BUDGET AMENDMENTS MVAT 2011 VIKRAM D. MEHTA D.R. MEHTA AND ASSOCIATES CHARTERED ACCOUNTANT

I)Voluntary Deposit paid for voluntary registration - Sec 16(2) becomes Security Deposit a) w.e.f (2) Voluntary deposit becomes Security Deposit Voluntary deposit becomes Security Deposit Security deposit not adjustable against tax payable Security deposit not adjustable against tax payable 16 (2A) – Security deposit refundable subject to fulfillment of conditions, restrictions and time limits 16 (2A) – Security deposit refundable subject to fulfillment of conditions, restrictions and time limits New Rule 60A inserted for refund of Security deposit New Rule 60A inserted for refund of Security deposit 1) certificate cancelled – Refund application within 6 months 1) certificate cancelled – Refund application within 6 months from the date of cancellation order from the date of cancellation order serviced serviced 2) any other case – Refund application within 36 months from date of registration but before 48 months from the date of effect of registration 2) any other case – Refund application within 36 months from date of registration but before 48 months from the date of effect of registration

Conditions for grant of above refund 1) Application made in time 2) Filed all the returns up to date of application / cancellation of registration 3) Paid taxes as per return Refund within 90 days from receipt of application if conditions satisfied

II) Revised Return Sec 20(4) The section allowed revision of revised return also when errors etc… found within 9 months The amendment now deletes the word revised return now, therefore only original return can be revised when errors etc… found within 10 months

The amendment thereafter inserts a proviso whereby dealer is allowed to furnish not more than one revised return under each of the three situation listed in Sec 20(4) i.e. a) Discovers any omission or incorrect statement there in b) Discovers as a result of audit report u/s 61 c) Agrees with any observation contained in any intimation received u/s 63 (Form 604) System prevails over law ? Kisanlal Rajmal v/s state of Maharashtra 45 STC 88 (Bom) Kisanlal Rajmal v/s state of Maharashtra 45 STC 88 (Bom) Malbar Products v/s CST 99 STC 546 (Bom) Malbar Products v/s CST 99 STC 546 (Bom)

III) Assessment 1) Sec 21 – Deleted - Time limits were prescribed under the section for - Time limits were prescribed under the section for issue of notice for assessment issue of notice for assessment - Time period for issuing notice when returns not filed in - Time period for issuing notice when returns not filed in time was 3 yrs time was 3 yrs - Department was not able to cope with this time period - Department was not able to cope with this time period - Hence ordinance promulgated before budget so that - Hence ordinance promulgated before budget so that the laxity of the government can be undone the laxity of the government can be undone - Saving and validation clause - Saving and validation clause

2) Sec 23 – Time limits for assessment enhanced Return filed in time - 3 yrs to 4 yrs Return filed in time - 3 yrs to 4 yrs Return not filed in time - 4 yrs to 5 yrs Return not filed in time - 4 yrs to 5 yrs Periods upto yrs Periods upto yrs URD / late registration - 8 yrs URD / late registration - 8 yrs For any return turnover not - 6 yrs For any return turnover not - 6 yrs disclosed, set-off excess, under disclosed, set-off excess, under assessed etc… assessed etc…

IV) Refund Sec 51 Sec 51(1) required that department should call for additional information within one month from the receipt of refund application. Sec 51(1) required that department should call for additional information within one month from the receipt of refund application. Amended section now lays down that on receipt of application department can call for additional information, thus one month limit is deleted Amended section now lays down that on receipt of application department can call for additional information, thus one month limit is deleted Sec 51(2) & (3)(a)(iv) have been deleted. Sec 51(2) & (3)(a)(iv) have been deleted. The clause (2) pertained to refund in case of new registered dealer, who could apply only after a year. The clause (2) pertained to refund in case of new registered dealer, who could apply only after a year. The clause (3)(a)(iv) granted refund to dealers making inter-state sales. The clause (3)(a)(iv) granted refund to dealers making inter-state sales.

