INDEX

TITLE PAGE NO. SIGN.

SERVICE TAX: 6-27

1. Meaning & Charge

2. Declared Services

3. Excluded Services

4. Services in Negative List

5. Exempt Services

6. Place of Provision of Services

MVAT: 27-37

1. Definitions

2. Registration

3. Levy, Computation, Set Off & Refund

4. Case study & Illustration

5. Audit, Penalty & Interest

CONCLUSION 38

BIBLIOGRAPHY 39

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Service Tax:
Meaning & Charge:
Service tax is a tax levied by Central Government of India on services provided or to be
provided excluding services covered under negative list and considering the Place of Provision
of Services Rules, 2012 and collected as per Point of Taxation Rules, 2011 from the person liable
to pay service tax. Person liable to pay service tax is governed by Service Tax Rules, 1994 he
may be service provider or service receiver or any other person made so liable. It is an indirect
tax wherein the service provider collects the tax on services from service receiver and pays the
same to government of India. Few services are presently exempt in public interest via Mega
Exemption Notification 25/2012-ST as amended up to date and few services are charged service
tax at abated rate as per Notification No. 26/2012-ST as amended up to date. Presently from 1
June 2016, service tax rate has been increased to consolidated rate at 15% of value of services
provided or to be provided. The service tax rate now is consolidated rate as education cess and
secondary higher education cess are subsumed with 2% of "Swach Bharat Cess(0.50%)" has
been notified by the Government.

From 15 November 2015, the effective rate of service tax plus Swachh Bharat Cess, post
introduction of Swachh Bharat Cess, was 14.5%. Currently, Swachh Bharat Cess and Krishi
Kalyan Cess would also be levied on all services on which Service Tax is being levied and
therefore, the Service Tax (including Swachh Bharat Cess and Krishi Kalyan Cess) applicable
from 1 June 2016 has become 15%......

Under the Service tax from the year of original levying year of 1994 are constantly growing.
The collections are shown as in the following table:

Financial Year Revenue Rupees(in crores) Number of services Number of Assessees

19931994 254 2 2568

19941995 407 3 3943

19951996 862 6 4866

19961997 1059 6 13982

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19971998 1586 18 45991

19981999 1957 26 107479

19992000 2128 26 115495

20002001 2613 26 122326

20012002 3302 41 187577

20022003 4122 52 232048

20032004 7891 62 403856

20042005 14200 75 774988

20052006 23055 84 846155

20062007 37598 99 940641

20072008 51301 100 1073075

20082009 60941 106 1204570

20092010 58422 109 1307286

20102011 71016 117 1372274

20112012 97509 119 1535570

20122013 132518 Negative List Regime 1712617

Rates:

Service Tax which started out at a nominal 5% is now at 15%.

It was increased to 14% for transactions that happened on or after 1 June 2015 and then for
transactions that occurred on or after 15 Nov 2015, the new Swachh Bharat Cess at 0.5% was
also added to the Service Tax. Therefore, the effective rate became 14.5% with effect from 15
Nov 2015

For transactions that occurred on or after 1 June 2016 this tax is at 15%.[2] 2016 Union budget of
India has proposed to impose a cess, called the Krishi Kalyan Cess, at 0.5% on all taxable
services effective from 1 June 2016. The current service tax is at 15%.

Reverse Charge (Tax Shift):

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 Normally, service tax is payable by person providing the service.

Section 68(2) makes provision for making person other than service provider liable to pay
tax.

Provision can be made that part of tax will be paid by service receiver and part by service
provider.

Provisions relating to reverse charge are contained in Notification No. 30/2012-ST dated 20-
6-2012.

2 Issues relating to reverse charge

The small service provider exemption of Rs 10 lakhs not available when tax is payable under
reverse charge.

Cenvat credit cannot be used to pay tax by service receiver. Service tax as to be paid by cash
only i.e. GAR-7 challan.

Once paid, Cenvat credit can be taken if otherwise it is his eligible input service.

Tax should be paid under service tax registration number of service receiver and included in
his return as he is liable to pay service tax.

Service tax is payable by service receiver when actual payment is made to service provider
and not on receipt of Invoice from service provider. However, if payment is not made to service
provider within 6 months, service tax is anyway payable. Interest is also payable.

Exception is that when service provider is outside India is Associated Enterprise (group
company with at least 25% common interest), the service receiver is liable to pay service tax as
soon as the account of service provider is credited in books of account of service receiver.

Reverse charge with condition of non-availability of Cenvat

In some services (e.g. GTA, renting or hire of motor vehicle designed to carry passengers),
the abatement is subject to condition of non-availment of Cenvat credit by service provider (not
by service receiver). The service receiver paying service tax does not have to prove that service
provider has not availed any Cenvat credit.

In case of renting of motor vehicle, in most of the case, Cenvat credit is not available. Hence,
it is cost to company.

Business Entity and Body Corporate

In some cases, reverse charge is applicable only when service receiver is business entity
registered as body corporate.

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 Business entity means any person ordinarily carrying out any activity relating to industry,
commerce or any other business or profession. Thus, Government, charitable organisation is not
business entity.

Body Corporate Company, LLP, Cooperative Society is Body Corporate Firm, HUF,
Trust is not Body Corporate [Society registered under Societies Act is legally not body
corporate].

Reverse charge in works contract service

50% tax by service receiver if service provider of works contract service is individual, HUF,
proprietary or partnership firm or AOP

AND service receiver is business entity incorporated as body corporate.

50% service tax is payable by service provider and 50% by service receiver. The service
receiver liable for 50% even if service provider does not charge service tax.

Construction, Job work with material, AMC covered under works contract.

Reverse charge in case of manpower supply

75% tax by service receiver if service provider of manpower supply is individual, HUF,
proprietary or partnership firm or AOP

AND service receiver is company or business entity incorporated as body corporate. Balance
25% by service provider.

Issues relating to manpower supply service

Service should be manpower supply i.e. under command of Principal Employer.

Supply of manpower means supply of manpower, temporarily or otherwise, to another person
to work under his superintendence or control. [Rule 2(g) of Service Tax Rules, inserted w.e.f. 1-
7-2012].
Security service, cleaning service, piece basis or job basis contract can be manpower supply
service only if the labour work under superintendence or control of Principal Employer.

Service tax payable on salary plus PF, ESI plus commission of labour contractor.

Persons sent on deputation is manpower supply service.

Person approaching himself and company appointing him on contract basis is not manpower
supply service.

Goods Transport Agency

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 Tax when consignment note issued. Simple transport of goods service (without issue of
consignment note) is not a GTA service.

Person liable to freight is liable to pay service tax on GTA if he is body corporate, factory,
registered dealer under Central excise, society, cooperative society, partnership firm (registered
or not).

Tax on 30% if GTA does not avail Cenvat Credit w.e.f. 1-4-2015 (earlier it was 25%)

GTA is liable to pay service tax if (a) person liable to pay freight is individual or HUF (b)
Person liable to ay freight is outside taxable territory (like J&K, Nepal, Bhutan, Bangla Desh,
Pakistan etc.).

