Basics of MVAT

MVAT or Maharashtra Value Added Tax was started w.e.f. 1st April, 2005 It is administered by Sales Tax Department under Finance Department of Mantralaya. Based on the principal of VAT.

Whether MVAT is another type of Tax ?

No, it has replaced following four existing taxes

The Bombay Sales Tax Act, 1959 The Maharashtra Sales Tax on the Transfer of Right to Use Any Goods For Any Purpose Act, 1985 The Maharashtra Sales Tax on the Transfer of Property in Goods Involved in the Execution of Works Contract (re-enacted) Act, 1989 The Bombay Sales of Motor Spirit Taxation Act, 1958

Different businesses covered by MVAT

VAT applies to all types of businesses including

(1)Importers (2)Manufacturers (3)Distributors (4)Wholesalers (5)Retailers (6)Works Contractors (7)Lessors

Basic Methodology of MVAT

All registered dealers, regardless of where they are in the chain of manufacture and production, must charge VAT on their sales of taxable goods and collect it from their customers. Registered dealers must issue a tax invoice to other registered dealers showing the VAT amount being charged as a separate amount. Registered dealers who pay VAT on their purchases can normally claim a set-off for the VAT paid to their suppliers. As a result, VAT is not a cost to the dealers. Dealers must ensure that tax is charged separately in their purchase invoice in order to be eligible to claim set-off. Certain dealers who sell mainly to consumers at retail level can opt for a simplified system of VAT calculation and payment under a Composition Scheme. Under the Composition Scheme, dealers will not issue a tax invoice or show VAT as a separate amount on a bill or cash memorandum.

Obligations under MVAT

Dealers who are required to be registered for VAT must

Charge and collect VAT on their sales of taxable goods Issue proper tax invoices Keep proper records and books of account Calculate the VAT due to Government based on VAT charged on sales LESS any VAT available as a set-off on business purchases File VAT returns on a regular basis declaring their VAT liability Pay any amount of VAT due to the Government with the VAT return

Rate of VAT

Under the VAT, the tax rates have been simplified. There are only two main rates of VAT

4% for items consisting mainly of raw materials used in the manufacturing process, IT products and some goods of common consumption 12.5% for all goods unless they are listed under the other rates Foodgrains including pulses, milk, vegetables and books are not subject to VAT.

In addition, there are two other rates for specific items

1% for gold, silver, other precious metals, precious and semi precious stones and their jewellery 20% for liquor.

Rates of MVAT A 0% Vegetables, eggs, milk other essential items B 1% Precious Metals, Precious Stones and their Jwellary C 4% Raw Materials, Notified Industrial products, IT products D 20% & above Liquor, petrol & diesel E 12.5% All remaining items

Who should obtain registration Every dealer having turnover exceeding the prescribed threshold limit, must register with the Sales Tax Department. However, there are provisions for dealers to register voluntarily. Further, If you are registered under the Central Sales Tax Act, you must register for VAT, regardless of the threshold.

Who are Dealers

Dealer means any person who for the purposes of or consequential to his engagement in or, in connection with or incidental to or in the course of, his business buys or sells, goods in the State whether for commission, remuneration or otherwise and includes,a factor, broker, commission agent, del-credere agent or any other mercantile agent, by whatever name called, who for the purposes of or consequential to his engagement in or in connection with or incidental to or in the course of the business, buys or sells any goods on behalf of any principal or principals whether disclosed or not; An auctioneer who sells or auctions goods whether acting as an agent or otherwise or, who organizes the sale of goods or conducts the auction of goods whether or not he has the authority to sell the goods belonging to any principal whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal;

Who are Dealers

contd..

A non resident dealer or as the case may be, an agent. residing in the State of a nonresident dealer, who buys or sells goods in the State for the purposes of or consequential to his engagement in or in connection with or incidental to or in the course of, the business. Any society, club or other association of persons which buys goods from, or sells goods to, its members;

Exceptions to Dealer

An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally, shall not be deemed to be a dealer within the meaning of this clause. An educational institution carrying on the activity of manufacturing, buying or selling goods, in the performance of its functions for achieving its objects, shall not be deemed to be a dealer within the meaning of this clause. A transporter holding permit for transport vehicles (including cranes) granted under the Motor Vehicles Act, 1988, which are used or adopted to be used for hire or reward shall not be deemed to be a dealer within the meaning of this clause in respect of sale or purchase of such transport vehicles or parts. components or accessories thereof.