 Explanation is added defining who is an exporter entitled to early refund. Exporters whose exports consists of 50% or more of the total turnover during such period are exporters entitled to early refund.  Sec 51(3)(b) is substituted as under ; The Commissioner on receipt of the said application may require dealer to furnish such bank guarantee for such amounts from such banks, for such periods and to such authorities as may be prescribed. The Commissioner on receipt of the said application may require dealer to furnish such bank guarantee for such amounts from such banks, for such periods and to such authorities as may be prescribed. Prior to this amendment within one month the commissioner was to decide for bank guarantee. Prior to this amendment within one month the commissioner was to decide for bank guarantee.

 To overcome delay in granting refund Sec 51(4) inserted as under ;  To overcome delay in granting refund Sec 51(4) inserted as under ; Refund Application Period of Refund Last date for Filed granting refund Filed granting refund On or before 31/3/2011 Prior to 31/3/ /09/2011 On of before 31/3/ – 12 30/06/2012

 Time period to file refund application curtailed - Sec 51(7) allowed 3 yrs to file a refund application - Sec 51(7) allowed 3 yrs to file a refund application section is amended and now from 1/5/ months section is amended and now from 1/5/ months are allowed to file refund application. are allowed to file refund application. - Controversy whether the amendment applies to all - Controversy whether the amendment applies to all refunds after 1/5/2011 or to prior period also. refunds after 1/5/2011 or to prior period also. Commissioner’s circular 7T says that “ new time limit Commissioner’s circular 7T says that “ new time limit applies to all periods for which the time period of 18 applies to all periods for which the time period of 18 months from end of relevant year has not expired as months from end of relevant year has not expired as on 31/3/2011……. on 31/3/2011…….

The last date for refund application as per Trade Circular will be as under ; Period Last date for refund application /03/ /09/ /09/2012 The last date for refund application as per Trade Circular will be as under ; Period Last date for refund application /03/ /09/ /09/2012

V)Powers of appellate authority – sec 26(5)(c) Sub section 5(c) enabled the appellate authority to confirm or cancel or modify the order levying interest in accordance with the provisions of the Act. Sub section 5(c) enabled the appellate authority to confirm or cancel or modify the order levying interest in accordance with the provisions of the Act. This power is withdrawn. This power is withdrawn.

 u/s 85(2) non-appealable orders include only Sec 30(2) & 30(4). Therefore can we still argue that interest u/s 30(1) & 30(3) can be appealed and adjudicated by appellate authority under residuary power 26(5)(d) in any other case, the appellate authority may pass such order in the appeal as it deems just and proper. The above situation will not arise when whole of the tax is deleted. It will arise only in case of remission of interest for any reason. The above situation will not arise when whole of the tax is deleted. It will arise only in case of remission of interest for any reason. (e.g. BIFR - ???, ) (e.g. BIFR - ???, )

VI)Sec 74 (IA) – Prosecution for Hawala Dealers Production of false tax invoice or issuing false tax invoice – punishment min - 1 yrs and max - 2 yrs Production of false tax invoice or issuing false tax invoice – punishment min - 1 yrs and max - 2 yrs What / who is a “Hawala” Dealer is not defined What / who is a “Hawala” Dealer is not defined One who alleges “Hawala” will have to prove the offence. One who alleges “Hawala” will have to prove the offence. Whether every non delivery of goods can be termed as Hawala? Whether every non delivery of goods can be termed as Hawala? Whether circular trading would constitute Hawala Whether circular trading would constitute Hawala

VII) Schedule Entries A-45 ~ Sugar and Fabrics - continue to remain exempt A-45 ~ Sugar and Fabrics - continue to remain exempt C-45,55 ~ Declared goods 4 to 5% from 1/5/2011 C-94(a) ~ Vada pav – 5%

