An employee expects and deserves, as a matter of right, some reward when he retires after a long meritorious service. The enactment of the Payment of Gratuity Act, 1972 has fulfilled this expectation of an employee. This Act has came into existence since 16th Sept., 1972.

What is Gratuity?

Gratuity is a short of an award which an employer pays out of his Gratitude, to an employee for his long and meritorious services, at the time of his retirement, or termination of his services. Payment of Gratuity is however, compulsory for employers subject to Eligibility. (stated as below)

Under the Act an employee becomes, entitled to earn gratuity after putting in service of minimum five years. When an employee dies while in service his nominee or heirs are entitle to get gratuity even if the employee had put in less than 5 years service. The rate of gratuity is 15 days salary every year of service but the total amount of gratuity cannot exceed
Rs. 3,50,000/- ; recently from 24th May, 2010, Central Govt. by Gazette Notification enhanced the limit up to
Rs. 10,00,000/- (Rupees Ten lakh)

Object

The Payment of Gratuity Act, 1972 has been passed with the object of providing a uniform scheme for payment of gratuity to industrial workers throughout the country.

Applicability

1. Every factory (as defined in Factories Act), mine, oilfield, plantation, port and Railway company.

2. Every shop or establishment to which Shops & Establishment Act of a State applies in which 10 or more persons are employed at any time during the year and

3. Any establishment employing 10 or more persons as may be notified by the Central Government.

4. Once Act applies, it continues to apply even if employment strength falls below 10.

5. The Act also has been made applicable to :-

a) Motor Transport undertaking,

b) Clubs,

c) Inland Water Transport Establishments

d) Local Bodies and

e) Solicitors Officers.

Eligibility

1. Any employee has to render minimum five years’ of service.

2. At the time of retirement or resignation or on superannuation, an employee should have rendered continuous service of not less than five years.

3. In case of death or disablement, the gratuity is payable, even if he has not completed 5 years of service.

Notice of Opening, Change or Closure of an Establishment

An employer has to send a notice in Form A to the Controlling Authority of the area within 30 days of the Rules as becoming applicable. In addition to that, Form B is to be submitted within 30 days of any change in the name, address, employer or nature of business whereas an employer has to send Form C intending to close down the business at least 60 days before intended closure.

It is permissible to Opt for Better Gratuity Scheme

An employee can, no doubt opt for scheme other than the Payment of Gratuity Act, if it appears to be better, but on adoption of that, he has to abide by the Scheme in to. The Supreme Court has held that sub-section (5) of section 4 of the Payment of Gratuity Act does not contemplate that the employee would be at liberty to opt for better terms of the contract, by keeping option open in respect of a part of the statute. While reserving his right to opt for beneficial provisions of the statute, he has to opt for either of them and not the best of the terms of the statute as well as those of the contacts. He cannot have both, such a constructions would defeat the purpose for which sub-section (5) of section 4 has been enacted. Impugned judgment cannot sustain and is set aside.

What is Continuous Service ???

The term ‘complete year of service’ means continuous service for one year.

An employee is said to have rendered continuous service, if:–

a) He has been in uninterrupted service, including service interrupted by sickness, accident, absents from duty with or without leave, lay-off, strike, or lock-out or cessation of work not due to the employee’s fault.

Note:– if an employee having been superannuated is a re-employed by the employer without any break in service, he will be eligible for payment of service.

b) In case of mine or non-seasonal establishment working for less than 6 days in week, he has actually worked for at least 190 days (in Mine) during the period of 12 months or 95 days, during the preceding 6 months, he shall be deemed to have rendered continuous service for a period of one year or 6 months, respectively.

c) In case of any other non-seasonal establishment he has actually worked for at least 240 days during the preceding 12 months or 120 days during the preceding 6 months, he shall be deemed to be have rendered continuous service for a period of 1 year or 6 months, respectively.

d) In case of seasonal establishment, he has actually worked for at least 75% of the days on which the establishment was in operation.

Notes:- For this purpose an employee shall be deemed to have actually worked on a day on which :-

a) He has been laid off under an agreement or in accordance with standing orders;

b) He has been on leave with full wages, earned in the previous year;

c) He has been absent due to temporary, disablement caused by accident arising out of, and in the course of, his employment, and

d) In the case of female, she has been on maternity leave not exceeding 12 weeks.

Retrenched Employee entitled to get Gratuity

Retrenchment means termination of service and termination of service is covered by the definition of retirement under the Act. Retrenchment of an employee falls within the scope of section 4(1)(b) of the Act under which gratuity is payable to an employee on his retirement. Therefore the employee is entitled to get gratuity.

Benefits

1. Gratuity is payable on the basis of all emoluments earned by the employee, i.e. basic wages plus Dearness Allowances / Special Allowances.

2. The quantum of gratuity is to be computed at the rate of 15 days wages (7 days wages in case of seasonal establishments) based on rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 months.

3. The total amount of gratuity payable shall not exceed the prescribed limit i.e.
Rs. 10,00,000/- (after publication of notification).

4. In case where higher benefit of gratuity is available under any gratuity scheme of the Co. the employee will entitled to higher benefit.

Calculation of Gratuity

1. Gratuity = Monthly Salary / x 15 days x No. of 26 Wages Last Drawn years of service

2. Piece rated employee –

Daily wage is average (total wages x 15 days x No. ofdrawn in last 3 months preceding years of servicetermination)

No. of days worked

3. Seasonal employee – based on 7 days wages for each season.

4. Max. Gratuity payable under the Act is
Rs. 10,00,000/- (w.e.f. 24th May, 2010)

Q. Since the payment of gratuity is not a regular feature, as such, we face difficulty in calculation of gratuity. Kindly appraise the method of calculation of gratuity?

A Section 4 of the Payment of Gratuity Act, 1972 deals with calculation of gratuity, The Explanation to the Act inserted by Act No. 22 of 1987 (w.e.f. 1-2-1987) provides that the completion of continuous services of five years shall not be necessary where the termination of the employment of the employee is due to death or disablement.

Example: Mr. Jatin joined an establishment in January 1985 at
Rs. 5,000/- per month. His wages were raised to Rs. 15,000 per month in December, 2005. He retired on 31st December, 2005. The amount of gratuity payable to him shall be calculated as under:

        =

Mr. Jatin retired on: =31-12-2005
———————————

x 15 x 20

Joined on : 1-1-1985

Total Service : 20 years

His last drawn monthly salary was
Rs. 15,000.

The gratuity for the period of 20 years

= 15 days wages x 20 monthly wages last drawn comprises 26 days.

Hence the calculation will result as follows

      =

15000
————-

x 15

 (days per completed 26 year of service) x 20 yrs.

= Rs. 1,73,077.00 will be payable toward Gratuity to Mr. Jatin

Forfeiture of Gratuity

1. The employee may wholly or partially forfeit the gratuity payable to him if his services are terminated on account:-

a) For his riotous or disorderly conduct or any other act of violence on his part or

b) For any act which constitutes an offence involving moral turpitude.

Note: If a workman who was dismissed for assaulting another workman, in a factory, is not entitled to payment of any amount of gratuity.

2. The employee partly forfeits the gratuity payable to him if his services are terminated for any act, wilful omission or negligence, causing any damage or loss to, or destruction of, property belonging to the employer, to the extent of damage or loss caused.

Deduction of Gratuity – Not permissible

The Gratuity of an employee can be forfeited or withheld only when he/she is dismissed for the prescribed misconduct like wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer shall be forfeited to the extent of the damage or loss so caused or if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude. In one case, the Calcutta High Court has also held that even if a workman gives an undertaking for making deductions, the gratuity of an employee cannot be withheld.

Time Limit of Payment

The Employer should pay the gratuity within 30 days from the date it becomes payable or after such date along with simple interest @10% p.a. (or as notified from Government from time to time) on the amount of gratuity, unless the delay is on the part of payee.

Protection

Gratuity payable under the Act cannot be attached in execution of any decree or order of any civil, revenue or criminal court.

Note: If the employee is dead then the gratuity becomes payable to the heirs of the employee and the same becomes attachable in the hands of the employer as the employer is legally bound to pay the said gratuity to the legal heirs of the employee.

Penal provision

1. If any person, for the purpose of avoiding any payment to be made under the Act, knowingly makes or causes to be made any false statement or false representation he would be punished with imprisonment up to 6 months, or with fine up to
Rs. 10,000/- or, with both.

2. If any employer contravenes, or makes default in complying with any provisions of the Act or any rule or order made thereunder, he would be punished with imprisonment up to 1 year, or with fine up to
Rs. 20,000/- or with both.

Handy tips for Employer

1) It is advisable for the employer to obtain nomination from the employee in Form ‘F’.

2) Form G when employee acquired family later.

3) And any change of nomination to be submitted in Form H, in duplicate.

As it renders easy for the employer to disburse the gratuity amount. If he neglects to obtain nomination and employee dies without nomination, it is likely that the family members of the deceased employee may approach the employer with conflicting claims to the gratuity compelling the employer to be in dilemma and to resort to the legal processes.