Support Services of Government or Local Authority

Sovereign and statutory activities not subject to service tax

Support services like testing, police protection, Advertisement, construction, Outsourcing

type services provided by Government to business entity

Business Entity liable for entire service tax

Import of Service

Service tax is payable only if Place of Provision of Service is in taxable territory (i.e. India
plus 200 nautical miles inside the sea minus J&K)

Service provider should be outside taxable territory and service receiver should be located in
taxable territory

Service tax is payable on gross amount including TDS

Declared Services
In the year of 2012, service tax laws has witnessed a paradigm shift when the taxation shifts from
positive list of services to negative list of services. At that time, another concept of declared
service was introduced by the Government of India via Section 66E of Finance Act, 1994.

Declared service is the deeming fiction of law. It provides the lawmakers with an arbitrary power
to declare any activity as a service. Section 65B(22) defines the declared service as any activity
carried out by a person for another person for consideration and declared as such under section
66E. Further, the definition of service under section 65B(44) also specifically covers the declared
service under the definition of service.

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This section is also one of the vital sections of Finance Act, 1994. Any service included under
this section will be liable to service tax straight.

In the definition of service contained in clause (44) of section 65B of the Act it has also been
stated that service includes a declared service. The phrase declared service is also defined
in the said section as an activity carried out by a person for another for consideration and
specified in section 66E of the Act. The following nine activities have been specified in section
66E:
1. renting of immovable property;
2. construction of a complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a buyer, wholly or partly, except where the
entire consideration is received after issuance of certificate of completion by a
competent authority;
3. temporary transfer or permitting the use or enjoyment of any intellectual property
right;
4. development, design, programming, customization, adaptation, up gradation,
enhancement, implementation of information technology software;
5. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation,
or to do an act;
6. transfer of goods by way of hiring, leasing, licensing or any such manner without
transfer of right to use such goods;
7. activities in relation to delivery of goods on hire purchase or any system of payment
by instalments;
8. service portion in execution of a works contract;
9. service portion in an activity wherein goods, being food or any other article of human
consumption or any drink (whether or not intoxicating) is supplied in any manner as
part of the activity.
1. Renting of Immovable Property:
Renting has been defined in section 65B as allowing, permitting or granting access, entry,
occupation, usageor any such facility, wholly or partly, in an immovable property, with or
without
the transfer of possession or control of the said immovable property and includes letting,
leasing, licensing or other similar arrangements in respect of immovable property
1. Is renting of all kinds of immovable properties taxable?
No. Renting of certain kinds of immovable properties is specified in the negative list. These
are
renting of vacant land, with or without a structure incidental to its use, relating to
agriculture.
renting out of any property by the Reserve Bank of India
renting out of any property by a Government or a local authority to a non-business
entity.Renting of all other immovable properties would be taxable unless covered by an
exemption

2. Construction of a complex, building, civil structure or a part thereof,

including a complex or building intended for sale to a buyer, wholly
or partly, except where the entire consideration is received after

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issuance of certificate of completion by a competent authority.:
This service is already taxable as part of construction of residential complex service under
clause of sub-section 105 of section 65 of the Act and as part of service in relation to commercial
or industrial construction under clause of sub-section 105 of section 65 of the Act. This entry
covers the services provided by builders or developers or any other person, where building
complexes, civil structure or part thereof are offered for sale but the payment for such building or
complex or part thereof is received before the issuance of completion certificate by a competent
authority.
Here two important transactions are identifiable:
(a) sale of land by the landowner which is not a taxable service; and
(b) construction service provided by the builder/developer. The builder/developer receives
consideration for the construction service provided by him, from two categories of service
receivers:
(a) from landowner: in the form of land/development rights; and
(b) from other buyers: normally in cash.
Construction service provided by the builder/developer is taxable in case any part of the
payment/development rights of the land was received by the builder/ developer before the
issuance of completion certificate and the service tax would be required to be paid by builder/
developers even for the flats given to the land owner.

3. Temporary transfer or permitting the use or enjoyment of any intellectual property right
1What is the scope of the term intellectual property right?
Intellectual property right has not been defined in the Act. The phrase has to be understood as
in normal trade parlance as per which intellectual property right includes the following:-
Copyright
Patents
Trademarks
Designs
Any other similar right to an intangible property

4. Development, design, programming, customization, adaptation, up gradation,

enhancement, implementation of information technology software:
The term information technology software has been defined in section 65B of the Act as any
representation of instructions, data, sound or image, including source code and object code,
recorded in a machine readable form, and capable of being manipulated or providing
interactivity to a user, by means of a computer or an automatic data processing machine or
any other device or equipment.

5. Activities in relation to delivery of goods on hire purchase or any system of payment by

instalments:
What is the scope of the phrase delivery of goods on hire-purchase or any system of payment by
installments?
Section 2 of the Hire Purchase Act, 1972 defines a hire purchase agreement as an agreement
under which goods are let out on hire and under which the hirer has the option to purchase them
in accordance with the terms of the agreement and includes an agreement under which-

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(i) possession of goods is delivered by the owner thereof to a person on condition that such
person pays the agreed amount in periodical installments, and
(ii) the property in the goods is to pass to such person on the payment of the last of such
installments, and
(iii)such person has a right to terminate the agreement at any time before the property
so passes.As per the Sales of Goods Act by Mulla delivery is voluntary dispossession in favour
of another and that in all cases the essence of delivery is that the deliverer, by some apt and
manifest act, puts the deliveree in the same position of control over thing, either directly or
through a custodian, which he held himself immediately before the act.

6. Transfer of goods by way of hiring, leasing, licensing or any such manner without
transfer of right to use such goods
1 What is the meaning and scope of the phrase transfer of right to use such goods
Transfer of right to use goods is a well recognized constitutional and legal concept. Every
transfer of goods on lease, license or hiring basis does not result in transfer of right to use goods.
Transfer of right of goods involves transfer of possession and effective control over such goods
in terms of the judgment of the Supreme Court in the case of State of Andhra Pradesh vs
RashtriyaIspat Nigam Ltd [Judgment dated 6/2/2002 in Civil Appeal no. 31 of 1991]. Transfer of
custody along with permission to use or enjoy such goods, per se, does not lead to transfer of
possession and effective control.The test laid down by the Supreme Court in the case of Bharat
Sanchar Nigam Limited vs Union of India [2006(2)STR161(SC)] to determine whether a
transaction involves transfer of right to use goods, which has been followed by the Supreme
Court and various High Courts, is as follows:
There must be goods available for delivery;
There must be a consensus ad idem as to the identity of the goods;
The transferee should have legal right to use the goods consequently all legal consequences of
such use including any permissions or licenses required therefore should be available to the
transferee;.

7. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to

do an act:
In terms of this entry the following activities if carried out by a person for another for
consideration would be treated as provision of service.
Agreeing to the obligation to refrain from an act.
Agreeing to the obligation to tolerate an act or a situation.
Agreeing to the obligation to do an act.

