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a. A. Introduction. B. Registration under Value Added Tax. C. Explaining Value Added Tax. D. Calculating Tax Liability. E. Filing of Return and Paying Tax. F. Records and Accounts. G. Business Audit. H. Appeals. I. 3 4 5 Tax Payer Service. J. Recovery, Offences and Penalties. Section III Appendix. Section IV Conclusion. Section V Bibliography. Page No. 1 12 13 14 16 17 21 22 27 28 36 37 44 45 48 49 51 52 56 57 61 62 66 67 69 70 71
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WHO PAYS?
All dealers registered under VAT and all dealers with an annual turnover of more than Rs 5 lakh will have to register. Dealers with turnovers less than Rs 5 lakh may register voluntarily.
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OTHER CONSIDERATIONS
It is imperative that policy makers in considering adoption of VAT should be interested in the economy wide impact of this tax. Special emphasis is often placed on its effect on equity, prices and economic growth. This is particularly important because of the potential effects on consumption of certain commodities that have a direct or indirect effect on labour productivity.
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consumed primarily by the poor such that they pay less or at zero rate or to tax luxury goods at a higher than standard rate.
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mostly by the poor. Equity concerns may also be addressed through other ways, outside the VAT
system, such as other tax and spending instruments of government. This could be in the form of lower basic income tax rates on the poor or some pro-poor expenditures of government. The use of multiple rates of VAT has however been widely discouraged for various reasons. These include: The fact that sometimes it is almost impossible to differentiate between
higher quality expensive products e.g. food, consumed by the rich and ordinary products consumed by the poor. Thus any concessions extended may tend to benefit the rich much more than the poor. Increased costs of VAT administration as a differentiated rate structure
brings with it problems of delineating products and interpreting the rules on which rate to use. significantly increased costs of tax compliance for small firms, which are usually This
results in the use of presumptive methods of determining the tax liability, which leads to more difficulties in monitoring the compliance. The higher compliance cost resultant from differentiation of VAT rates may also be regressive with respect to income since smaller firms with lower income tend to bear proportionately more of the burden than do larger firms. Exemptions refer to situations where output is not taxed but taxes paid on inputs are not recoverable. follows: www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 8 The rationale behind exemptions is to reduce negative distributional effects of tax through the effect on incomes. The effects of exemption may be as
falling of revenues exemptions break the VAT chain. If exemptions are granted
at prior to the final sale, it results in a loss of revenue since value added at the final stage escapes tax. Un-recovered taxation of some intermediate goods may lead to producers
substituting away from such inputs thus distorting the input choices of the said producers. Exemptions may create incentives to self supply i.e. tax avoidance by vertical
integration. Exemptions tend to feed on each other giving rise to a phenomenon called This arises from the fact that each exemption gives rise to
exemption creep.
pressures on further exemption. For example creating an exemption to reduce the tax burden on a particular commodity or goods may lead to increased pressure for exemption or zero rating of inputs used for the production of such a commodity. Based on the above, it is important that care is taken when introducing exemptions in order to avoid distortions in the production process as well as to minimize revenue loss resulting from such distortions. Given the fact that the primary purpose of VAT is to raise government revenue in an efficient manner and with as little distortions of economic activity as possible, distribution effects are perhaps better addressed by other forms of tax and government expenditure policies which can often be better targeted at these aims.