Display of abstract of the Act

Every employer must display an abstract of the Act and the Rules made thereunder in English and in the language understood by the majority of the employees at a conspicuous place at or near the main entrance of the establishment.

Obligations of Employer

1) Pay gratuity to the employees as required by the provisions of the Act and the rules framed thereunder

2) Determine the gratuity as soon as it becomes payable, and give notice of the same to the employee concerned and the controlling authority. In case of dispute regarding the amount determined, the admitted amount of gratuity must be deposited with the Controlling Authority. If the latter decides that any more gratuity is due to the employees, the same must be deposited with him.

3) Obtain an insurance in the prescribed manner for his liability for payment of gratuity under the Act, or establish an approved gratuity fund in the prescribed manner.

Obligations of Employee

1) An employee eligible for payment of gratuity under the Act, or any person authorised in writing to act on his/her behalf, has to apply to the employer within such time and in such form as may be prescribed under the rules for payment of gratuity as soon as it becomes due.

2) Every employee, after completing one year of service, has to nominate members of his / her family who may receive gratuity in case of his / her death.

1. Input Tax Credit – To Unit / Dealer whose sale is exempt – But goods are taxable – Not exempted goods

The Input tax credit is available to Unit / Dealer whose sale is exempt but goods are taxable. There is a distinction between exempted goods which means complete exemption for the specified goods, and when the goods are taxable goods, but a transaction or a person is granted exemption. When the goods are exempt there would not be a taxable transaction or exemption to taxable person. In other case, goods might be taxable, but exemption could be given to a taxable event. Exemption with reference to taxable events or taxable persons would not be exempt goods as such, for a subsequent transaction or when the goods are sold or purchased by a non-specified person the subsequent transaction or the taxable person would be liable to pay tax.

(Commercial Tax Officer v. M/s. A Infrastructure Ltd. (2016) 53 PHT 1 (SC)

2. Input Tax Credit – Disallowance for deficiency in tax invoice – Not justified

Disallowance of input tax credit merely on the ground that tax invoices did not contain name of the buyer and also its TIN number is not justified.

(M/s. Sanjeev Stone Crushing Company v. State of Haryana and Others (2016) 53 PHT 36(P&H)).

3. Sodexo meal vouchers (pre printed meal vouchers – Are not goods

Sodexo Meal Vouchers are not goods within the meaning of term goods contained in section 2(25) of the MVAT Act, 2002. The High Court had mistakenly held that these vouchers after being printed are sold by the appellant whereas its only a service charge of a small amount taken from its customers in proportion to the face value of the vouchers. The goods are provided by the affiliates whereas the appellant is only a facilitator between customers and affiliates. The intrinsic character of the entire transaction is to provide service by appellant through these vouchers.

(M/s. Sodexo SVC India Private Limited v. State of Maharashtra (2016) 53 PHT 45 (SC))

4. Turnover Tax on Textile Articles – Valid

The Constitutional validity of levy of turnover tax u/s. 6A of the Kerala VAT Act as it stood till the date of its omission from the KVAT Act was upheld subject to the restrictions imposed by Article 286 of the Constitution of India read with sections 3, 5 and 15 of the CST Act, 1956. The levy of turnover tax was contemplated only in respect of textiles articles specified in Entries 17A, 46A and 51 of The 1st Schedule to the KVAT Act. The tax, if any, collected on other articles during the period from 1-4-2014 to 23-7-2014 cannot be held to be legal and State was directed to refund it.

(Abdul Jabbar P. M. v. State of Kerala, 53 (2016) 24 KTR (Kar.)).

5. Sale price – Freight up to the delivery point – Forms part of sale price – Liable for Vat

Under the terms of the contract, seller was to deliver goods at a particular destination and was responsible and liable for any shortage, damages or deterioration to the consignment in transit and it was the duty of the seller to deliver goods to the destination point. Freight charges recovered shall from part of sale price liable to tax.

(M/s. Indian Oil Corporation v. Asst. Commissioner Commercial Taxes, Rajasthan, (2016) 24 KTR 109 (Raj.))

6. Purchase of goods under e-auction in Kerala – by SEZ unit, in Chennai – Not exempt – Liable to purchase tax under the Kerala VAT Act

Purchase of sandalwood by SEZ unit, Chennai, from Forest Department, Kerala by participating in e-auction and thereafter exporting to various countries, Chennai is not an export covered by section 5(1) of the CST Act, 1956. No exemption is provided from levy of VAT under SEZ Act. It is left at discretion of State Legislatures. In absence of any exemption, sale effected from DTA to a unit in the SEZ would not qualify to be export sales for the purpose of section 5(1) of the CST Act read with Article 286 of the Constitution of India and therefore, the levy of purchase tax under the Kerala VAT Act was upheld. However, the Court kept issue open to be decided in appropriate proceedings about exemption from payment of tax under section 5(3) of the CST Act, 1956.

(Lalitha Muralidharan v. Commr. of Comml. Taxes & Ors., (2016) 24 KTR 124 (Ker.)).

7. Entry Tax – Barely Matt – Not agri-culture produce – Liable to entry tax

Malted barley / Barley Malt, Hops, Pellets, and Maize flakes are not agricultural / horticultural produce falling under Entry – 2 of Schedule II of the Act and they are not exempt from levy of Entry Tax.

(State of Karnataka v. United Breweries Ltd. & Anr., 2015-2016 (20) KCTS 225 (Karn.)).

8. Higher rate of Entry tax on lime stone used for manufacture of clinker – Which is stock transferred outside the State – Not valid

Section 4A of The Entry Tax Act provides for higher rate of Entry Tax on certain goods consumed or used in manufacture of other goods. On a plain reading of it a higher rate of tax could be imposed based on the nature of the product manufactured from the goods entering the local areas. Once the nature of product manufactured is made the basis of tax it has to be applied uniformly and there can be no further imposition based on the nature of the end user of the goods so manufactured by notification. The sub-classification sought to be done based on the end users outside the local area by notification therefore clearly unsustainable in the law as having no nexus with the object to be achieved by levy of higher rate of entry tax.

(M/s. Ultra Tech Cement v. State of C. G. (2016) 28 STJ 169 (CG)).

9. Levy of Tax on MRP – Not valid

Levy of tax on sale of petrol and diesel by Oil Companies to the retail outlets at the price on which the retail outlets will sell these goods to consumers cannot be sustained in law as it is not on the actual price of the completed sale but on the price of a sale which is yet to take place from the retail outlet to the ultimate consumers.

(M/s. Veer Services v. Govt. of NCT of Delhi (2016) 28 (STJ) 176 (Del.))

10. Classification of Goods – Markers and Highlighters pens, carbon paper, stamp pad, ink of stamp pad and eraser are stationery.

Markers as well highlighters are defined in various dictionaries will literally fall in the category of “all Types of Pens” and accordingly will be covered by it. In common parlance (i) Carbon Paper, (ii) Stamp Pad & Ink of Stamp Pad and (iii) covert (eraser) can certainly be called to be the items of stationery and cannot be taxed under residual entry.

(Assistant Commissioner v. Camlin, (2016) 28 STJ 187 (Raj.)).

1. Interest on builders

Whether interest under section 30(2) or 30(3) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act, 2002) is payable by builder for 2007-08, where amendment in rule 58 is made in 2014?

Reply: Interest u/s. 30(2) is charged on delayed payment as per returns. In other words, this interest is attracted once there is filing of returns showing tax amount payable and such payment is beyond the prescribed time of filing return.

In case revised returns are filed and any amount is to be paid as per revised returns, still the interest will be attracted from due date of original return.

In case of builders, the liability under MVAT Act, 2002 is contemplated from 20-6-2006. However, the matter was under litigation. The issue was resolved by Hon’ble Bombay High Court in 2012 vide judgment in case of Maharashtra Chamber of Housing Industry (51 VST 168)(Bom). The matter was further carried to Hon’ble Supreme Court which is decided by Hon’ble Supreme Court vide common judgment in case of Larsen & Toubro Limited and Another v. State of Karnataka and another (65 VST 1)(SC). This judgment came in September, 2013. Thereafter, there is amendment in MVAT Rules about computation of tax liability. In particular rules 58(1A), 58(1B) etc., are changed/inserted.

Vide Circular No.7T of 2014 dt. 21-2-2014, the Commissioner of Sales Tax advised to file revised returns in view of amended position by 30-4-2014.

Therefore, the builders may be filing returns/revised returns and paying additional taxes etc., much after the due dates of original returns based on above background. However, there is no relief granted in respect of interest. In other words, the interest will remain attracted from the due date of original return, whether builders file original return or revised return.

However, the interest is not at present recoverable. This is as per the Circular bearing No. 12T of 2014 dated 17-4-2014. In point 3(22), it is explained as under;

“(22) The applicability of interest on the tax liability determined now in accordance with new rules.

Ans: Interest is applicable as per provisions of law. However, the stay to coercive recovery of interest granted by Division Bench of Supreme Court in the SLP No. 17709 of 2012 continues till it is finally disposed by Supreme Court.”

Interest u/s. 30(3) is about differential dues, which get attracted from 1st day following the concerned period of assessment.