8. Service portion in execution of a works contract:

Works contract has been defined in section 65B of the Act as a contract wherein transfer of
property in goods involved in the execution of such contract is leviable to tax as sale of goods
and such contract is for the purpose of carrying out construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable
or immoveable property or for carrying out any other similar activity or a part thereof in relation
to such property. Typically every works contract involves an element of sale of goods and
provision of service. In terms of Article 366 (29A) of the Constitution of India transfer of
property in goods involved in execution of works contract is deemed to be a sale of such goods.

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It is a well settled position of law, declared by the Supreme Court in BSNLs case [2006(2) STR
161 (SC)], that a works contract can be segregated into a contract of sale of goods and contract
of provision of service. This declared list entry has been incorporated to capture this position of
law in simple terms.

9. Service portion in an activity wherein goods, being food or any other article of human
consumption or any drink (whether or not intoxicating) is supplied in any manner as part
of the activity:
1 What are the activities covered in this declared list entry?
The following activities are illustration of activities covered in this entry-
Supply of food or drinks in a restaurant;
Supply of foods and drinks by an outdoor caterer.
In terms of article 366(29A) of the Constitution of India supply of any goods, being food or any
other article of human consumption or any drink (whether or not intoxicating) in any manner as
part of a service for cash, deferred payment or other valuable consideration is deemed to be a
sale of such goods. Such a service therefore cannot be treated as service to the extent of the value
of goods so supplied.

Negative list
Exempted items under Service Tax Act and Negative List
Negative List - The changes proposed in Finance Bill 2015 in the Negative List in Section 66 D are
as follows:

(i) The Negative List entry that covers admission to entertainment event or access to amusement
facility is being omitted [section 66D (j)]. Consequently, the definitions of amusement facility
[section 65 B (9)] and entertainment event [section 65B(24)] are also being omitted. The
implication of these changes are as follows,-

(a) Service Tax shall be levied on the service provided by way of access to amusement facility
providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement
parks, amusement arcades, water parks and theme parks.

(b) Service tax to be levied on service by way of admission to entertainment event of concerts,
pageants, musical performances concerts, award functions and sporting events other than the
recognized sporting event, if the amount charged is more than Rs. 500 for right to admission to
such an event. However, the existing exemption, by way of the Negative List entry, to service by
way of admission to entertainment event, namely, exhibition of cinematographic film, circus,
recognized sporting event, dance, theatrical performance including drama and ballet shall be
continued, through the route of exemption. For this purpose a new entry is being inserted in
notification No. 25/12-ST. The term recognized sporting event has been defined in the proposed
amendment in the said notification.

(ii) The entry in the Negative List that covers service by way of any process amounting to
manufacture or production of goods [section 66D (f)] is being pruned to exclude any service by

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way of carrying out any processes for production or manufacture of alcoholic liquor for human
consumption. Consequently, Service Tax shall be levied on contract manufacturing/job work for
production of potable liquor for a consideration. In this context, the definition of the term
process amounting to manufacture or production of goods [section 65 B (40)] is also being
amended, along with the Negative List entry [section 66D (f)], with a consequential amendment
in S. No. 30 of notification No. 25/12-ST, to exclude intermediate production of alcoholic liquor
for human consumption from its ambit.

(iii) Presently, services provided by Government or a local authority, excluding certain services
specified under clause (a) of section 66D, are covered by the Negative List. Service Tax applies
on the support service provided by the Government or local authority to a business entity. An
enabling provision is being made, by amending section 66D (a)(iv), to exclude all services
provided by the Government or local authority to a business entity from the Negative List.
Consequently, the definition of support service [section 65 B (49)] is being omitted.
Accordingly, as and when this amendment is given effect to, all services provided by the
Government or local authority to a business entity, except the services that are specifically
exempted, or covered by any another entry in the Negative List, shall be liable to service tax .

The above changes in the Negative List shall come into effect from a date to be notified
later, after the enactment of the Finance Bill, 2015

As per section 66B of the Finance Act, 1994, service tax should be levied on all services except
the services which are specified in Section 66D of the said Act. Negative list of Service Tax for
2013-14 as per Section 66D revised as per latest budget is give below. There are currently 17
heads of Services which are given in the negative list. Every activity not covered under this list
is chargeable to Service Tax. So the Negative List is Very Important.

Prior to the amendment as per Finance Bill 2015 the Negative list of Service Tax is
comprised of following 17 heads. They are:
1) Services by Government or a local authority excluding the following services to the
extent they are not covered elsewhere:
a) Services by the Department of Posts by way of speed post, express parcel post, life insurance,
and agency services provided to a person other than Government;
b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an
airport;
c) transport of goods or passengers; or
d) Support services, other than services covered under clauses (i) to (iii) above, provided to
business entities.

2) Services by the Reserve bank of India;

3) Services by a foreign diplomatic mission located in India.

4) Services relating to agriculture or agricultural produce by way of -

a) agricultural operations directly related to production of any agricultural produce including
cultivation, harvesting, threshing, plant protection or seed testing;

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b) supply of farm labour;
c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting,
drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk
packaging and such like operations which do not alter essential characteristics of agricultural
produce but make it only marketable for the primary market;
d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its
use;
e) loading, unloading, packing, storage or warehousing of agricultural produce;
f) agricultural extension services;
g) Services by any Agricultural Produce Marketing Committee or Board or services provided by
a commission agent for sale or purchase of agricultural produce.

5) Trading of goods.

6) Any process amounting to manufacture or production of goods.

7) Selling of space or time slots for advertisements other than advertisements broadcast by
radio or television.

8) Service by way of access to a road or a bridge on payment of toll charges.

9) Betting, gambling or lottery.

10) Admission to entertainment events or access to amusement facilities.

11) Transmission or distribution of electricity by an electricity transmission or distribution

utility.

12) Services by way of -

a) Pre-school education and education up to higher secondary school or equivalent;
b) Education as a part of a curriculum for obtaining a qualification recognized by law;
c) Education as a part of an approved vocational education course.
13) Services by way of renting of residential dwelling for use as residence;

14) Services by way of -

a) extending deposits, loans or advances in so far as the consideration is represented by way of
interest or discount;
b) inter-se sale or purchase of foreign currency amongst banks or authorized dealers of foreign
exchange or amongst banks and such dealers;

15) Service of transportation of passengers, with or without accompanied belongings, by -

a) a stage carriage;
b) railways in a class other than - (A) first class; or (B) an air conditioned coach;
c) metro, monorail or tramway;
d) inland waterways;
e) public transport, other than predominantly for tourism purpose, in a vessel between

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f) places located in India; and
g) metered cabs, radio taxis or auto rickshaws;

16) Services by way of transportation of goods

a) by road except the services of -
i) a goods transportation agency; or
ii) a courier agency;
b) by an aircraft or a vessel from a place outside India up to the customs station of clearance in
India; or
c) by inland waterways;

17) Funeral, burial, crematorium or mortuary services including transportation of the

deceased.