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FEATURES OF VAT
1. Rate of Tax VAT proposes to impose two types of rate of tax mainly: a. 4% on declared goods or the goods commonly used. b. 10-12% on goods called Revenue Neutral Rates (RNR). There would be no fall in such remaining goods. c. Two special rates will be imposed-- 1% on silver or gold and 20% on liquor. Tax on petrol, diesel or aviation turbine fuel are proposed to be kept out from the VAT system as they would be continued to be taxed, as presently applicable by the CST Act. 2. Uniform Rates in the VAT system, certain commodities are exempted from tax. The taxable commodities are listed in the respective schedule with the rates. VAT proposes to keep these rates uniform in all the states so the goods sold or purchased across the country would suffer the same tax rate. Discretion has been given to the states when it comes to finalizing the RNR along with the restrictions. This rate must not be less than 10%. This will ensure By doing this www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 10 -
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VAT in Maharashtra is levied under a legislation known as the Maharashtra Value Added Tax Act (MVAT Act), supported by Maharashtra Value Added Tax Rules (MVAT Rules). VAT is levied on sale of goods including intangible goods. The meaning of goods for VAT purposes Goods means every kind of moveable property including goods of incorporeal and intangible nature but there are some exclusion, such as newspapers, actionable claims, money, shares and securities and lottery tickets. Businesses engaged in. the buying and selling of goods within the scope of the VAT law are referred to as dealers. The meaning of 'sale' for VAT purposes A transaction of sale can be a: normal sale of goods; sale of goods under hire-purchase system; deemed sale of goods used I supplied in the course of execution of works contract; deemed sale of goods given on lease.
The rate of tax applicable to the goods sold under various classes of sales is uniform. However, in respect of normal sales of goods and deemed sales of goods under works www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 16 -
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If the dealers turnover is less than the above threshold, then they are not liable to collect and pay VAT. However, if a dealer wishes to avail the benefits of being a registered dealer, then they may apply for voluntary registration by paying a fee of Rs.5,000/ -. Benefits of being a registered dealer As a registered dealer, they are entitled to: collect VAT on the sales; claim set-off of tax (input tax credit) paid on purchases; Issue tax invoices and, be competitive.
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If a dealer loses his / her certificate of registration or hologram, or it is accidentally destroyed or defaced, then they may obtain a duplicate copy of the certificate of hologram from their sales tax office. The certificate of registration and hologram is personal to the dealer to whom it is issued and is non-transferable. Changes to business circumstances If, following dealer register, there are any amendments to the details they can be reported while applying for registration, it must done within 60 days of the change, inform us in writing. Where the amendment involves a: change in the name of the business; change in the constitution of the business without dissolution of the firm; change in the trustees of a Trust; change in the guardianship of a ward; change in the Karta of a Hindu Undivided Family; conversion of Private limited Company to a Public limited Company; change in the place of business; addition of new place of business; formation of a partnership with regard to the business, an application made by a dealer for insolvency or liquidation of their business; an application made against dealers business for insolvency or liquidation; opening or closing of a bank account;
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A dealer must inform the Sales Tax Department within 30 days of the event. In case of disposal or sale of business, their successor will need to apply for a fresh registration certificate. For cancellation of registration a dealer should submit form 103 which is available with the local sales tax office. It can also be downloaded from the website www.vat.maharashtra.gov.in If the Sales Tax Department cancels the dealers registration, they must return the Certificate of Registration The cancellation of their certificate does not affect their liability to pay any tax, interest or penalties in respect of any period prior to the date of cancellation of their registration.
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Shopkeeper C Purchases polished stainless steel utensils 1,80,000 Packing material 5,000 Total Purchases 1,85,000 Sales 2,25,000 Value added 40,000 Shopkeeper C is liable to pay V AT on Rs.2,25,000 @ 4% 9,000 Set off of tax paid on purchases (Rs.7,200 + Rs.200 of 7,400 packing material) Net VAT amount to pay with the Return Vendor D Tax paid costs Sales Value Added Nil 5,000 5,000 1,600
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Thus, through a chain of tax on sale price and set off on purchase price, the cascading impact of tax is totally eliminated.