Thus, this interest is also mandatory and no relief is given by any statutory provision.

However, like above, this interest is also not recoverable due to above circular.

2. Branch transfer vis-à-vis issue of ‘C’ form by branch

Whether ‘C’ form can be issued by Branch, where ‘F’ form is not produced and claim of stock transfer is disallowed?

Reply: The issue is in light of section 6A of the CST Act. The said section is as under:

“S. 6A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale.

(1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of dispatch of such goods and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale. …”

Thus, section 6A provides that if F form not available it will be deemed to be “sale for all purposes of CST Act”. Once the transfer is considered as a sale, the tax is attracted under CST Act and it will be levied at full rate. Therefore, transferee branch can issue ‘C’ form to reduce impact of tax on such deemed interstate sale. When the tax is to be levied even though the transfer is between two branches of same entity considering the same as sale then certainly there cannot be any objection about C form also.

It may also be noted that if the branch transfer is considered to be sale under CST Act i.e. deemed sale for failure to bring F form, then under MVAT Act, reduction of set off under Rule 53(3) for branch transfer should not apply.

Query No. 1 (Clubbing of income)

If husband invests his own funds in house property but the property was purchased in his wife’s name and the same is sold, in whose hands the capital gains will be chargeable to tax?

Answer:

Section 64(1) of the Income-tax Act, 1961 specifically provides that:

“In computing the total income of individual, there shall be included all such income as arises directly or indirectly –

iv) Subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart”.

Thus, from the fact, it is clear that husband has invested his own funds in house property but the property was purchased in his wife’s name. So he has transferred the property to his wife. On sale of the said property the capital gains would be chargeable in the hands of husband.

The Supreme Court in Sevantilal Maneklal Sheth v. CIT [68 ITR 503] held that when the spouse transfers the property to a third person and receives the sale price giving rise to capital gains such capital gains are includible in the name of the transferor spouse as being arising from assets transferred. This follows from the definition of income in the statute.

Query No. 2 (Reference to Valuation Officer)

Assessing Officer ascertaining the defect in the books, as to accounting for Cost of Construction refer it to “Valuation Officer” u/s. 142A.

Can Assessing Officer refer it, without finding any defect in books as to the Cost of Construction?

Answer

Yes, in CIT v. Bhavani Shankar Vyas [311 ITR 8] the Uttarakhand High Court held that, section 142A was inserted in the Income-tax Act, 1961 by the Finance Act of 2004, with retrospective effect from November 15, 1972. Under section 142A of the Act, full power has been given to the Assessing Officer to call for a report from Valuation Officer. A perusal of section 144 read with sections 145, 142A and 131(1)(d) make it clear that it is not mandatory for the Assessing Officer to reject the books of account first before making reference under section 131(1)(d) of the Act or calling for a report of the valuer under section 142A.

However, the Supreme Court in Sargam Cinema v. CIT [328 ITR 513] has held that before making a reference to the Valuation Officer it is mandatory for the Assessing Officer to reject the books of account..

The aforesaid judgment of the Supreme Court has been considered by the Andhra Pradesh High Court in Bharathi Cement Corporation P. Ltd. v. CIT [356 ITR 74]., wherein the Court observed that the said judgment is very short judgment and nothing is placed before us to infer that the matter pertains to a year after the amendment of section 142A by the Finance (No. 2) Act, 2004. The relevant facts are not discernible from the judgment and in our opinion this decision cannot, therefore come to the rescue of the petitioner.

Query No. 3 (Formation of HUF)

The HUF ‘s pool is empty. It consists of husband & wife only. Can it be formed with gift from relatives etc.

Answer

Yes, in C. Krishna Prasad v. CIT [97 ITR 493], the Supreme Court clarified that family signifies a group plurality of persons is an essential attribute of a family.

So, husband and wife being family nucleus . The Supreme Court in CIT v. Satyendra Kumar [232 ITR 360] affirmed the decision in Satyendra Kumar v. CIT [140 ITR 840 (Mad.)] and held that where female donor had gifted funds with clear intention of benefitting the family as a whole, the gifted property was part of the joint family property and the assessee was liable to be taxed in the status of HUF. This was a case where donor lady who provided the funds made it perfectly clear that those funds were to be utilised only for the benefit of the family. Therefore, the intention of the donor must necessary be spelt out in the gift deed or letter conveying gift.

Query No. 4 (Indexation u/s. 48 from which date?)

Purchase of flat under self finance scheme: An assessee booked a flat with RHB under self financing scheme & paid regular instalments. The flat was booked in 2006 and the amount was paid till 2011. The flat was allotted in 2010 & possession was given in 2011. What will be the date of acquisition & position of indexation of instalment.

Answer

Explanation to section 48 of the Act, defines “indexed cost of acquisition” means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981 whichever is later.

Since the expression “held by the assessee” is not defined under section 48 of the Act, that expression has to be understood as defined under section 2 of the Act [see CIT v. Manjula J. Shah – 355 ITR 474 (Bom.)].

Now, from the fact, it is clear that though a flat was allotted in 2010 but the possession was given only in 2011. Therefore acquisition of flat would be in 2010 but indexation would be from 2011.

Query No. 5 [Penalty u/s. 271(1)(c)]

The assessee purchased material for construction of his factory building and partly for use of his manufacturing process. The A.O. held the purchase as bogus and added amount to total income. The A.O. levied penalty u/s. 271(1)(c) on entire sum added in spite of fact that major part was not claimed under any head (capital expenses debited to building account). Is there any way for exclusion of the said amount? Can any sum not chargeable under the law be considered for penalty u/s. 271(1)(c )?

Answer

Section 271(1)(c ) of the Act provides for levy of penalty for concealing the particulars of income or furnishing inaccurate particulars of such income.

From the fact, it is clear that the assessee had purchased the material for construction of factory building and use of his manufacturing process. Majority part of the material was capitalised as used for factory building. But the same was held by AO as bogus purchases. Hence the assessee should file an appeal before the CIT(A) to prove that the purchases are genuine by adducing cogent material/evidence

Further, there is no concealment of the particulars of income, as only some of the purchases have been considered as bogus.

In CIT v. Reliance Petroproducts Pvt. Ltd. [322 ITR 158] the Supreme Court held that making an incorrect claim does not amount to furnishing inaccurate particulars. In the said judgment, the Supreme Court has observed :

“A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars, of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.

Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”

Note: Please send your queries relating to Direct, Indirect & International taxation, Accounting & Auditing Standards and Company Law, FEMA etc., to AIFTP, having interest to the Members.

1. Interest on builders

Whether interest under section 30(2) or 30(3) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act, 2002) is payable by builder for 2007-08, where amendment in rule 58 is made in 2014?

Reply: Interest u/s. 30(2) is charged on delayed payment as per returns. In other words, this interest is attracted once there is filing of returns showing tax amount payable and such payment is beyond the prescribed time of filing return.

In case revised returns are filed and any amount is to be paid as per revised returns, still the interest will be attracted from due date of original return.

In case of builders, the liability under MVAT Act, 2002 is contemplated from 20-6-2006. However, the matter was under litigation. The issue was resolved by Hon’ble Bombay High Court in 2012 vide judgment in case of Maharashtra Chamber of Housing Industry (51 VST 168)(Bom). The matter was further carried to Hon’ble Supreme Court which is decided by Hon’ble Supreme Court vide common judgment in case of Larsen & Toubro Limited and Another v. State of Karnataka and another (65 VST 1)(SC). This judgment came in September, 2013. Thereafter, there is amendment in MVAT Rules about computation of tax liability. In particular rules 58(1A), 58(1B) etc., are changed/inserted.

Vide Circular No.7T of 2014 dt. 21-2-2014, the Commissioner of Sales Tax advised to file revised returns in view of amended position by 30-4-2014.

Therefore, the builders may be filing returns/revised returns and paying additional taxes etc., much after the due dates of original returns based on above background. However, there is no relief granted in respect of interest. In other words, the interest will remain attracted from the due date of original return, whether builders file original return or revised return.

However, the interest is not at present recoverable. This is as per the Circular bearing No. 12T of 2014 dated 17-4-2014. In point 3(22), it is explained as under;

“(22) The applicability of interest on the tax liability determined now in accordance with new rules.

Ans: Interest is applicable as per provisions of law. However, the stay to coercive recovery of interest granted by Division Bench of Supreme Court in the SLP No. 17709 of 2012 continues till it is finally disposed by Supreme Court.”

Interest u/s. 30(3) is about differential dues, which get attracted from 1st day following the concerned period of assessment.

Thus, this interest is also mandatory and no relief is given by any statutory provision.

However, like above, this interest is also not recoverable due to above circular.

2. Branch transfer vis-à-vis issue of ‘C’ form by branch

Whether ‘C’ form can be issued by Branch, where ‘F’ form is not produced and claim of stock transfer is disallowed?

Reply: The issue is in light of section 6A of the CST Act. The said section is as under:

“S. 6A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale.