Extra services included in Negative list

There are two more services included in the negative list:
a) Vocational courses offered by institutes affiliated to the State Council of Vocational Training;
and,
b) testing activities in relation to agriculture and agricultural produce.

Exempt Services:
Under this service mentioned are taxable but exemption has been provided through the
notification. Under this 39 services have been mentioned. And any changes in this can be
done by notification.

1.Services provided to the United Nations or a specified international organization but

service provided by the United Nations or a specified international organization are taxable if
not exempted anywhere.

2.Health care services by a clinical establishment, an authorized medical practitioner or Para-

medics (all service related to Health Care are exempt.
clinical establishment means a hospital, nursing home, clinic, sanatorium or any other
institution by, whatever name called, that offers services or facilities requiring diagnosis or
treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized
system of medicines in India, or a place established as an independent entity or a part of an
establishment to carry out diagnostic or investigative services of diseases.health care
services means any service by way of diagnosis or treatment or care for illness, injury,
deformity, abnormality or pregnancy in any recognized system of medicines in India and
includes services by way of transportation of the patient to and from a clinical establishment,
but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to
restore or to reconstruct anatomy or functions of body affected due to congenital defects,
developmental abnormalities, injury or trauma

3.Services by a veterinary clinic in relation to health care of animals or birds ( Like as in 2nd
above).

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4.Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of
1961) by way of charitable activities.
Charitable activities means activities relating to
1)Public health by way of
(a) Care or counseling of (i) terminally ill persons or persons with severe physical or mental
disability, (ii) persons afflicted with HIV or AIDS, or(iii) persons addicted to a dependence-
forming substance such as narcotics drugs or alcohol;
(b) Public awareness of preventive health, family planning or prevention of HIV infection
2)Advancement of religion or spirituality
3)Advancement of educational programmes or skill development relating to-
(a) abandoned, orphaned or homeless children
(b) physically or mentally abused and traumatized persons or prisoners
(c) persons over the age of 65 years residing in a rural area
4)Preservation of environment including watershed, forests and wildlife.

5.Services by a person by way of- (a) renting of precincts of a religious place meant for
general public; or (b) conduct of any religious ceremony. However, renting of precincts of
religious place not meant for general public would not be covered under the exemption.
religious place means a place which is primarily meant for conduct of prayers or worship
pertaining to a religion, meditation, or spirituality

6.

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Service Provider Service Receiver Taxability
(a) arbitral tribunal Any person other than Exempt
business entity(No limit of
turnover)
A business entity
(Turnover =10 Lacs Preceding
Exempt
financial year)
A business entity with a Reverse charge(Service
turnover up >10 lakh in the Receiver ha to pay Service
preceding financial year Tax)
An advocate or partnership firm An advocate or partnership Exempt
of advocates (legal services) firm of advocates providing
legal services
Any person other than a
business entity
A business entity with a Exempt
turnover up =10 lakh in the
preceding
Financial year Exempt
A business entity with a Reverse charge(Service
turnover up >10 lakh in the Receiver ha to pay Service
preceding financial year Tax)
An advocate or partnership firm Any person Taxable
of advocates (other than legal
service)
A person represented on an Any person Exempt
arbitral tribunal to an arbitral
tribunal
Any person provide legal service Any person Taxable
except (an advocate or
partnership firm of advocates)

Legal service means any service provided in relation to advice, consultancy or assistance in
any branch of law, in any manner and includes representational services before any court,
tribunal or authority.

1. Services of technical testing or analysis in relation to newly developed drugs,

vaccines and herbal remedies, on human participants by a clinical research
organization (approved by the Drug Controller General of India).

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2. Services by way of training or coaching in recreational activities relating to arts,
culture or sports; In this, exemption is provided to training or coaching in
recreational activities relating to all forms of dance, music, painting, sculpture
making, theatre, sports, etc. In this category, choreographers, sport coaches would be
covered. If above activities are done other than recreational purpose means on
professional basis then these will be taxable. Recreation activities are done for fun or
enjoyment.

3. Services provided to an educational institution in respect of education exempted

from service tax, by way of,(a) Auxiliary educational services; or (b) Renting of
immovable propertyAuxiliary educational services means any services relating to
imparting any skill, knowledge, education or development of course content or any
other knowledge enhancement activity, whether for the students or the faculty, or
any other services which educational institutions ordinarily carry out themselves but
may obtain as outsourced services from any other person, including services relating
to admission to such institution, conduct of examination, catering for the students
under any mid-day meals scheme sponsored by Government, or transportation of
students, faculty or staff of such institution.

4. Services provided to a recognized sports body by-(a) An individual as a player,

referee, umpire, coach or team manager for participation in a sporting event
organized by a recognized sports body;(b) Another recognized sports body;Service
provided by individual such as selectors, commentators, technical experts etc are not
exempt. Recognized sports body means (i) the Indian Olympic Association,
(ii)Sports Authority of India, (iii) a national sports federation recognised by the
Ministry of Sports and Youth Affairs of the Central Government, and its affiliate
federations, (iv) national sports promotion organisations recognised by the Ministry
of Sports and Youth Affairs of the Central Government, (v) the International
Olympic Association or a federation recognised by the International Olympic
Association or (vi) a federation or a body which regulates a sport at international
level and its affiliated federations or bodies regulating a sport in India.

5. Services by way of sponsorship of sporting events organized,-(a) By a national sports

federation, or its affiliated federations, where the participating teams or individuals
represent any district, state or zone;(b) By Association of Indian Universities, Inter-
University Sports Board, School Games Federation of India, All India Sports Council
for the Deaf, Paralympic Committee of India or Special Olympics Bharat;(c) By
Central Civil Services Cultural and Sports Board;(d) As part of national games, by
Indian Olympic Association; or(e) Under Panchayat Yuva Kreeda Aur Khel
Abhiyaan (PYKKA)Scheme;

There is no exemption to IPL.

16
6. Services provided to the Government, a local authority or a governmental authority
by way of construction, erection, commissioning, installation, completion, fitting out,
repair, maintenance, renovation, or alteration of

(a) A civil structure or any other original works meant predominantly for use other
than for commerce, industry, or any other business or profession;

(b) A historical monument, archaeological site or remains of national importance,

archaeological excavation, or antiquity specified under the Ancient Monuments and
Archaeological Sites and Remains Act, 1958 (24 of1958);

(c) A structure meant predominantly for use as (i) an educational, (ii) aclinical, or (iii)
an art or cultural establishment;

(d) Canal, dam or other irrigation works;

(e) Pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii)sewerage
treatment or disposal; or

(f) A residential complex predominantly meant for self-use or the use of their
employees or other persons specified in the Explanation 1 to clause 44 of section 65 B
of the said Act; Residential complex means any complex comprising of a building or
buildings, having more than one single residential unit.single residential unit means
a self-contained residential unit which is designed for use, wholly or principally, for
residential purposes for one family.

