxable sales in returns
Excess set off due to mismatch of J2 of buyer with J1 of supplier
Amt. payable as per VAT audit report.
ii. CDA compliance system available on the website, communication
to the dealer in Form 604 A.
iii. Payment of due tax & interest, and filing of revised annual return.
iv. Compliance to the CDA to be filed on the website before 3rd
sept.2014
v. Communication of case closer in Form 605.
Recent developments in VAT - II
2. Concession in late fees due to delay in filing
of Returns.
i. If return is filed within 30 days from the
expiry of due date, late fees Rs.2000/- only
ii. If delay is beyond 30 days late fees payable
Rs.5000/iii. For defaults relating to returns of old periods
upto February 2014 returns can be filed by
paying late fee of Rs.1000/- per return scheme
available upto 30th sept, 2014.
Audits
1. Business Audit
This Audit is done by the dept.
2. Audit U/s 61 by CA/CMA
i. If turnover of Sales plus OMS branch transfers, or if
turnover of Purchases exceeds Rs. 1 Cr. Audit
applicable
ii. Last date for Audit report filing 15 January of next
year.
iii. Penalty for non filing of Audit report, 0.1 % of total
sales.
iv. Audit report to be filed in Form no. 704
Preparing VAT Audit programme
Factors to be considered:
1. Turnover of client.
2. Number of Business locations.
3. Number of sales & Purchase
transactions.
4. Composition of Sales.
5. Periodicity of filing returns.
Areas to be covered in
VAT Audit
1.
2.
3.
4.
5.
6.
7.
8.
9.
Sales .
Purchases.
Set-off availed.
Tax Payments & Interest for delay, if
any.
Deductions claimed.
Declarations received.
TDS Compliances.
Reconciliation of turnover of sales &
purchase as per returns with Trading,
P & L Account.
Asset purchases and Sales.
TDS under VAT - I
1. Applicable to payments made for Works contracts.
2. Rate of TDS: 2 % if contractor is RD, 5 % if URD.
3. No deduction if aggregate amt in a year is less than Rs. 5 lakhs, in
case of Co-op Hsg. Soc.,this limit is Rs.10 lakhs.
4. Deduction on the date of payment or credit whichever is earlier.
5. No need to obtain tax deduction Account number.
6. Interest @ 1.25% per month for late payment.
7. TDS payment by 21st of next month.
8. TDS certificate to be issued in Form No. 402
9. E TDS return in Form 424 to be filed.
10. Register to be maintain in Form No. 404.
11. Annual TDS return to be filed in Form No 405 within 3 months from
the end of year.
TDS under VAT – II
12. Who has to deduct TDS:
i. Company registered under the Companies Act.
ii. A registered dealer under MVAT Act.
iii. Trusts
iv. Co-op. Housing Society registered under MCS Act.
V. Societies registered under Societies Act.
vi. Insurance or Finance corporation or Company & Bank
included in the second schedule to the RBI Act & any
scheduled Bank.
Vii. A Local authority.
viii. All industrial, Commercial or Trading undertakings,
Company or corporations of Central/State govt. & Port
trust.
ix. Central or State Government.
Basic conditions for availing Set-off
1. Purchase invoice must be in the
form of Tax Invoice.
2. Tax charged separately.
3. Record of Purchases to be
maintained.
4. Tax must have been paid into the
Govt. treasury by supplier of goods.
1. This presentation is prepared for CEP
organised by WIRC- ICAI on 23rd August,
2014.
2. It is prepared on the basis of laws prevalent at
the time of making presentation .
3. Given the constraints of space & time, it
explains in a summarised manner the
important points relating to matters covered in
the presentation.
4. One should refer the provisions of relevant
laws for proper interpretation and
understanding.
Thank You