(1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of dispatch of such goods and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale. …”

Thus, section 6A provides that if F form not available it will be deemed to be “sale for all purposes of CST Act”. Once the transfer is considered as a sale, the tax is attracted under CST Act and it will be levied at full rate. Therefore, transferee branch can issue ‘C’ form to reduce impact of tax on such deemed interstate sale. When the tax is to be levied even though the transfer is between two branches of same entity considering the same as sale then certainly there cannot be any objection about C form also.

It may also be noted that if the branch transfer is considered to be sale under CST Act i.e. deemed sale for failure to bring F form, then under MVAT Act, reduction of set off under Rule 53(3) for branch transfer should not apply.

The State Finance Minister, Hon’ble Shri Sudhir Mungantiwar presented the State Budget on 18th March, 2016 Various proposals are given effect by way of amendments to various laws administered by the State of Maharashtra as also by issuing notifications wherever required. In addition to the various tax proposals, the Finance Minister has announced a scheme for settlement of arrears of disputes under various Acts administered by the Sales Tax Department. This scheme is also introduced by way of bill No. XIX of 2016 dated 7th April, 2016. Except the notifications as detailed herein below, rest of the details are as per Bill presented. The Act though stated to have been passed is yet not available. I shall discuss first the amendments made to various tax laws:

A. Amendment by The Maharashtra Tax Laws (Levy, Amendments and Validation) Act, 2016 (L.A. Bill No. XVIII of 2016) dated 4-4-2016

The date of effect of each provision is stated separately herein below:

1. Amendment to Maharashtra Motor Vehicle Tax Act: Section 3 of the Maharashtra Motor Vehicle Tax Act 1988 refers to levy of tax on all motor vehicles used or kept for use in the State of Maharashtra. The rates of tax are notified by the State Government. A beneficial amendment is made to section 3(1C)(c). In terms of the new provision, onetime tax specified in part 1 or part 2 of the second schedule for the motor cycle or tricycle used or kept for use in the State by any person other than an individual, local authority, public trust, university or an education institute is reduced to twice the rate specified in the Schedule. Earlier, the one time tax for this sub-section was thrice the rate specified in the Schedule.

Similarly, the motor vehicle tax on all imported motor cycles and tricycles is reduced to twice the rate. This section shall come into force from the date to be notified by the Government. Second schedule appended to Motor Vehicle Act is amended. By amending Entry 1 relating to motor cycles, tricycles, including those used for drawing trailer or a side car, the onetime tax on such vehicles is made with reference to the engine capacity as follows:

(a)

With engine capacity up to 99 cc

8% of the cost of vehicle subject to a minimum of
Rs. 1,500

(b)

With engine capacity above 99 cc and up to 299 cc

9% of the cost of vehicle subject to a minimum of
Rs. 1,500

(c)

With engine capacity more that 299cc

10% of the cost of vehicle subject to a minimum of
Rs. 1,500

2. Amendment to Maharashtra Purchase of Sugarcane Act 1962: In this Act, section 12B(2) is inserted to grant exemption to sugar factory for the tax payable on the purchase of sugarcane in the year 2015-16, if such sugar factory exports sugar in the year 2015-16 to the extent of MIEQ (Mill-wise indicative export quota).

3. The amendment to Maharashtra State Tax on the Profession Tax Act

A) Section 3(3) inserted to Profession Tax Act gives partial immunity to the persons who have not enrolled under this Act. If an application for enrolment of a person covered under the Profession Tax Act is filed between lst April 2016 and 30th September, 2016, then he would not be called upon to pay tax for the period prior to lst April 2013. This provision will apply to the pending application for enrolment too.

B) Section 27A of the Profession Tax Act refers to exemption provided to various persons As per new section 27A(h) the armed members of the Central Reserve Police Force and the armed members of Border Security Force serving in the State of Maharashtra would be exempt from payment of profession tax.

4 Amendment to Maharashtra Tax on Entry of Goods into Local Areas Act, 2002

A. This Act provides for levy of tax on entry of certain goods in the State of Maharashtra for consumption, use or sale within the State. By a separate notification No. ENG 1516/C.R. 56/Taxation dated the lst April, 2016, Schedule Entry 15 relates to all types of tiles, whether vitrified or not, including those made from cement, ceramic, natural or artificial stores, marble, travertine, alabaster or granite but excluding asphaltic roofing tiles and earthen roofing tiles. One more type of goods is added into this Entry as 15(2) i.e slabs of marble and granite: The entry tax leviable is @ 12.5%.

B. The State of Maharashtra has introduced e-governance in most of the Acts administered by it. By inserting section 6A in this Act, the State has provided for application of provisions MVAT Act and Rules regarding electronic filing of returns, e-payment of tax or any amount payable under this Act, electronic application appeal or any other electronic documents.

5 Amendment to the Maharashtra Value Added Tax Act, 2002

(a) Under new section 8 (3d), the State is empowered to exempt, by notification, fully or partly the transfer of property or goods involved in sizing or warping of yarn. This amendment is to come into force from lst April, 2016.

(b) Section 10 of the MVAT Act refers to sales tax authorities. Section 10(9) is amended to include the advance ruling authority to be constituted under section 55 of the MVAT Act.

(c) Amendment to Registration provision: Section 16(3) is substituted and the prescribed authority is empowered to reject the Registration application without giving an opportunity to be heard, the application which is not complete or the documents prescribed for grant for registration are not uploaded or the document submitted are not consistent with the information in the application or the documents are not legible or the applicant has not fulfilled the prescribed condition for e-registration.

(d) The second proviso, now inserted, provides for restoration of such rejected application if the applicant complies with discrepancy in the rejection order within 30 days of intimation of the rejection order and the prescribed authority approves of the compliance, such restoration application would be entertained only once.

(e) In Section 16(6) the second proviso is substituted. Under this proviso the Commissioner has power to suo motucancel the registration if he is satisfied that the person who has voluntarily registered has not commenced the business within 6 months of the date of registration or has obtained registration by fraud or misrepresentation of facts. The date of cancellation or the effect of cancellation would be fixed by the Commissioner in accordance with the Rules.

(f) Provision to file multiple revised returns: Section 20(4) of MVAT Act refers to the events under which the revised returns can be filed. Section 20(4)(a) is amended, This sub-section permits filing of revised return on discovering omission or incorrect statement in the return. The limit provided earlier was before the expiry of 10 months from the end of the year to which return relates or before a notice of assessment is served, whichever is earlier. As per the new amendment, a dealer can file a revised return under this sub-section before the expiry of period prescribed for furnishing the audit report under section 61 of the MVAT Act or before the receipt of notice of assessment, whichever is earlier. The time prescribed for furnishing the audit report under section 60(1) read with Rule 66 is 9 months and 15 days from the end of the year to which the return relates. Simultaneously, the proviso to section 20(4) is amended. The reference to clause (a) is deleted. This proviso prohibited furnishing revised return more than once for the events covered by section 20(4)(a). The effect of the above two amendments is the freedom to the dealer to revise the return for more than once, time up to the date of furnishing the audit report.

(g) Acceptance of retuns: The MVAT Act did not provide for the suo motu acceptance of the return by way of an assessment by the Commissioner. Section 23(2)(a) now provides that if the Commissioner is satisfied he may accept the returns as correct and complete if the registered dealer has filed all the returns within the time prescribed for filing revised returns under section 20(4)(a). As per proviso to the new sub-section, if such order is not passed within four years from the end of the year to which return relates, then such return shall be deemed to have been accepted.

(h) New sub-section 23(5)(A) – Intimation of liability: As per this new section, after commencement of the proceedings for assessment under sections 23(2), 23(3), 23(4) or under section 23(5), the Commissioner may intimate to the dealer his observations about the tax liability before passing the order. Such intimation should be communicated to the dealer six months before the date of expiry of passing the assessment under above sub-sections. If the dealer agrees with the observations, files the returns or the revised returns, under the section 20(4)(c), and makes full payment of the tax as per the intimation along with interest, then a confirmation order would be passed and the assessment proceedings shall be deemed to have been closed. As per this new sub-section, now the Commissioner can close the assessment in advance by passing the confirmation order if the dealer agrees to the liability created by him. This new sub-section will also apply to the assessment proceedings pending as on lst April under sub-sections 2, 3, 4 and 5 of section 23.

(i) New concept of fair market price: Section 28(A) is introduced with effect from lst April, 2011. This new section will apply only to the commodity to be prescribed for class of dealers. This section enables the Commissioner to determine the tax liability as per fair market price of a transaction while passing an order in any proceedings under the Act. Therefore, if the Commissioner is of opinion that any transaction entered into by any dealer is below the prescribed fair market price, the Commissioner can determine the tax liability on such sale or purchase as per fair market price. This concept is being introduced for the first time under the MVAT Act.

(j) Amendment to TDS provision

1) Section 31(4) is substituted. This relates to the TDS deducted by the employer from the main contractor. The new sub-section enables the employer to claim of the TDS deducted by the person making the supply to the employer (main contractor) or he may transfer the credit of the TDS to the sub-contractor, awarded in the same contract, in the prescribed manner. The principle contractor should claim the credit in the period for which the certificate for payment of TDS is furnished to him. The sub-contractor can claim the credit in the period in which principal contractor has transferred the credit of such amount to him or in any subsequent period. As a result of this beneficial amendment the principal contractor would be able to transfer the credit of TDS to the sub-contractor.