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(The list is illustrative and not exhaustive. Please refer to the schedules for details)
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Alternatively, in lieu of the deductions as above, a dealer may choose to discharge the liability arising on works contracts by referring to the table prescribed in the rules. If the dealer finds that it is too complicated to calculate the deductions, then they may opt for a composition scheme for any works contract. Sales and purchases not liable to tax under VAT The VAT law specifically excludes from value added tax all imports, exports and interstate transactions. These transactions are covered by the CST Act. Similarly, transactions that take place outside Maharashtra are not within the scope of MVAT Act. Point of levy in certain cases Hire purchase Where there is a hire purchase agreement or an agreement for sale by installments, the date of the sale is deemed to be the date of the delivery of goods. This is despite the fact that legal ownership of the goods only passes to the buyer after payment of the final installment. If the hire-purchase agreement specifies the interest component then in calculating the sales price, dealer should disregard the interest component included in the agreement. Calculating the amount of VAT due on sales Dealer should also make some adjustments to the total turnover of sales to arrive at the amount on which tax is due. From the total sales one should deduct the total of exports and inter-State sales. the total of sales of goods that are tax free, and branch / consignment transfers to locations in Maharashtra as well as other States. the tax collected.
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The resulting figure represents purchases against tax invoices from registered dealers. Calculating the amount of set off due (VAT paid on purchases) This is the next stage of tax calculation. At this stage VAT is charged on total purchases. Dealer must, however, make some adjustments to this amount for, in certain cases, the full set off of the VAT paid on purchases is not available. Adjustments to tax available for set off If dealers purchases include goods, used o as fuel, or o for the manufacture of any tax-free goods, or o as packaging for tax-free goods, this goods should be sold. Then a dealer must calculate the value of those items and deduct tax @ 4% of the corresponding purchase price from the amount otherwise available for set off. (Not applicable to PSI dealers other than the New Package Scheme of Incentives for www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 33 -
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Apart from part of the admissible set-off which can remain unutilized, excess credit can be on account of: unutilised portion of tax deducted at source or refund payment order or ad-hoc payment made is more than tax payable.
Whatever may be the reason for credit in excess of tax due and payable during a tax period, dealers are eligible to claim refund of such excess credit. For the purpose of granting refund, dealers have been classified under two categories viz. a) specified class of dealers and b) other dealers Refund to specified class of dealers Specified classes of dealers are : Exporters exporting out of the country or dealers selling to an exporter against form H. A unit set-up in SEZ or STP or EHTP or a 100% EOU unit. These units have to be certified by the Commissioner of Sales Tax. An Entitlement Certificate holder availing of the benefit of Package Scheme of Incentives (PSI). Specified class of dealers and the dealers who have made a sale in the course of interState trade or commerce and in the return he has shown any amount to be refundable are eligible to claim refund in each of the returns filed by them. Full amount of excess credit can be claimed as refund due for the return period. The dealer eligible to claim refund has to file refund application in Form 501. The application has to be filed with the Refund Branch. The Refund Branch may ask for www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 37 incentives under the
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Thus, if they are required to file a quarterly return, but they file a monthly return, then the refund would not be granted for the monthly return. In order to be eligible for refund, they would have to file a quarterly return.
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Value Added Tax in Maharashtra Part 5 - Filing a return and paying the tax
VAT is a self-assessment system and dealers are expected to make self assessment for a given tax period and declare their VAT liability by filing returns. The returns have to be filed in the prescribed form and by the specified dates. Further, they are also required to pay the tax due as per the return filed. In Maharashtra, return form is return-cum-chalan. As such, filing of returns along-with payment of tax on or before the due date at the notified bank would be considered as sufficient compliance. However, where any amount of tax including interest or penalty is due as per a fresh or revised return, then they should first pay such amount in Government Treasury and file the return in the local office of Sales Tax Department along with a self attested copy of the chalan. If no payment is due or a refund is claimed as per the return, they are also required to file the return in the local office of the Sales Tax Department. Return forms The return forms prescribed are as follows. Form No. 221 To Be Used By All VAT dealers other than dealers executing works contract, dealers engaged in leasing business, composition dealers (including dealers opting for composition only for part of the activity of the business), PSI 222 dealers and notified Oil Companies. All composition dealers whose entire turnover is under composition (excluding works contractors opting for composition and dealers 223 opting for composition only for part of the activity of the business). VA T dealers who are also in the business of executing works contracts, leasing and dealers opting for composition only for part of
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224
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Scrutiny of returns filed The return filed by the dealer should be correct, complete, and self-consistent in every respect. The Sales Tax Office will check the return to ensure that there are no obvious errors in consistencies or contradictions in calculations. If this check reveals discrepancies, then the dealers will be advised and invited to submit a fresh return. The department will issue this defect notice within four months of receiving their return. Then they should file their fresh return within 30 days of the notice. If they fail to do so, it will be deemed not to have filed the return within the time allowed, and will so liable to a penalty charge. At the same time, as the department issues the defect notice, dealers will be sent a 'show cause' notice, explaining that a penalty may be imposed.