7. Services provided by way of construction, erection, commissioning, installation,

completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a) A road, bridge, tunnel, or terminal for road transportation for use by general
public;

(b) A civil structure or any other original works pertaining to a scheme under
Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c) A building owned by an entity registered under section 12 AA of the Income tax
Act, 1961(43 of 1961) and meant predominantly for religious use by general public;

(d) A pollution control or effluent treatment plant, except located as a part of a

factory; or

(e) A structure meant for funeral, burial or cremation of deceased;

General public means the body of people at large sufficiently defined by some
common quality of public or impersonal nature

17
8. Services by way of construction, erection, commissioning, or installation of original
works pertaining to,-

(a) An airport, port or railways, including monorail or metro;

(b) A single residential unit otherwise than as a part of a residential complex;

(c) Low- cost houses up to a carpet area of 60 square meters per house in a housing
project approved by competent authority empowered under the Scheme of Affordable
Housing in Partnership framed by the Ministry of Housing and Urban Poverty
Alleviation, Government of India;

(d) Post- harvest storage infrastructure for agricultural produce including a cold
storages for such purposes; or

(e) Mechanised food grain handling system, machinery or equipment for units
processing agricultural produce as food stuff excluding alcoholic beverages;

9. Services provided by way of temporary transfer or permitting the use or enjoyment

of a copyright,;(a) Covered under clause (a) of sub-section (1) of section 13 of the
Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical or
artistic works; or (b) Of cinematograph films for exhibition in a cinema hall or
cinema theatre.

10. Services by a performing artist in folk or classical art forms of (i) music, or (ii)
dance, or (iii) theatre, excluding services provided by such artist as a brand
ambassador.
brand ambassador means a person engaged for promotion or marketing of a brand
of goods, service, property or actionable claim, event or endorsement of name,
including a trade name, logo or house mark of any person
folk or classical art forms can be of any country .

11. Services by way of collecting or providing news by an independent journalist, Press

Trust of India or United News of India;

12. Services by way of renting of a hotel, inn, guest house, club, campsite or other
commercial places meant for residential or lodging purposes, having declared tariff
of a unit of accommodation below rupees one thousand per day or equivalent.

13. Services provided in relation to serving of food or beverages by a restaurant, eating

joint or a mess, other than those having the facility of air-conditioning or central air-
heating in any part of the establishment, at any time during the year (N.N.3/2013)

14. Services by way of transportation by rail or a vessel from one place in India to
another of the following goods -;(a) Relief materials meant for victims of natural or

18
 man-made disasters, calamities, accidents or mishap;(b) Defence or military
equipments;(c) Newspaper or magazines registered with the Registrar of
Newspapers;(d) Railway equipments or materials;(e) Agricultural produce;(f)
Foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible
oil, excluding alcoholic beverages; or(g) Chemical fertilizer and oilcakes.

15. Services provided by a goods transport agency, by way of transport in a goods

carriage of,- (a) Agricultural produce;(b) Goods, where gross amount charged for the
transportation of goods on a consignment transported in a single carriage does not
exceed one thousand five hundred rupees;(c) Goods, where gross amount charged for
transportation of all such goods for a single consignee does not exceed rupees seven
hundred fifty;(d) Foodstuff including flours, tea, coffee, jaggery, sugar, milk
products, salt and edible oil, excluding alcoholic beverages;(e) Chemical fertilizer
and oilcakes; (f) Newspaper or magazines registered with the Registrar of
Newspapers;(g) Relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap;(h) Defence or military equipments

16. Services by way of giving on hire (a) To a state transport undertaking, a motor
vehicle meant to carry more than twelve passengers;(b) To a goods transport agency,
a means of transportation of goods.

17. Transport of passengers, with or without accompanied belongings, by (a) Air,

embarking from or terminating in an airport located in the state of Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,or Tripura or at
Bagdogra located in West Bengal;(b) A contract carriage for the transportation of
passengers, excluding tourism, conducted tour, charter or hire(c) Ropeway, cable car
or aerial tramway;

If transport of passenger is done without contact carriage Service Tax will be

applicable.

18. Services by way of vehicle parking to general public excluding leasing of space to an
entity for providing such parking facility(deleted N.N.3/2013)

19. Services provided to Government, a local authority or a governmental authority by

way of (a) Carrying out any activity in relation to any function ordinarily entrusted
to a municipality in relation to water supply, public health, sanitation conservancy,
solid waste management or slum improvement and up gradation; or(b) Repair or
maintenance of a vessel

20. Services of general insurance business provided under following schemes (a) Hut
Insurance Scheme;(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna
(earlier known as Integrated Rural Development Programme);(c) Scheme for
Insurance of Tribals;(d) Janata Personal Accident Policy and Gramin Accident

19
 Policy;(e) Group Personal Accident Policy for Self-Employed Women;(f)
Agricultural Pumpset and Failed Well Insurance;(g) premia collected on export credit
insurance;(h) Weather Based Crop Insurance Scheme or the Modified National
Agricultural Insurance Scheme, approved by the Government of India and
implemented by the Ministry of Agriculture;(i) Jan Arogya Bima Policy;(j) National
Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);(k) Pilot Scheme on
Seed Crop Insurance;(l) Central Sector Scheme on Cattle Insurance;(m) Universal
Health Insurance Scheme;(n) Rashtriya Swasthya Bima Yojana;(o) Coconut Palm
Insurance Scheme

21. Services provided by an incubatee up to a total turnover of fifty lakh rupees in a

financial year subject to the following conditions, namely:-(a) The total turnover had
not exceeded fifty lakh rupees during the preceding financial year; and(b) A period of
three years has not been elapsed from the date of entering into an agreement as an
incubatee;Incubatee means an entrepreneur located within the premises of a
Technology Business Incubator (TBI) or Science and Technology Entrepreneurship
Park (STEP) recognised by the National Science and Technology Entrepreneurship
Development Board (NSTEDB) of the Department of Science and Technology,
Government of India and who has entered into an agreement with the TBI or the
STEP to enable himself to develop and produce hi-tech and innovative products

22. Service by an unincorporated body or a non- profit entity registered under any law
for the time being in force, to its own members by way of reimbursement of charges
or share of contribution

1. As a trade union;

2. For the provision of carrying out any activity which is exempt from the levy of
service tax; or

3. Up to an amount of five thousand rupees per month per member for sourcing
of goods or services from a third person for the common use of its members in
a housing society or a residential complex;

Place of Provision of Services Rules:

In exercise of the powers conferred by sub-section (1) of section 66C and clause (hhh) of sub-
section (2) of section 94 of the Finance Act, 1994 and in supersession of the notification of the
Government of India in the Ministry of Finance, Department of Revenue, number 9/2005-ST,
dated the 3rd March, 2005 published in the Gazette of India Extraordinary, Part II, Section 3, Sub-
Section (i) vide number G.S.R. 151 (E) dated the 3rd March, 2005 and the notification of the
Government of India in the Ministry of Finance, Department of Revenue, number 11/2006-ST
dated the 19th May, 2006 published in the Gazette of India Extraordinary, Part II, Section 3, Sub-
Section (i) vide number G.S.R. 227 (E) dated the 19th May, 2006, except as respects things done

20
or omitted to be done before such supersession, the Central Government hereby makes the
following rules for the purpose of determination of the place of provision of services, namely:-

1. Short title, extent and commencement. -

(1) These rules may be called the Place of Provision of Services Rules, 2012.
(2) They shall come into force on 1st day of July, 2012.