2) Sales tax deduction account number now mandatory. In terms of newly inserted section 31(8), every employer liable to deduct the tax should apply for allotment of sales tax deduction account number to be mentioned in documents, statements and returns to be filed by him. If the employer is registered under MVAT Act, he need not apply for separate sales tax deduction account no. Consequential amendments are made in section 31(9).

3) Filing of tax deduction return in the prescribed form is made mandatory under section 31(10). A revised return can also be filed before expiry of 9 months from the end of the year. Failure to apply for sales tax deduction number may invite imposition of penalty. On failure to file return the Commissioner can impose the penalty up to
Rs. 5,000/-.

(k) Introduction of advance ruling: The provision of determination of disputed question under section 56 is deleted and a new provision for advance ruling is introduced by substituting section 55 of MVAT Act. Although section 55 remained in the statute book since introduction of VAT, this section was not brought into operation till date. Section 55 now provides for modality of applying for advance ruling. The advance ruling authority would comprise of 3 authorities, not below the rank of Joint Commissioner. The pending DDQ applications under section 56 shall be allotted to the authority of advance ruling. The advance ruling will be made within 90 days from the date of acceptance of the application. The Commissioner is also empowered to accept the application within 30 days from the date of submission of application. The advance ruling under this section shall be binding on all the officers including Appellate Authority in respect of similarly situated persons, excluding the Commissioner. The advance ruling authority has the power to direct prospective effect to the ruling given by them. The order under this section would be appealable and the appeal shall lie to the Tribunal. However the appeal against this order must be filed within 30 days from the date of communicating the advance ruling order. The power to rectify on their own motion is given to the advance ruling authority. The Commissioner has power to call for the erroneous advance ruling order and pass a fresh order or review the order passed under this section. Such review order can be made prospective by the Commissioner. In confirmation of this amendment, section 26 of MVAT Act is amended to include the appeal against order by authority of advance ruling.

(l) Amendment to section 70 – huge penalty for failure to submit details. Section 70 empowers the Commissioner to collect the statistics from any person or persons by notice in newspapers or by any such manner. As per section 70(3), the person not furnishing the information as prescribed under section 70 can be liable for penalty up to
Rs. 1 lakh and additional penalty of Rs. 1,000/- per day for the default continuing after two months.

(m) Amendment for mega units, ultra mega units: Sections 89(3) & (4) of the MVAT Act are now substituted by one sub-section 89(3). The invoice issued by a dealer specified in section 3(A) shall contain a prescribed declaration in respect of goods other than declared goods covered by eligibility certificates. In terms of section 89(3A) the prescribed declaration conditions would be applicable to (i) mega unit, ultra mega unit, holding identification certificate; (ii) very large unit or mega unit availing deferment benefit under 1993 PSI; (iii) to the immediate purchaser or the subsequent purchaser purchasing goods, originally manufactured by the dealers in (i) and (ii) hereinabove.

Failure to incorporate the prescribed declaration would invite imposition of penalty equivalent to the amount of tax contained in the said invoice.

(n) Amendment to Rules:

i) Rule 52(B) was introduced with effect from 1-1-2016. This rule has an overriding effect. The dealer (trader) purchasing the goods specified in this rule is entitled to claim set-off only to the extent of aggregate of taxes paid and payable under the CST Act on inter-State re-sale of the corresponding goods and the taxes paid on the purchase of the said goods if resold locally under the Act. The set-off under this rule can be claimed only in the month in which corresponding sale of the goods is effected by the claimant dealer

Under MVAT Act, normally the claim of ITC is allowed on purchase of the goods, irrespective of the date of sale. This rule is deviation from the normal rule. The only exception provided under this rule is that this rule shall not apply to the purchase of the goods which are sold in course of export out of the territory of India. Mobile phones or cellular hand sets, i.e., telephones for cellular network or for other wireless networks are now covered by this restrictive rule w.e.f 1-4-2016.

ii) A beneficiary Rule 53(11) is added to enable the claim of ITC by dealer engaged in the business of transferring the right to use passenger vehicles. Such dealer would be entitled to claim ITC only to the extent of tax payable on transfer of right to use the goods. It is also provided that the ITC can be claimed in the period in which such right to use is transferred by the claimant dealer. Accordingly consequential changes are made in Rule 54.

(o) Amendment to various composition schemes

i) The composition amount specified in the Notification No. VAT.1505/CR-105/Taxation-1 dated 1-6-2005 for the Restaurants, hoteliers, eating house, caterers etc. is amended as follows.

1. The composition at the rate of 5% of the turnover of sales referred to in the notification, in case of a registered dealer whose turnover of such sales, does not exceed
Rs. 3 crore in the previous year.

2. @ 8% for the dealers whose turnover is above
Rs. 3 crore in the previous years.

3. In case of URD, the composition amount shall be 10%.

ii) Composition for bakers

The present notification included the turnover of bread, rolls, etc. for payment of composition for bakers covered by Entry 2 of the notification. An amendment is made to exclude the turnover of bread in loaves, rolls or in slices, toasted or otherwise from the turnover of sales liable for payment of composition amount.

iii) In the composition for retailers two amendments are made. The retailers up to the turnover of
Rs. 1 crore would be eligible to claim the benefit of notifications. The condition for 6 monthly returns is deleted. That means the composition dealer would file the returns as regular dealers.

(p) Amendment in Schedule Entries: The major amendment is made to Schedule C goods. The goods covered by this Schedule were liable to payment of 5% tax up to 31-3-2016. On and w.e.f. 1-4-2016, all the goods covered by this Entry, excluding declared goods are liable to 5.5% tax. There are few other changes in rate of tax as per notifications

(q) Maharashtra Settlement of Arrears in Dispute Act, 2016.

The much awaited Amnesty Scheme is introduced by this Act. The arrears in dispute is defined to mean tax, by whatever name called, interest payable and penalty imposed under relevant Act, in respect of any Statutory order pertaining to any period ending on 31-3-2012. The Act will apply to BST Act, MVAT Act, CST Act, Bombay Motor Spirit Taxation Act, Works Contract Act, Sugarcane Purchase Act, Profession Tax Act, Lease Act, Entry of Goods in Local Area Act, Entry Tax on Entry of Motor Vehicle Tax Act and Luxuries Act.

It is applicable for dues for which an appeal is filed and stay is granted in full or part by Appellate Authority. The dealer would obviously have to withdraw the appeal. There is no Amnesty for Tax dues.

1. For period before 1st April, 2005 : Disputed tax to be paid in full, then corresponding interest and penalty to be waived.

2. For 1st April, 2005 to 31st March, 2012: Disputed Tax and additional 25% Interest to be paid, balance interest and penalty to be waived.

Amnesty can be availed for some of the issues pending in appeal. This indicates that partial amnesty can be availed on certain issues where dealer knows there is little chance of defending due to lack of evidence, declarations etc. The amnesty shall be available from 1st April, 2016 to 30th Sept., 2016. The modalities are awaited.

Odisha as matter of fact in linguistically the First recognised State of India which was created in 1936. This year budget is the 80th year of the budget of the State of Odisha. The estimate budget for the year 2016-17 is
Rs. 94,052.65 crore. For this budget estimation an opinion was taken from almost 1666 persons from cross section of people. The budget for 2016-17 is in two parts. The 1st part is the agriculture budget and the 2nd part is the general budget. Odisha is among few states that present separate agriculture budget. A comparative figure of budget of financial year 20 2015-16 and 2016-17 is given as under:–

Financial Year 2015-16 Budget Estimate

Financial year 2016-17 Budget Estimate

Non-Plan

43956.32

48096.49

State Plan

40150.00

45600.00

Central Plan

349.55

311.33

Centrally Sponsored Plan

31.91

44.83

TOTAL

84487.77

94052.65

In the current budget the estimate has increased up to 11.32%. The non-planned budget has increased to 9.43% to 13.57%.

Previously the Annual Budget was presented in the State Assembly, prior to presentation of Union Budget. From this it was decided to hold it after the presentation of the Union Budget as it has become necessary to factor in State’s share in Central Taxes and Central Assistance, reflected in Union Budget, for the State’s Annual Plan to impart a greater degree of accuracy to the Budget Estimate

Budget Estimates, 2016-17

The total Non-Plan expenditure is estimated at
Rs. 48,096.49 crore in 2016-17 including provision of Rs. 18,800 crore for salaries,
Rs. 9,500 crore for penion, Rs. 4,650 crore for interest payment and
Rs. 4,977.35 crore for maintenance of capital assets.

State’s Annual Plan outlay for the financial year 2016-17 will be
Rs. 50,000 crore. This includes an outlay of Rs. 45,600 crore for the Government sector and
Rs. 4,400 crore for the Public Sector Undertakings.

The outlay for Central Plan will be
Rs. 311.33 crore. Centrally sponsored Plana will have an outlay of
Rs. 44.83 crore.