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Consequences for filing a return, which is not correct, complete and selfconsistent Each of the returns filed by them is checked to confirm that the same is correct, complete and self-consistent. In case the return is defective, a defect notice is issued by the Returns Branch pointing out the error or the omission. On receipt of the notice, it is required to file fresh return which is correct, complete and self-consistent and should also pay differential tax due, if any. The return filed by them in response to defect notice is termed as Fresh Return and the dealer should indicate so on the return in the space provided for the same. Fresh return rectifying the defects has to be filed within the time limit specified in the defect notice. Failure to comply with the notice would be construed as non-filing of return and consequently, a unilateral (ex-parte) assessment order would be passed.
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Filing of returns in special cases The first return for the newly registered dealer is for the period up to the end of the quarter containing the date of its registration. Example 1 The turnover exceeds the threshold on 1st November. Then they should apply for registration, which is granted on 30th November and the date of effect is 1st November. The first return is for the quarter ended 31st December covering the period 1st, April to 31st December; and the second return is for the quarter ending following 31st March. Example 2 If turnover exceeds the threshold on 1st November. But dealer apply late for registration i.e. on 10th December, and the registration is granted on l0th December, then the date of effect registration is 10th December i.e., Date of application. The first return is due for the quarter ending on 31st December (covering. the period 10th December to 31st December). .
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And it must also be signed either by dealer or by someone who is authorized by the dealer. If a dealer issues a bill or cash memorandum, it must contain: words 'Bill / cash memorandum', printed in bold letters at the top or at a prominent place; if a dealer is 'a composition dealer (other then works contractor) then the words Composition Dealer at the top of the bill / cash memorandum; dealers name, address and registration number (TIN); the name and address of the purchaser; serial number of the bill / cash memorandum; date of issue; description of the goods, the quantity and price of the goods sold; prescribed declaration' regarding validity of the registration and payment of tax;
And it must also be signed either by dealer or by someone who is authorized by the dealer. Retention of records A dealer must keep all their records including tax invoices / bill / cash memorandum, relating to their stock of goods, purchases, sales, deliveries and payments made or received for the purchase or sale of goods for a minimum of five years from the end of the year to which they relate.
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A dealer who consistently and regularly complies with the VAT law and files correct, complete and self consistent returns will normally not be selected for audit. The selection of audit cases will be by exception rather than as a rule. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 53 -
The Business Audit Process If any of the dealers business is selected for an audit, then Sales Tax Office will inform them and then fix a suitable date. The audit officer will inspect the books of accounts and supporting documents. At that time dealer should make available any information or documents that he may require to enable him to carry out the audit effectively and speedily. The audit officer may like to understand dealers business process and examine their stocks of goods. He may also like to interview the person or its employees for this. The audit officer cannot remove any books of accounts or documents from their premises. However, audit officer can request for copies. Results of the audit If the audit shows that the returns filed do not reflect the true picture of the dealers business, then the auditor may discuss the matter with the dealer and will give guidance to them to prevent recurrence and will also explain them about what action should be followed. The audit may result in additional tax demand or a refund.
