Hon’ble Finance Minister of the State of Gujarat presented the budget proposals for the year 2016-17 in the State Legislative Assembly on 23-2-2016. In order to implement the budget proposals, a bill to amend the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as “the GVat Act”) and the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 have been amended and certain notifications have also been issued by the State Government under both the Acts. These budgetary amendments have been highlighted hereunder.
Exemption from tax
Tax on following goods has been exempted from whole of tax without any condition by notification issued under section 5(2) of the GVAT Act:
(1) Bamboo, whether whole or split and articles made of bamboo except furniture – Notification Entry 107
(2) Pedal rickshaws and Cycle rickshaws –Notification Entry 108
(3) Mosquito net – Notification Entry 109
(4) Frozen Semens – Notification Entry 110
(5) Sanitary napkins and adult diapers –Substitution of Notification Entry 92.
By new Notification Entry 92A baby diapers continue to be liable to tax at the rate of 5% including the additional tax of 1%
Concession in rate of tax
Exemption in excess of 5% tax including additional tax at the rate of 1% is granted to ceramic products without any condition.
Tax on Motor Vehicles
Motor Vehicles are covered by Residuary Entry 87 of Schedule II to the GVAT Act and hence are liable to 15% tax including additional tax at the rate of 2.5%. Following two new entries have been introduced in Schedule II to the Vat Act for imposing tax at the rate of 20% including 2.5% additional tax on the motor vehicles stated in those entries:
(1) Entry 49C – Luxury cars, luxury SUVs and luxury two wheelers. In the explanation to this entry it is clarified that luxury car and luxury SUV means a car or SUV with price more than rupees fifteen lakhs and luxury two wheelers means a two wheeler with price more than rupees two and a half lakhs.
(2) Entry 80A – Motor vehicles (except school buses, college buses, passenger buses and goods carrier trucks) sold to companies, firms, HUFs, Societies. institutes, association of persons or bodies of individuals whether incorporated or not, clubs, trusts, Government departments, Government undertakings, Boards, Corporations, local self-Government bodies and artificial juridical person. In the budget speech it was stated that since depreciation is admissible under the Income-tax Act on purchases by such institutions it was proposed to increase the rate of tax. However in the schedule entry purpose for the entry is not specifically stated and therefore on purchase of vehicles by any legal entity stated in the entry will attract higher rate of tax irrespective of the purpose for which the purchase is made.
Increase in Rate of Tax
(1) On pan masala the rate of tax was 15% including additional tax of 2.5% as the same was falling under Residuary Entry 87 of Schedule II to the GVat Act. However new Entry 55A has been introduced in Schedule II to provide the rate of tax of 22.5% plus 2.5% additional tax thus total tax of 25% on pan masala.
(2) In budget speech it was proposed to impose 5% tax on industrial salt. In order to implement this proposal Entry 246 of the notification issued under Entry 42A of Schedule II to the Vat Act relating to Industrial Inputs has been substituted so as to notify salt used as raw material in the manufacture of goods as industrial input attracting 5% tax including 1% additional tax. Correspondingly Entry 50 of Schedule I has been substituted so as to exempt salt other than salt specified under entry 42A of Schedule II to the GVat Act. A further condition is imposed in entry 50 of Schedule I for claiming exemption from tax to the effect that the seller should obtain a declaration from the purchaser to the effect that salt purchased by him shall not be used for the purpose specified under entry 42A of Schedule II to the GVat Act.
Power given to the State Government to enhance rate of tax on petroleum products
An amendment is made in section 7(2) of the GVat Act whereby the State Government has been given power to add or omit from or otherwise amend or modify Schedule III so as to levy tax on the basis of price, weight, volume, measurement or unit or reduce or enhance the rate of tax payable in respect of any goods specified in Schedule III to the GVat Act which relates to petroleum products.
In the Budget Proposal it is announced to implement an Amnesty Scheme for the outstanding dues up to 31-12-2015 under the Sales Tax Act, Value Added Tax Act, Motor Spirit Act and the Central Sales Tax in which except in cases of tax evasion interest and penalty will be remitted on full payment of outstanding principal tax amount. In case of tax evasion cases tax, interest and 25% penalty will be required to be paid and only penalty in excess of 25% will be remitted. The notification implementing the Amnesty Scheme is still not issued.
Entry Tax on e-Commerce transactions
In the budget speech it was pronounced to impose entry tax on goods coming into the State through e-commerce. In order to implement this proposal a Bill to amend the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 has been passed by the State Legislature. Accordingly, the definition of importer has been amended so as to include a person who facilitates to bring any specified goods into local area from any place outside the State but not being a place outside the territory of Union of India through any means including the online purchase, web based software application or by tele-shopping platform for use, consumption or sale therein. A specific provision has been made by enactment of sub-section 2A in section 3 whereby an importer facilitating the entry of goods into local area through e-commerce is required to mandatorily collect tax from the person to whom he has provided the facility to bring goods within the State of Gujarat. A provision for garnishee recovery proceedings has also been introduced by inserting section 10A in the Entry Tax Act. The Entry Tax Rules have also been amended wherein the importer facilitating the entry by providing e-commerce facility has been defined as electronic operator and the liability to pay tax has been imposed on such electronic operator. For e-commerce transactions entry tax is imposed on all the taxable goods under the GVat Act at the rate of tax including additional tax applicable under the GVat Act. The entry tax is required to be deposited within 2 days of the entry of specified goods into Gujarat. If any electronic operator would like to avoid making payment within 2 days of each entry of goods, it can make a payment by way of deposit towards the estimated tax liability and when the actual tax liability equals such deposit then it will have to start making payment of tax within 2 days of the entry of specified goods in to the State of Gujarat. Such operator is also required to furnish details in Form 1AA of goods entered within the State because of the facility provided by him within 3 days of entry of specified goods into Local Area. However if the operator has made advance deposit then such details in Form 1AA are required to be given within 3 days of the end of each week. The electronic operator is also required to furnish online return in Form 1A within a period of seven days immediately succeeding the month for which the return is required to be furnished. A notification to impose entry tax at the rate applicable to motor vehicles has also been introduced so as to make the rate of tax equivalent to 20% imposed for luxury cars, luxury SUV and luxury two wheelers covered under Entry 49C of Schedule II as also the purchases of motor vehicles by institutions specified in Entry 80A of Schedule II to the GVat Act.