Thus the Budget Estimates for 2016-17 contains total outlay for expenditure of
Rs. 94,052.65 crore. This also includes repayment of debt. However, the gross provision made in the Budget is
Rs. 98,416.93 crore which includes recoveries and accounting adjustments.

The State proposed to enhance the capital outlay in 2016-17 to
Rs. 16,749.70 crore, which is about 4.37 per cent of GSDP. Besides, the Loans and Advances given, grants for creation of capital assets and other expenditure for capital formation put together account for
Rs. 11,766.20 crore which is 3.07 per cent of GSDP. Loans and Advances include
Rs. 1196.18 crore towards back-to-back loan to GRIDCO under UDAY scheme.

The State’s public expenditure policy is oriented towards development expenditure which consists of expenditure on social and economic sector. The share of development expenditure out of total expenditure excluding repayment of debt will be 74.49 per cent in 2016-17.

Financing the Annual Budget, 2016-17

The State proposes to finance the outlay for expenditure of
Rs. 94.52.65 crore in 2016-17 in the Consolidated Fund through estimated revenue receipts of
Rs. 78,126.72 crore, recovery of loans and advances of Rs. 185. 15 crore and borrowing and other receipts of
Rs. 15,740.78 crore.

Total revenue receipts for the year 2016-17 include State’s share in central taxes for
Rs. 26,567.56 crore, State’s Own tax for Rs. 23,200 crore , Own Non-tax revenue of
Rs. 9,822.93 crore and grants from Centre for Rs. 18,536.23 crore. With this, the Tax/GSDP ratio would be 6.05 per cent in 2016-17.

The State Budget has taken care of several sectors such as:

1. Social Sector – The total outlay will be
Rs. 33,823.00 core. This represents an increase of 16.10% over previous year.

2. Health Sector – The Govt. proposes to invite private investment in health care facility for providing affordable health care facility in rural and remote areas. Besides other health related, it has substantially increased to
Rs. 4,771.87 crore.

3. General Education – It is proposed an outlay of
Rs. 13,396.35 crore including free distribution of bicycles to Class X students

4. Welfare of ST, SC and Minorities – The total allocation of the Department has been enhanced to
Rs. 2,835. 12 crore.

5. Social security and empowerment of Women, Children and persons with disability – The total outlay will be
Rs. 4,693.55 crore.

6. Development of Infrastructure – The total provision has been
Rs. 17,172.30 crore for 2016-17.

7. Public Works – Provision for public works, the total. outlay is
Rs. 4,524.42 crore.

8. Development of Rural Infrastructure – The total outlay is
Rs. 6,489.86 crore.

9. Development of Urban Infrastructure and Sanitation including housing & urban development and smart city mission – The total outlay is
Rs. 3,357.10 crore.

10. Energy Security and Power Infrastructure – A sum of
Rs. 2,800.92 crore is provided for Energy Department both under plan and non-plan.

11. An amount of Rs. 22 crore has been provided towards incentives under Industrial Policy Resolution (IPR).

12. Promoting Heritage, Culture and Tourism –_Odisha’s cultural heritage is deeprooted and multifaceted. Jagannath culture forms the nucleus of the cultural heritage and identity of the State. A sum of
Rs. 242.54 crore is provided for the sector.

13. Forest and Environment: An allocation of
Rs. 603.22 crore is proposed for Forest and Environment Department, which includes a provision of
Rs. 90 crore for increasing green cover.

14. Planning and Convergence: An outlay of
Rs. 815.25 crore is proposed for Planning and Convergence Department.

15. Transport Department- An outlay of
Rs. 383.83 crore is proposed for Transport Department in the Budget which is an increase of 69.78% over the previous year.

16. Internal Security and Administration of Justice – A sum of
Rs. 3,965.20 crore is provided for administration of justice and maintaining internal security.

17. Revenue Administration and Disaster Management – Our State has created a national bench mark in effective handling of natural calamities. The Government is determined to consolidate the best practices and improve our preparedness to handle natural disasters. Provision of
Rs. 3,258.87 crore is made for Revenue and Disaster Management Department under Plan and Non-plan in the Budget. This provision includes
Rs. 1,785 crore towards State Disaster Response Fund (SDRF) and National Disaster Response Fund (NDRF). Besides,
Rs. 320 crore is provided for World Bank assisted “Odisha Disaster Recovery Project (ODRP)” and
Rs. 352 crore has been provided for Cyclone Risk Mitigation Programmes.

The Hon’ble Chief Minister and Finance Minister of Karnataka presented the State Budget for the fiscal year 2016-17 on 18-3-2016 in the Legislative Assembly. The highlights of Value Added Tax and Entry Tax proposals are as under:

A. Karnataka Value Added Tax Act, 2003

1. Tax rates

Changes in tax rates are as under:

1.1 Tax exemption is extended on sale of paddy, rice, wheat, pulses, flour and suji of rice and wheat, maida of wheat and ragi rice (processed ragi) up to March 31, 2017 (Notification No. I FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016).

1.2 Exemption from payment of tax has now been extended to

• Handmade paper and hand-made paper boards including handmade paper products manufactured and sold by a dealer recognised as Khadi and Village Industry by the Khadi and Village Industries Commission or the Karnataka Khadi and Village Industries Board

• Jowar roti and ragi roti

• Aluminium household utensils other than pressure cookers and cutlery (Notification Nos. II and III FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016)

• The rate of tax on sale of Cotton – all kinds of cotton (indigenous or imported) in its un-manufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste (Declared goods u/s. 14(ii) of CST Act, 1956) has been reduced to 2% (Notification No. IV FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016)

1.3 The rate of tax on sale of the following goods has been reduced to 5.5% from 14.5% (Notification No. V FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016):

• Chatnipudi prepared from groundnut, nigar seeds, copra, bengal gram, garlic, flax seeds and fried gram

• Office files made of paper and paper boards

• Adult diapers

• Hand operated rubber sheet making machine

• Set top boxes for viewing television content

• Surgical gowns, masks, caps and drapes of single use made of non-woven fabrics

• Helmets

• LED bulbs

1.4 The rate of tax on sale of nickel bars, rods, profiles and wire falling under HSN 7505, nickel plates, sheets, strip and foil falling under HSN 7506 and titanium and articles thereof including waste and scrap falling under HSN 8108 has been reduced to 5.5% from 14.5% (Notification No. VI FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016).

1.5 ‘Multi-media speakers’ which were notified as IT products vide Entry 53 of Third Schedule to the KVAT Act, 2003 would be liable to tax at the rate of 5.5% irrespective of the sale value of such speakers. Hitherto, it was liable to tax at the rate of 5.5% only if the price of the speakers did not exceed
Rs. 1,000/- per set (Notification No. VII FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016).

1.6 Up to 31-3-2016 the following goods were liable to tax at 1% against declaration in Form-C in terms of notification issued by the Government of Karnataka under Section 8(5) of the CST Act, 1956:

• Aluminium ingots, saws, billets, and wire rods;

• Plastic woven sacks and plastic woven sacks laminated coated or laminated with any material; and

• Two wheelers, three wheelers and plastic stitching yarn;

The relevant notifications issued have been rescinded and therefore, the said goods will now be liable to tax at 2% against declaration in Form-C w.e.f. 1-4-2016 (Notification No. IX FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016)

1.7 Tax exemption has been provided to sale of crude oil [declared goods as specified u/s. 14(ii-c) of CST Act, 1956 (Notification No. XI FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016)

1.8 The rate of tax on sale of aerated and carbonated non-alcoholic beverages whether or not containing sugar or other sweetening matter or flavour or any other additive including soft drinks and soft drink concentrates (whether in sealed container or otherwise) has been increased to 20% from 14.5% by introducing Entry 7 to the Fourth Schedule to the KVAT Act, 2003 (Clause 7 of the L.A. Bill No. 12 of 2016).

1.9 Execution of works contract of fabrication and erection of structural works of iron and steel including fabrication, supply and erection of iron trusses, purlines and the like is liable to tax at 5.5%. Hitherto, fabrication and erection of all kinds of structural works were liable to tax at the rate of 5.5% (Clause 8 of the L.A. Bill No. 12 of 2016)

2. Input Tax Credits

2.1 Input tax credit may be claimed within 5 months: By introducing a new proviso to Section 10(3) of the KVAT Act, 2003 the claim of input tax credit within a period of 5 months from the end of the month to which the relevant purchase relates to is made effective from 1-4-2015 (Clauses 2(i) & (ii) of the L.A. Bill No. 12 of 2016).

Additional comment

In Karnataka Value Added Tax (Amendment) Bill, 2015 to alleviate the difficulties on account of the judgment of the Hon’ble Karnataka High Court in the case of Centum Industries (80 KLJ 65), the timelines within which the input tax credit is to be claimed is pegged at 5 months from the end of the month in which the input tax credit accrues. The Hon’ble Karnataka Appellate Tribunal in the case of Bharat Earth Movers Limited – STA No. 369/2015 dated 5-1-2016 (BEML) has held that the said amendment was retrospective. In the recent Karnataka Value Added Tax (Amendment) Bill, 2016 to bring-in clarity with regard to claim of input taxes within a period of 5 months from the end of the month to which the relevant purchase relates to, Section 10(3) of the KVAT Act, 2003 has been amended by introducing new proviso to Section 10(3) of the KVAT Act, 2003 to make it effective from 1-4-2015.