2. Definitions.-

In these rules, unless the context otherwise requires,-

(a) "Act" means the Finance Act, 1994 (32 of 1994);

"Account' means an account bearing interest to the depositor, and includes a non-resident
(b)
external account and a non-resident ordinary account;

'banking company" has the meaning assigned to it in clause (a) of section 45A of the Reserve
(c)
Bank of India Act, 1934 (2 of 1934);

"continuous journey" means a journey for which a single or more than one ticket or invoice is
issued at the same time, either by one service provider or through one agent acting on behalf
(d)
of more than one service provider, and which involves no stopover between any of the legs of
the journey for which one or more separate tickets or invoices are issued;

"financial institution" has the meaning assigned to it in clause (c) of section 45-I of the
(e)
Reserve Bank of India Act,1934 (2 of 1934);

"intermediary" means a broker, an agent or any other person, by whatever name called, who
arranges or facilitates a provision of a service (hereinafter called the 'main' service) between
(f)
two or more persons, but does not include a person who provides the main service on his
account.;

"leg of journey" means a part of the journey that begins where passengers embark or
(g) disembark the conveyance, or where it is stopped to allow for its servicing or refueling, and
ends where it is next stopped for any of those purposes;

21
(h) "location of the service provider" means-

(a) where the service provider has obtained a single registration, whether centralized or
otherwise, the premises for which such registration has been obtained;

(b) where the service provider is not covered under sub-clause (a):

(i)the location of his business establishment;

(ii)where the services are provided from a place other than the business establishment, that
is to say, a fixed establishment elsewhere, the location of such establishment; or

(iii)where services are provided from more than one establishment, whether business or
fixed, the establishment most directly concerned with the provision of the service; and

(iv)in the absence of such places, the usual place of residence of the service provider

(i) "location of the service receiver" means:-

(a) where the recipient of service has obtained a single registration, whether centralized or
otherwise, the premises for which such registration has been obtained;

(b) where the recipient of service is not covered under sub-clause (a):

(i)the location of his business establishment; or

(ii)where services are used at a place other than the business establishment, that is to say, a
fixed establishment elsewhere, the location of such establishment; or

(iii)where services are used at more than one establishment, whether business or fixed, the

22
 establishment most directly concerned with the use of the service; and

(iv)in the absence of such places, the usual place of residence of the recipient of service.

Explanation :- For the purposes of clauses (h) and (i), "usual place of residence" in case of a
body corporate means the place where it is incorporated or otherwise legally constituted.

Explanation 2:- For the purpose of clause (i), in the case of telecommunication service, the
usual place of residence shall be the billing address.

"means of transport" means any conveyance designed to transport goods or persons from
(j)
one place to another;

(k) "non-banking financial company" means-

(i) a financial institution which is a company; or

(ii) a non-banking institution which is a company and which has as its principal business
the receiving of deposits, under any scheme or arrangement or in any other manner, or
lending in any manner; or

(iii) such other non-banking institution or class of such institutions, as the Reserve
Bank of India may, with the previous approval of the Central Government and by
notification in the Official Gazette specify;

"online information and database access or retrieval services" means providing data or
(l) information, retrievable or otherwise, to any person, in electronic form through a computer
network;

"person liable to pay tax" shall mean the person liable to pay service tax under section 68 of
(m)
the Act or under sub-clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994;

(n) "provided" includes the expression "to be provided";

23
(o) "received" includes the expression "to be received";

(p) "registration" means the registration under rule 4 of the Service Tax Rules, 1994;

"telecommunication service" means service of any description (including electronic mail,

voice mail, data services, audio text services, video text services, radio paging and cellular
(q) mobile telephone services) which is made available to users by means of any transmission or
reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire,
radio, visual or other electro-magnetic means but shall not include broadcasting services.

words and expressions used in these rules and not defined, but defined in the Act, shall have
(r)
the meanings respectively assigned to them in the Act.

3. Place of provision generally -

The place of provision of a service shall be the location of the recipient of service:

Provided that in case the location of the service receiver is not available in the ordinary course of
business, the place of provision shall be the location of the provider of service.

4. Place of provision of performance based services.-

The place of provision of following services shall be the location where the services are actually
performed, namely:-

(a) services provided in respect of goods that are required to be made physically available by
the recipient of service to the provider of service, or to a person acting on behalf of the provider
of service in order to provide the service:

Provided that when such services are provided from a remote location by way of electronic
means the place of provision shall be the location where goods are situated at the time of
provision of service:

Provided further that this sub-rule shall not apply in the case of a service provided in respect of
goods that are temporarily imported into India for repairs, reconditioning or reengineering for re-
export, subject to conditions as may be specified in this regard.
(b) services provided to an individual, represented either as the recipient of service or a person

24
acting on behalf of the recipient, which require the physical presence of the receiver or the
person acting on behalf of the receiver, with the provider for the provision of the service.

5. Place of provision of services relating to immovable property.-

The place of provision of services provided directly in relation to an immovable property,

including services provided in this regard by experts and estate agents, provision of hotel
accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of
rights to use immovable property, services for carrying out or co-ordination of construction
work, including architects or interior decorators, shall be the place where the immovable
property is located or intended to be located.

6. Place of provision of services relating to events.-

The place of provision of services provided by way of admission to, or organization of, a
cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration,
conference, fair, exhibition, or similar events, and of services ancillary to such admission, shall
be the place where the event is actually held.

7. Place of provision of services provided at more than one location.-

Where any service referred to in rules 4, 5, or 6 is provided at more than one location, including
a location in the taxable territory, its place of provision shall be the location in the taxable
territory where the greatest proportion of the service is provided.

8. Place of provision of services where provider and recipient are located in taxable
territory.-

Place of provision of a service, where the location of the provider of service as well as that of the
recipient of service is in the taxable territory, shall be the location of the recipient of service.

9. Place of provision of specified services.-

The place of provision of following services shall be the location of the service provider:-

(a) Services provided by a banking company, or a financial institution, or a non-banking

financial company, to account holders;

(b) Online information and database access or retrieval services;

(c) Intermediary services;

(d) Service consisting of hiring of means of transport, upto a period of one month.