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Appeal accepted If dealers appeal is admitted, then the appellate authority will give them a minimum of 10 days' notice of the date, place and time of the appeal hearing (unless they request an earlier hearing). The hearing may be adjourned or postponed upon the dealers request if deemed fit by the appellate authority. The Appeal hearing At the appeal hearing, dealer and legal adviser if any together - will be given an opportunity to explain their reasons for making the appeal and to support their case by producing evidence. After considering their arguments and evidence, the appeal officer will confirm or modify the order under appeal. If the dealer is not satisfied with the appeal officer's decision, then they may file a second appeal within 60 days to be heard by the Tribunal Appeal to Tribunal Dealer should file their appeal to the Tribunal in Form 310, taking care to ensure that they provide all the information relevant to their appeal as required by the form. And they must pay the appropriate fee through a challan in Form 210. The proceedings before the Tribunal will be similar to those outlined above. Dealer may present their case and evidence before the Tribunal through their legal representative.
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Central Repository for Issuance of Statutory Forms A Central Repository has been set up in every Sales Tax Office having Registration branch. Each Central Repository issues various statutory forms prescribed under the CST Act, to the dealers registered within the jurisdiction of the concerned registration office. However, Form I will be issued to the SEZ units from the office of the Commissioner of SEZ. The Dealer has to submit an application in the prescribed format for supply of statutory forms along with the 'Statement of Requirement' which is available in every Sales Tax Office or can be downloaded from the Sales Tax Office website www.vat.maharashtra.gov.in Dealers will be issued the requisite number of forms on payment of the following fees by way of court fee stamps only: SR.No. 1 2 3 4 5 Type of Form C F H E-I E-II 3.00 3.00 3.00 1.00 1.00 Fee per form (Rs.)
The statutory forms will be issued on a quarterly basis only after the transactions of the said quarter are completed. However, form F will be issued on a monthly basis.
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Dealer will be given an opportunity to present their case before the Commissioner makes an order. If the dealer disagrees with the commissioner's ruling, then they may appeal to the Tribunal against the order.
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Dealer should apply for a certificate using Form 414. Service Cell The service cell meetings are held at the Head Quarters in Mumbai once in every quarter. Dealer can actively participate and can provide their valuable feedback / suggestions during these meetings. The Website (www.vat.maharashtra.gov.in) Sales Tax Office has developed a Website for serving all the dealers or person in a more efficient and faster way. The website has been divided into five sections as under:
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If the department is still unable to recover the amounts of tax, interest and penalties plus any costs incurred in the attachment proceedings, it will initiate prosecution proceedings through police. The VAT law outlines a number of offences and the financial and other consequences that follow. In addition, interest will be charged on any tax paid late at the rate of 15% per year. Offences The principal offences, each of which has been referred to in the text of this guide, are as follows: If a person poses as a registered dealer when they not registered. files a false return. keeps false account of the value of goods bought or sold. produces false accounts, registers or documents or provides false information. issues any document (including bills, cash memoranda, vouchers or any other certificate or declaration) which the dealer knows or has reason to believe is false. He may be liable for criminal proceedings including imposition of fine
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In addition, dealer is committing an offence and if he fails to register when his turnover exceeds the, threshold. provides information about changes to his business. declares the name of the manager. provides to Sales Tax Department the PAN allotted to the business. files a return. get his accounts audited, when required. keeps proper accounts, when required to do so by the Sales Tax authorities because the existing records are inadequate. produce his accounts for inspection, when required issues a tax invoice, bill or cash memorandum.
In these circumstances, the dealer may be prosecuted and a fine may also be imposed. There are two other events that may also give rise to a penalty. If the dealer: transfers any assets of his business with the intention of not paying tax, or fails to respond to a notice requiring him to provide statistical information.