In a recent judgment of Sonal Apparel Private Limited W.P. Nos. 22483-22494 of 2015 dated 29-3-2016, the Hon’ble Karnataka High Court has distinguished the case of Centum Industries and held as follows:

‘The Revenue’s reliance on the said judgment is however, wholly misplaced as that was a case where the dealer, having apparently accounted his purchases in June 2006, claimed credit of tax paid on purchases in the month of February 2007. Noting that credit ought to have claimed in the month of June 2006 an error that could have been rectified by filing a revised return within six months, that is by December 2006, the Court disapproved the dealer’s action in claiming credit in the month of February 2007. Therefore, the facts of the said case are entirely different from the case of the petitioners, wherein they have claimed consistently claimed in the month in which they have accounted for the purchases.

Moreover there is nothing sacrosanct about the date of the seller’s invoice as section 10(3) does not, in any way, suggest that input tax credit must be availed in the return filed for the month in which the selling dealer raised his invoice. Despite the same, relying on the judgment in Centum Industries, the Revenue started passing reassessment orders from the end of 2014 denying input tax credit claimed by dealers to the extent it was availed in a month other than the month in which the purchase invoice were raised.’

However, with the amendment of section 10(3) of the KVAT Act, 2003 it is now clear that the claim of input taxes must be made within a period of 5 months from the end of the month to which the relevant purchase relates to.

2.2 Disallowance of input tax credit for non-uploading of e-UPaSS: Input tax credit will be disallowed in respect of a dealer who is mandatorily required to furnish purchase and sales statement and who fails to furnish or furnishes incorrect and incomplete particulars electronically (i.e. e-UPaSS) in the commercial tax department website by issuing a demand notice. However, upon completion of an assessment if the dealer subsequently furnishes particulars in the prescribed form or furnishes correct and complete particulars electronically the jurisdictional Local VAT Officer or VAT Sub-Officer shall withdraw the assessment but the dealer will be liable to penalty at
Rs. 50 per day of default under Section 72(3-A) of KVAT Act, 2003 (Clause 2(iii) of the L.A. Bill No. 12 of 2016).

2.3 Restriction of input tax on inter-State sale of cigarettes: Input tax credit in excess of 2% is to be restricted on inter-State sale of cigarettes against the declaration in Form–C (Notification No. VIII FD 34 CSL 2016 dated 31-3-2016 w.e.f. 1-4-2016).

3. Returns and assessments

3.1 It has now been mandated that the monthly returns shall be filed electronically (Clause 4 of the L.A. Bill No. 12 of 2016).

3.2 In respect of those dealers who file incorrect or incomplete return the Commissioner is empowered to notify the dealers for assessment by a prescribed authority (Clause 5 of the L.A. Bill No. 12 of 2016).

4. Filing of Audit

4.1 It is now been mandated to file the audited statement of accounts and other documents in Form VAT – 240 electronically through the notified website i.e., http://vat.kar.nic.in/ (Clause 3 of the L.A. Bill No. 12 of 2016).

4.2 Non-submission of audited statements and other prescribed documents in Form VAT 240 electronically will be liable to penalty of Rs. 50 for each day of default (Clause 6(ii) of the L.A. Bill No. 12 of 2016).

5. Penalty for revised return

A revised return which either understates a dealer’s tax liability or overstates a dealers entitlement to input tax credit by more than 5% of the actual liability to tax or actual tax credit in comparison with the original return will be liable to penalty equal to 10% of the tax/input tax credit which is understated or overstated (Clause 6(i) of the L.A. Bill No. 12 of 2016).

Additional comment

This amendment has been made to overcome the judgment of the Hon’ble Karnataka High Court in the case of Indus Towers Ltd. 2015 (5) TMI 339 wherein it was held that penalty under section 72(2) of the KVAT Act, 2003 cannot be levied in case where revised return is filed.

‘Imposition of penalty under S. 72(2) of the KVAT Act – Understatement of tax liability – Held that:- Imposition of penalty under S. 72(2) of the KVAT Act was not warranted in the present case – Once a revised return has been filed and accepted by the Department, the original return gets obliterated and the only return which remains for consideration would be the revised return, as there cannot be two live returns pending consideration of the Department. In the present case, as a matter of fact, not only the revised return had been filed by the petitioner, but the same was also accepted by the respondents, and the validity of the revised return is not in question or in dispute. Once the revised return has been accepted and acted upon by the parties, then it is only the revised return which has to be taken as the sole return for the purpose of sub-section (2) of S. 72.

For the prescribed tax period, the return to be considered was the revised return filed on 16-3-2009 and not the original return filed on 20-2-2009, which had been nullified or obliterated after the filing and acceptance of the revised return. Then, it cannot be said that there was any understatement of the tax liability by the petitioner to any extent in its revised return (which was the only return to be considered), as in terms of the said revised return, the entire tax along with interest, had been paid. In such view of the matter, we are of the opinion that in the facts of the present case, the provision of sub-section (2) of S.72 of the KVAT Act would not be attracted.’

B. Karnataka Tax on Entry of Goods Act, 1979

• Mandatory payment of disputed tax, interest and penalty for preferring appeal before First Appellate Authority and Karnataka Appellate Authority is reduced to 30% from 50% to bring it at par with the VAT laws.

• Online filing of Appeals: The website on which the appeals shall be filed may be notified by the Commissioner.

(Clause 6 of the L.A. Bill No. 11 of 2016 w.e.f. 1-4-2016)

The above comments / analysis are based on Karnataka State Budget 2016-17. Every effort has been made to avoid errors or omissions in this write-up. Inspite of this, errors may have crept in. Any mistake, error or discrepancy noted may be brought to the notice of the paper writers.

The Finance Minister of Telangana, Mr. Eatala Rajender, presented the Budget for Telangana for financial year 2016-17 on March 14, 2016.

Budget Highlights

• The Gross State Domestic Product of Telangana for 2016-17 is estimated to be
Rs. 6,70,756 crore. This is 15% higher than the revised estimate for 2015-16.

• Total expenditure for 2016-17 is estimated to be
Rs. 1,30,416 crore, a 30.3% increase over the revised estimate of 2015-16. In 2015-16, there was a decrease of
Rs. 15,627 crore (13.5%) in the revised estimate over the budget estimate.

• Total receipts (excluding borrowings) for 2016-17 are estimated to be
Rs. 1,04,849 crore, an increase of 31.3% over the revised estimates of 2015-16. In 2015-16, total receipts fell short of the budgeted target by
Rs. 16,221 crore.

• Revenue surplus for the next financial year is targeted at
Rs. 3,718 crore, or 0.55% of the Gross State Domestic Product (GSDP). Fiscal deficit is targeted at
Rs. 23,467 crore (3.5% of GSDP). Primary deficit is targeted at Rs. 15,761 crore (2.35% of GSDP).

• Departments of Irrigation, School Education, Social Welfare, Roads and Bridges, Medicine and Public Health saw increases in allocations for the year 2016-17. On the other hand, the Department of Rural Development witnessed a 5.8% decrease in allocation in 2016-17.

Policy Highlights

• Irrigation projects were granted
Rs. 25,000 crore.

• Telangana Government’s prestigious project Mission Bhagiratha was allocated with
Rs. 40,000 crore funds.

• For Health sector Rs. 5,967 crore was given.

• For Education sector
Rs. 1,694 crore of planned expenditure and Rs. 9,044 crore of planned expenditure were allocated.

• For SC welfare Rs. 7,122 crore was allocated.

• For ST welfare Rs. 3,552 crore was allocated.

• For BC welfare Rs. 2,538 crore was allocated.

• Brahmin Welfare Corporation was granted
Rs. 100 crore.

• Kalyana Lakshmi scheme was given
Rs. 738 crore.

• Women and Child Welfare was given
Rs. 1,553 crore.

• For Aasara pensions
Rs. 4,693 crore was allocated.

• For maintenance and development of Roads and Buildings a fund of
Rs. 3,333 crore was allocated.

• Panchayat Raj and Rural Development was allocated
Rs. 10,731 crore

• Urban Development sector was granted
Rs. 4,815 crore

• For development of Industries
Rs. 967 crore was allocated.

• IT and Communications Department was granted
Rs. 254 crore

• Special Development Fund of
Rs. 4,675 crore was allocated.

Various amendments were proposed in the budget by Hon’ble Finance Minister based on which VAT Amendment Bill 2016 was published in MP Gazette dated 17-3-2016 and the same has been passed by the Legislature ignoring objections raised by public at large on certain issues. Most of the amendments made in the Act shall adversely affect the trade and industry of the State. Few amendments are discussed hereunder :

1. Input tax rebate

In Section 14(1)(a), sub-clause (1a) has been inserted whereby resale of goods in the course of Inter-State Trade & Commerce has been classified separately. Corresponding amendment in sub-clause (6) of section 14(1a) of the Act reads as under :

“In the case of goods referred to in sub-clause (1a), which is equal to the amount of Central Sales tax payable under the Central Sales tax Act, 1956 on such sale”.