25
MAHARASHTRA VALUE ADDED TAX ACT,
2002(MVAT):
Definitions :
Section 2 gives definitions of various terms. The definitions are almost at par with earlier law i.e.
Bombay Sales Tax Act, 1959. Some of the important definitions:
Section 2 (4) -The definition of Business includes in its scope any service, trade, commerce,
manufacture or any adventure or concern in the nature of such service, trade, commerce or
manufacture, whether carried on with or without profit motive and whether actual profit is
earned or not. Further, it also includes any transaction which is incidental or ancillary to such
trade, commerce, manufacture, adventure, concern or service and also includes any transaction
which is incidental or ancillary to commencement or closure of such trade, commerce,
manufacture, service etc. The purchase of any goods the price of which is debited to business is
also be deemed to be the purchase effected in the course of business. Similarly sale of any goods,
the proceeds of which are credited to the business is also deemed to be the sale affected in the
course of business. Though service is also included in the definition of business, as per Section
2(34) only notified services are to be included in the scope of the definition. As on today no such
services are notified and as such at present no service gets covered under the definition of
business.
Section 2(12) -Goods mean every kind of movable property. The definition specifically includes
live stocks, growing crop, grass and tree, plants including produce thereof under given
circumstances. However, it excludes newspapers, money, stocks, shares, securities or lottery
tickets and actionable claims.
Section 2(8) - Definition of Dealer includes any person who buys or sells goods in the state for
commission, remuneration or otherwise. It also includes, among others, by an Explanation,
public 2013-2014 charitable trust government departments, societies, State Government, Central
Government, shipping companies, airlines, advertising agencies etc.
Section 2 (13)- Importer means a dealer who brings any goods into the State or to whom any
goods are dispatched from outside the state, which will include import out of India also.
Section 2 (24)-Sale means a sale of goods made within the State for cash or deferred payment or
other valuable consideration but does not include a mortgage, hypothecation, charge or pledge.
Ordinarily sale means transfer of property to buyer in goods for cash or deferred payment or
other valuable consideration. A sale within the State includes a sale determined to be inside the
State in accordance with the principles formulated in Section 4 of the Central Sales Tax Act,
1956. Following types of transactions are also included in definition of sale.
i. The transfer of property in any goods, otherwise than in pursuance of a contract, for
cash, deferred payment or other valuable consideration
ii. The transfer of property in goods (whether as goods or in some other form) involved
in the execution of a works contract including an agreement for carrying out for
cash, deferred payment or other valuable consideration, the building, construction,
manufacture, processing, fabrication, erection, installation, fitting out, improvement,
modification, repair or commissioning of any movable or immovable property;
(known as works contract transactions).

26
 iii. A delivery of goods on hire-purchase or any system of payment by installments. iv.
The transfer of the right to use any goods or any purpose (whether or not for a
specified period) for cash, deferred payment or other valuable consideration; (known
as lease transactions). v. The supply of goods by any association or body of persons
incorporated or not, to a member thereof for valuable consideration. vi. The supply,
by way of or as part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (whether or not
intoxicating), where such supply or service is made or given for cash, deferred
payment or other valuable consideration.
Section 2(25) Sale Price - The definition is almost at par with old definition under BST Act,
1959. Therefore, interpretations made under BST Act will apply in relation to this definition also.
2013-2014 Sale price is defined to mean an amount received/ receivable for any sale including
any sum charged by seller in respect of the goods at the time of or before delivery thereof. The
amount of duties levied or leviable on goods under the Central Excise Act, 1944 or the Customs
Act, 1962 or the Bombay Prohibition Act, 1949, shall be deemed to be part of the sale price of
such goods, whether such duties are paid or payable by or on behalf of, the seller or the
purchaser or any other person. However, the definition excludes the cost of insurance for transit
or of installation, when such cost is separately charged. Sales tax, if any, charged separately shall
not form a part of sale price. Generally, freight/ and octroi will be a part of sale price if the sale is
door delivery contract. If the same is ex sellers place and the above expenses are received as
reimbursement then it will not form a part of sale price. However, freight separately charged on
interstate sale will not form part of sale price, because the definition of sale price under the C.S.T
Act specifically excludes freight charged separately.

Registration(Sec.16, R 8):
Dealers liable to pay Tax: [Sec. 3]

The dealers, holding a valid registration certificate under the earlier laws, whose turnover of
either of sales or purchases exceeds the specified limits during the financial year 2004-05, shall
be deemed to be registered dealer under MVAT Act and shall, therefore be liable to pay tax i.e.
1st April, 2005. The dealers, holding a valid registration certificate under the earlier laws, whose
turnover of either of sales or purchases has not exceeded the specified limits during the financial
year 2004-05, but who have opted to continue their registration certificate (by applying to
assessing officer in specified format), shall also be deemed to be registered dealer under MVAT
Act and shall, therefore be liable to pay tax i.e. 1st April, 2005.New dealers, whose turnover of
sales exceeds the prescribed limits during any year, commencing on or after 1st April, 2005, are
liable to pay tax from the date on which such limit exceeds. A successor in business of any dealer
shall become liable to pay tax on and from the date of succession. A dealer, applying for
voluntary registration, shall be liable to pay tax from the date of registration. Every dealer, who

27
becomes liable to pay tax under the provisions of MVAT, shall apply electronically for
registration to the prescribed authority, in Form 101, within 30 days from the date of such
liability.

Turnover limits for the purpose of Liability/Registration [Sec. 3(4)]

Sr. No. Category of Dealer Total turnover of Sale Turnover of Sale or

To exceed Purchase of taxable
goods
1. Importer Rs. 1,00,000/- Not less than
Rs. 10000/-
2. Others Rs. 5,00,000/- Not less than
Rs. 10000/-
3. Voluntary Registration NA NA

Notes:
i. Reference of turnover of Rs.1,00,000 or Rs.5,00,000 is with respect to sales only. Sales will
include sales of both, tax-free goods as well as taxable goods.
ii. No turnover limit for import is specified for importer. Even an import of Re. 1 is sufficient to
treat the dealer as an importer.
iii. The dealer who is liable to pay tax is required to apply for registration under the Act within
30 days from the date on which prescribed limit of turnover exceeds. In case of change in
ownership or constitution, an application for new registration certificate (TIN certificate) is to be
made within 30 days from the date of such change. In case of death of a dealer, an application for
new registration for transfer or succession of business can be made within 60 days from the date
of death of dealer. If so applied in time, registration certificate will be granted form the date of
liability, otherwise from the date of application. One TIN number will be issued for whole state
of Maharashtra, which will cover all the places of business of the dealer.
iv. With effect from 20th June 2006, if there is a shifting of place of business from one place to
another place, there is no need to cancel the existing number and apply for new number. The
existing TIN will continue. However, the event of shifting should be intimated to the registration
authority of the old place.
v. The dealer can also apply for voluntary registration by paying registration fees of Rs. 5,000/-.
Registration certificate in such case will be granted with effect from the date of application,
which should be accompanied by challan of payment of Rs. 5,000/-. Apart from registration fee
of Rs. 5000/- , a dealer is also required to deposit Rs. 25,000/-. This deposit is in the nature of
advance tax and is to be adjusted against his tax liability during the year of registration and in
subsequent financial year.
vi. The application for registration (VAT TIN) is to be made in Form No.101 and in Form A for
C.S.T TIN. Following documents are required to be submitted along with the application:
Two passport size photographs of the proprietor / any one partner of the firm/ anyone
director of private limited company. This requirement is not applicable in case of Public
Ltd. Co., public trusts, corporations or a local authority.

