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:
With engine capacity up to 99 cc
8% of the cost of vehicle subject to a minimum of
With engine capacity above 99 cc and up to 299 cc
9% of the cost of vehicle subject to a minimum of
With engine capacity more that 299cc
10% of the cost of vehicle subject to a minimum of
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
(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.