At present full input tax rebate was being claimed and allowed to a trader on purchases effected from registered dealer of MP on resale of such goods in the course of Inter State Trade. After aforesaid amendment, with effect from 1-4-2016, a trader will be eligible to claim input tax rebate on purchases equal to Central Sales tax payable by him on resale of such goods in the course of Inter-State Trade and balance input tax rebate in excess of CST liability will not be allowed.

2. Interest payable on delayed/non-payment – Section 18

It was proposed in the budget that interest will be payable @ 2% per month when delay in payment exceeds three months and delay of less than three months will be liable for interest @ 1.5% per month. Section 18(4)(a)(iv) has been amended whereby interest will be levied @ 2% per month on delayed payment of tax including on additional demand created by assessment order.

Interest rate of 24% per annum is exorbitant and Government has attempted to make it a source of revenue, ignoring genuine financial crisis. No prudent businessman wants to delay the payment because interest @ 18% per month is itself much higher than the bank interest on borrowings. Logically, interest charged is always compensatory in nature and keeping the interest rate of 24% per annum cannot be termed as compensatory but it is penal in nature. Under section 37 of VAT Act interest is payable to a dealer on refund due to him @ 12% per annum only. Though interest is payable on failure to pay tax due as per the accounts yet interest is being levied and confirmed u/s. 18(4)(a) even by the Appellate Board on additional demand of tax created. Such additional demand is neither provided for in the accounts nor collected in sale invoices. It is being raised due to difference of opinion on any legal issue or mismatch of ITR etc. Interest @ 24% per annum on such extra demand will be levied after a period of 2 ½ years from the end of the Financial year up to the date of assessment order. Under Income-tax Act also interest for delayed payment of taxes is 12% per annum only. Therefore, it is not fair on the part of the Government to increase the rate of interest to 24% per annum.

3. Tax deduction at source – Section 26(1)

At present an obligation u/s. 26(1) of the Act is cast upon Central Government/State Government or a notified Public Sector undertaking to deduct an amount equal to the amount of VAT payable on the purchases, where such purchases are in excess of
Rs. 5,000/-. The amount so deducted is required to be deposited by the deductor before 10th of next month.

Section 26(1) and Explanation given thereunder, has been amended so as to include all Public Limited Companies, all Dental Colleges & Hospitals recognised by Dental Council of India; all Medical Colleges & Hospitals recognized by medical council of India and all recognized Universities in the above category.

The object behind such amendment may be to check tax evasion on supplies made by traders to service providers or there may be intention to collect more taxes through TDS provisions because under Income-tax Act, major collection is made through TDS.

Following issues shall create hardship to trade and industry

a) On purchases effected from 1-4-2016 onwards, all Public Limited Companies and Medical Colleges & Hospitals will have to deduct VAT charged in the invoices by the selling dealer and deposit the same in the treasury by 10th of the next month.

b) Such deduction is unlike to section 26A on “notified goods” hence credit of TDS will be claimed by the selling dealer and will be allowed to it because tax deducted is not being retained by the purchaser but deposited in next month.

c) The suppliers will have to collect certificates and claim the credit thereof in the return. Therefore, to obtain blank certificate form No. 31 and to issue the same to all selling dealers (in duplicate) within ten days of the deposit of such amount will be a tremendous job for the Public Limited Companies, Medical Colleges, Hospitals and Universities as well for suppliers.

d) Substantial amount of input tax credit will be blocked in cases of suppliers of public limited companies. Not only small and medium scale industries, manufacturing allied products, but the traders will also be adversely affected.

By this amendment entire VAT regime will be distorted and small traders as well all SSI units being suppliers of goods to public limited companies would be in financial crisis. Is it a movement towards “Ease of Doing Business” or “Make in India”?. It is not a step to ban the trading community and SSI units in the States who are supplied the goods to public limited companies?

4. Section 28A – Provisional attachment to protect revenue

New section has been inserted whereby, notwithstanding anything contained in any law for the time being, powers have been given to the Commissioner to provisionally attach any money due or which may become due to a person or dealer from any other person or any money which any other person holds or may subsequently hold for and on behalf of such person to protect the interest of the Revenue.

The power can be exercised during the course of an inquiry in any proceedings including any inspection or search where some amount of tax evasion is suspected. Thus, even during assessment proceedings the attachment is possible. Such provisional attachment shall be effective for a period of one year from the date of service of the order of such attachment. The period can further be extended which shall not exceed two years. The powers can be exercised by the Commissioner, Addl. Commissioner and Dy. Commissioner to whom such powers are delegated by notification.

The person shall be personally liable to pay the amount of money so attached till the order is not revoked. If a person or dealer files an application within fifteen days of the date of service of the order, the Commissioner may confirm, modify or revoke the order having regard to the circumstances of the case. An appeal can be filed against the order passed under sub-section (5) before the Appellate Board.

Other Amendments

i) Form 49 will be required to be generated and produced at the check post on incoming of the goods on all taxable commodities covered under Schedule-II of VAT Act. Similarly, transit pass will be required to be carried by the transporter while transporting of all kinds of iron and steel, oil seeds, edible oil, pan masala and tea within the State. No threshold limit has been prescribed regarding movement of goods within State for small and medium dealers.

ii) Annual return will only be required to be submitted instead of four quarterly returns by the dealers having turnover less than
Rs. 40 lakh as against present limit of Rs. 20 lakh per annum.

iii) Due date for making payment of monthly tax will be sixth of every month instead of tenth of every month for first and second month of the quarter for dealers who are depositing total tax of
Rs. 25 crore annually or Rs. 6.25 crore quarterly.

iv) Tax will be required to be deducted at source @ 3% instead of 2% when any works contract is given to an unregistered contractor.

v) Input tax rebate will be allowed in excess of 2% to manufacturers of exercise books, graph books, drawing books and laboratory books. (Notification No.18 dated 31-3-2016). The manufacturers will not get refund of ITR on paper @ 3%.

vi) In case of ex-parte order, if an application u/s. 34 is submitted, the assessing officer will reopen the case and pass the order within sixty days.

With an object to reduce pending litigations, it was proposed in the budget that Kar Vivad Samadhan Scheme will be announced in relation to all appeals pending under VAT Act, CST Act and Entry tax Act, but till date it has not been announced. It was also proposed in the budget that e-commerce transactions will be covered in the tax net by levy of Entry tax @ 6% thereon. Such proposal has not been covered in the amendment Act till date.

I) Amendment in Schedule-I : Tax free goods

Following goods have been included in Schedule-I

Entry Nos. (90) to (94) – Bio-insecticides and bio-pesticides; dry ber and ber powder; all kinds of electric/battery run two wheelers; car and autorickshaw; milking machine; bags and envelopes made of biodegradable material.

II) Amendment in Schedule II

• Rate of tax on soya milk, parts and accessories of bio-fuel based smokeless stove, and induction cook top, dialysis machine and dialysis consumables, reduced from 14% to 5%.

• Tax on goods being sold to Central police canteen, through Canteen stores is reduced @ 4%. The facility of concessional rate of tax on sales by Canteen Stores Department will be available to officers and soldiers of BSF also.

• Tax on heavy transport vehicles (over 12 MT capacity) reduced from 15% to 14%.

• Tax on cups, glasses, plates, bowls, thali, katori, and dona-pattal which are made from paper to be tax @5%. In Entry No.(29) of Part-II of Schedule-II the word “plastics” has been omitted.

• Entry No. 39A omitted from Part-II of Schedule-II hence rate of tax on glass mirror will be 14% as against 5%.

• Entry No.55(205) – All kinds of bags & sacks for packing of goods (excluding woven sacks and bags made of HDPE/LDPE/PP, Polythene Bags, Plastic Bags and sacks) and articles of plastics for packing of goods – 5%. The effect would be that woven sacks and bags made of HDPE/LDPE/PP, Polythene Bags, Plastic Bags and sacks will be taxable @ 14%. It will adversely affect industrial units manufacturing such products because the consumer units will purchase the goods from Inter State against form ‘C’. The traders of grains, dalhan etc. will also suffer because after reversal of ITR on bags, they will have to claim refund of ITR of 9%.

• All bicycles were covered in Schedule-I i.e. tax free. Now bicycles having sale price of which exceeds
Rs. 10,000/- and parts thereof will be taxable @ 5%.

CENTRAL SALES TAX ACT

Soya de-oiled cake, cotton seed, mustered de-oiled cake, corn cake are presently taxable @ 1% on sales during the course of Inter State. As per Notification No.(19) dated 31-3-2016, a dealer shall not be liable to pay tax on Inter State sales of de-oiled cake including soya meal, cotton seed oil cake, mustard oil cake and makka khali subject to fulfillment of requirement u/s. 8(4) of CST Act. Therefore, submission of form ‘C’ will be a mandatory requirement to claim sales of aforesaid goods as non taxable.