What is prescribed threshold limit

The threshold is based on the total turnover of sales and the level of taxable sales or purchases in a year commencing 1 April. The threshold limit above which you must register, depends on the nature of your business. If your are an importer and your total turnover exceeds Rs. 1,00,000 and your taxable sales or purchases exceed Rs.10,000 in a year commencing 1st April, you must register and account for tax. If you are not an importer and your total turnover exceeds Rs 5,00,000 and your taxable sales or purchases exceed Rs.10,000 in a year commencing 1st April, you must register and account for tax. Importer for this purpose means a dealer who brings any goods into the state or to whom any goods are despatched from any place outside the state.

Procedure for registration Application to be made in Form No. 101 within 30 days of crossing the prescribed threshold limit. In case of change in ownership / constitution application within 30 days to be made for new registration certificate. In case of death of dealer, application for transfer or succession of business to be made within 60 days.

Procedure for registration

In case of dealer having more than one place of business, single application for all places is to be made. Documents required

Two Photographs Registration fees Bill wise statement of sales / purchases Proof of Address Partnership Deed / MOA & AOA for Co. PAN Proof Proof of Bank account etc.

Records to be maintained under MVAT

No special records have been mentioned for VAT. However, the records should be sufficient to enable to complete VAT return, and to calculate and account for VAT. Ideally, there must be records having details of all the goods sold / disposed of and the VAT charged, as well as Details of all business purchases and the VAT paid on it.

Tax Invoice

A tax invoice can be in any form to suit business requirements. However, all tax invoices must show

the words `Tax Invoice in bold letters either at the top or at a prominent place a serial number the date of the transaction/sale/issue description of the goods the quantity or number of goods involved in the transaction the price of the goods the amount of VAT charged on the goods (this must be shown separately) a declaration certificate suppliers name, address and Registration Certificate number name and address of buyer

Contents of declaration certificate

The words on the certificate on the bill or cash memorandum you issue should read I/We, hereby certify that my / our registration certificate under the Maharashtra Value Added Tax Act, 2002 is in force on the date on which sale of goods specified in this bill/ cash memorandum is made by me / us and that the transaction of sale covered by this bill / cash memorandum has been effected by me and it shall be accounted for in the turnover of sales while filing my return.

Returns under MVAT

Monthly Return
Dealer having tax liability of more than Rs. 10 Lacs in previous year or Dealer having entitlement for refund of more than Rs. 1 Crore during previous year and Retailer opting for Composition Scheme

Return to be filed within 21 days of next month.

Returns

contd..

Six Monthly Return

Dealer having tax liability of Rs. 1 Lacs or less in previous year or Entitlement for refund is Rs. 10 Lacs or less during previous year

Quarterly Return others to file Quartely return i.e. Liability of Rs. 1 to 10 Lacs or refund from Rs. 10 Lacs to Rs. 100 Lacs

Meaning of tax liability for return

Tax liability refers to total of all taxes payable by him in respect of all his places of business in the State under Central Sales Tax Act, 1956 and Maharashtra Value Added Tax, 2002 after adjustment of amount of set off or refund claimed by him, if any under respective act.

First time dealers First time dealers to file Quarterly Returns. First Return shall be from 1st April till the end of respective quarter. From next year onwards depending upon the tax liability for the first year Monthly / Quarterly or Half yearly returns shall be filed.

Forms of Return

Form No. 231

For dealers, other than

Composition dealers Dealers executing works contract Dealers engaged in right to use any goods Dealers under Package scheme of incentive

Form No. 232

Dealers opting for composition scheme excluding works contractors / dealers opting composition for part business

Forms of Return

contd..

Form No. 233

Dealers under composition for part business Works contractors Dealers engaged in activity of transfer of right to use goods

Form No. 234

Dealers under Package Scheme of Incentive Notified oil companies

Form No. 235