D-13 - Aerated and carbonated non alcoholic 20% Whether Appy fizz? Would be covered?? - Corrective spectacles only 5% 12.5% - Copyrights of distribution and exhibition of cinematographic films in theatres and cinema halls exempt ~ Rest taxable as usual - Live telecasting rights of events performed in Maharashtra 5% - Notification of composition of Bakery products limit 40 lakh to 50 lakh ~ 4 to 5%

LIQUOR w.e.f. 1/5/ % ~ By notification rate reduced 25% ~ subject to conditions Vendor Rate of Tax Condition Manufacturer MRP * 25 / 125 Registered Dealer MRP on bill Wholesaler : - Purchase from local RD EXEMPT - OMS / Import purchase MRP * 25 / 125 Registered Dealer MRP on bill

Vendor Rate of Tax Condition Retailers - Purchase from local RD EXEMPT Taxes paid previously to Registered Dealer Restaurants 4 star and above: - Purchase from local RD 20% of Actual Sale price - OMS / Import MRP * 25 / 125 & 20% of Actual Sales Price Restaurants below 4 star and clubs: - Purchase from local RD 5% of Actual Sale price - OMS / Import MRP * 25 / 125 & 5% of Actual Sale price Vendor Rate of Tax Condition Retailers - Purchase from local RD EXEMPT Taxes paid previously to Registered Dealer Restaurants 4 star and above: - Purchase from local RD 20% of Actual Sale price - OMS / Import MRP * 25 / 125 & 20% of Actual Sales Price Restaurants below 4 star and clubs: - Purchase from local RD 5% of Actual Sale price - OMS / Import MRP * 25 / 125 & 5% of Actual Sale price

For stock as on 30/04/ Stock statement to be filed by all except manufacturer Rule 54(i) inserted w.e.f. 1/5/2011 No Set off on Purchase of liquor covered under entries D-1,2 & 3. Thus no set – off to liquor dealers.

VIII) Mega Units Sec 88(a-1) For certificate of Identification to Mega Units as per Industrial policy regulation, covered under PSI (Power Generation Promotion Policy entitlement holders) Generation Promotion Policy entitlement holders) All mega units having Identification certificate to file return in 231 All mega units having Identification certificate to file return in 231 Rule 52A inserted for dealers reselling goods purchased from mega units ( other than declared goods ) Rule 52A inserted for dealers reselling goods purchased from mega units ( other than declared goods )

 Set – off available as under a) Tax paid or payable on Inter-state re-sale of corresponding goods i.e. local purchase – CST sale, then set off eligible to the extent of tax charged under CST b) Tax paid on purchase of said goods when they are sold locally Declaration as per rule 83-A to be printed on bill by all dealing in goods of mega units

Penalty for Incomplete Audit report Section 61(2A) has been newly inserted whereby additional 0.1% of the total sales is sort to be levied on the dealer who knowingly furnished the audit report which is not complete. Section 61(2A) has been newly inserted whereby additional 0.1% of the total sales is sort to be levied on the dealer who knowingly furnished the audit report which is not complete. Explanation to Sec 61(1) has been added to give the definition of “Complete Audit Report“ Explanation to Sec 61(1) has been added to give the definition of “Complete Audit Report“ Audit Report shall be deemed to be complete Audit Report only if all the items, certifications, tables, schedules and annexures are filled appropriately and are arithmetically self-consistent. Audit Report shall be deemed to be complete Audit Report only if all the items, certifications, tables, schedules and annexures are filled appropriately and are arithmetically self-consistent. The words used are knowingly furnished and therefore mensrea needs to be proved by the department. The words used are knowingly furnished and therefore mensrea needs to be proved by the department. The new penalty is over and above the existing penalty for non-filing of report. The new penalty is over and above the existing penalty for non-filing of report.

THANK YOU VIKRAM D MEHTA (C.A) D. R. MEHTA AND ASSOCIATES H2, EVEREST BUILDING, 9 th FLOOR, TARDEO ROAD, MUMBAI – CONTACT NO. – /