Dealer will be liable to a fine and may also face prosecution. Financial penalties or fines There are various financial penalties, each depending on the nature of the offence:
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Tax related Some offences attract a maximum penalty in proportion to the amount of tax due. If the dealer: conceals or misclassifies any transaction or provides inaccurate information or claims a set off in excess of the amount due or, issues or produces a documents, including tax invoice, bill or cash memorandum, that results in a person or dealer not paying the correct amount of tax The penalty is an amount equal to the tax due. If the dealer avoids paying the correct amount of tax as a result of issuing bogus, false tax invoices, the maximum penalty is an amount equal to half of the tax under assessed or Rs.100/-, whichever is higher. Non Tax Related Penalties If the dealer fails to file a return, within the time allowed, the penalty is Rs.2,000/-. If dealer files the return late but before any penalty proceedings have started, the penalty will be reduced to Rs1,000/-. If the dealers return is not correct, complete and self-consistent, the penalty is Rs1,000/-, but this is without prejudice to any other penalties that may be imposed. If, after the issue of summons, the dealer fails to attend any proceedings or to produce books of account, registers or documents, the Tribunal or the Sales Tax authorities may impose a fine, not exceeding Rs.5,000/-.
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Most other offences attract a penalty of Rs.1,000/- although there is also a provision for some offences to attract a penalty of Rs.2,000/- plus a continuing daily penalty of Rs.100/Payment of Penalty or Fine As a result of proceedings, such as audit, investigation, assessment etc., Sales Tax Authority may issue a demand notice containing details of tax, interest and penalties, if any, that are imposed. The dealer should pay the amount due within 30 days of the date of the order. Dealer should make the payment using Form 210 through the bank where he normally files his return.
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Appendix 1
List of important forms referred to in the Guide Sr. Form Subject Application for Registration under the MV AT Act, 2002. Application for cancellation of Registration Certificate. Chalan in respect of payment made otherwise than with return by a dealer under the MVAT Act, 2002 Return-cum-chalan for all VAT dealers other than dealers executing works contract, dealers engaged in leasing business, composition dealers (including dealers opting for composition only for part of the activity of the business), PSI dealers and 5 222 notified Oil Companies. Return-cum-chalan for all composition dealers whose entire turnover is under composition (excluding works contractors opting for composition and dealers opting for composition only 6 223 for part of the activity of the business). Return-cum-chalan for VAT dealers who are also in the business of executing works contracts, leasing and dealers opting for composition only for part of the activity of the 7 224 business. Return-cum-chalan for PSI dealers holding Entitlement
Certificate. (Transactions by PSI dealers relating to the business of execution of works contracts, leasing, trading and composition only for part of the activity of the business to be 8 225 included in a separate return in Form 223). Return-cum-chalan for Notified Oil Companies. (Transactions by OIL Companies relating to the business of execution of www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/ Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright () to its Authors. This is only for Educational Purpose.- 73 -
works contracts, leasing and composition only for part of the activity of the business, to be inc1uded in a separate return in 9 304 Form 223). Application for cancellation of assessment order under section (1) of section 23 of the Maharashtra Value Added Tax Act, 10 11 12 13 14 310 311 414 501 704 2002. Appeal against an order of assessment, interest, penalty or fine. Application for grant of stay against order of assessment, penalty, interest or fine Application for tax clearance certificate. Application for refund under sub-section (1) of section 51 of the Maharashtra Value Added Tax Act, 2002. Audit report under section 61 of the Maharashtra Value Added Tax Act, 2002.
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There are total 40 Sales Tax Office located all over the Maharashtra. Out which some of them are in: Mumbai (Head Quarters), Bandra, Raigad (Division), Thane (Division), Kalyan, Nalasopara, Palghar, Pune (Division), Solapur, Kolhapur (Division), Satara, Sangli, Ratnagiri, Nasik (Division), Ahmednagar, Aurangabad (Division), Nagpur (Division), Wardha, Amaravati (Division), Akola, and many more
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Conclusion
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Bibliography
1. Value Added Tax By Sales Tax Department.
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