28
 Payment of registration fees of Rs. 500 or Rs. 5,000/- and deposit of Rs. 25,000, as the
case may be for Vat TIN and Rs.25/- for C.S.T.TIN. Payment is to be made in chalan No.
210.
Bill wise statement of sales and purchases from the beginning till the date on which
turnover of sales or purchases exceeds the prescribed limit for registration. However,
the same is not required in case of application for TIN under voluntary registration
scheme.
Copy of partnership deed / memorandum and articles of association / trust deed etc.
Proof of address of place of business and residence of applicant, partners, directors etc.
(copy of maintenance bill, electricity bill, property card, leave license agreement etc.
any one proof of above for place of business as well as for place of residence is required.)
Copy of passport / /driving license / voter card of applicant / partners/ directors.(any one
proof is required)
Copy of license or certificate issued under any other Act, if any.
Income Tax PAN of the applicant / company / firm / partners / HUF and Karta.
Profession tax number of the proprietor /Company /Partners / Directors.
Proof of bank account of the applicant, Firm or Company.
Copy of proof of filing of last return and assessment order, if any (applicable only in case
of application for registration due to change in constitution or change in ownership of the
concern).

Levy of Tax:
Under MVAT Act, 2002, sales tax is payable on all sale of goods effected from the state, whether
such goods are manufactured or resold or imported from out of the State of Maharashtra or
purchased from registered or unregistered dealer. There is no concept of resale or second
sale under the MVAT Act, 2002.
Charging Provisions Section 4, 5, 6 and 7 are charging Sections.
As per Section 5, no tax is to be levied on sale of goods covered by Schedule A.
Section 6 provides for levy of tax on turnover of goods covered by schedule B, C, D and
E.
Section 7 specifies the rate of tax on packing material. Where any goods are sold and
such goods are packed in any material, then the tax on such sale of packing material shall
be at the same rate of tax, if any, at which tax payable on the goods is so packed, whether
the packing material is charged separately or not.
Schedules and Rate of Tax
All the goods are classified under Schedule A to E.
Schedule A covers goods, which are generally necessities of life. Goods covered by
schedule A are free from tax. Some of the items covered by Schedule A are agricultural
implements, cattle feed, books, bread, fresh vegetables, milk, sugar, fabrics, plain water
etc.
Schedule B covers jewellery, diamonds and precious stones.
Goods covered by Schedule B are subject to tax at 1%.
Goods covered by Schedule C are subject to tax @ 4%. Schedule C covers items of daily
use or raw material items like drugs, readymade garments, edible oil, utensils, iron and

29
 steel goods, non ferrous metal, IT products, oil seeds, paper, ink, chemicals, sweetmeats,
farsan, industrial inputs, packing materials etc.
Schedule D covers liquor which is subject to 20% tax. It also covers various types of
motor spirits that are subject to tax from 4% to 34%.
All items which are not covered in any of the above Schedules are automatically covered
in residuary Schedule E. Goods covered by Schedule E are subject to tax at 12.5%.

Exemptions :
Following sales transactions are exempt from payment of tax under MVAT Act:
1. Interstate sale is exempt from payment of sales tax since it is liable to tax under C.S.T Act.
[Section 8(1)]
2.Sales taking place outside the state as determined under Section 4 of the C.S.T Act.
[Section8(1)]
3.Sales in the course of import or export [Section 8(1)]
4.Sales of fuels and lubricants to foreign aircrafts. [Section 8 (2)]
4.Inter-se sales between Special Economic Zones, developers of SEZ, 100% EOU, Software
Technology Parks and Electronic Hardware Technology Park Units subject to certain conditions.
[Section 8 (3)]
5.Sales to any class of dealers specified in the Import and Export Policy notified by the
6.Government of India [8(3A)]. This is subject to issue of notification by State Government
under this Section. However, no such notification is issued till today.
7.As per Section 8(3B), the State Government may, by general or special order, exempt fully or
partially sales to the Canteen Stores Department or the Indian Naval Canteen Services.
8.Under power granted u/s. 8(3C), the State Government, by general order, has exempted fully
the sale by transfer of property in goods involved in the processing of textile covered in column
3 of the first schedule to the Additional Duties of Excise (Goods of Special Importance) Act,
1957.
9.Sales effected by manufacturing unit under exemption mode in backward area is exempt
u/s.8(4).

10.As per Section 8(5), the State Government may, by general or special order, exempt fully or
partially sales to specific category of dealers mentioned in this sub Section. By Notification
dated 19.4.2007 concessional rate of tax @ 4% is provided for sale to specified Electric Power
Generating and Distribution Companies, MTNL, BSNL and other specified telephone service
providers.

11.The State Government may issue the notification to grant refund of any tax levied on and
collected from any class or classes of dealers or persons or as the case may be, charged on the
purchases or sales made by such class or classes of dealers or persons. (Section 41).

12.At present this notification is issued for grant of refund in case of Consulate and Diplomat
authorities.

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13.As per Section 41(4)(b) read with notification dated 30.11.2008 issued under the said section,
the sale of motor spirit at retail outlets is exempted from tax.

Methods of Computation of Tax:

There are two methods for computation of tax liability in respect of Works Contract transaction.
1. Determination of sale price of goods (u/r 58):
a) Actual Expenses b) Fixed Percentage
2. Composition u/s 42(3) & (3A):
a) Construction or Non-construction contract b) Builder / Developer.
SALE PRICE OF GOODS USED IN W.C. u/r 58(1)ENTIRE VALUE OF CONTRACT
LESS:-
a) Labour & Service charges for the execution of works;
b) Amounts paid by way of price for sub-contract, if any to sub- contractors;
c) Charges for planning, designing, & architect`s fees;
d) Charges for obtaining on hire or otherwise, machinery & tools for the execution of the works
contract;
e) Cost of consumables such as water, electricity, fuel used in the execution of the contract, the
property in which is not transferred in the course of execution of the works contract;
f) Cost of establishment of the contractor to the extent to which it is relatable to supply of the
said labour & services;
g) other similar expenses relatable to the said supply of labour & services, where the labour and
services are subsequent to the said transfer of property;
h) Profit earned by the contractor to the extent it is relatable to the supply of labour & services:
SALE PRICE OF GOODS: FIXED PERCENTAGE
Where proper evaluation of such expenses [a to h of Rule 58(1)] is not possible, fixed
percentage of deduction is prescribed from 15% to 40% various activities enlisted in the table,
e.g. Installation of Plant & Machinery 15%, Painting 20%, Pipeline 20%, other works
contracts- 25%.
Either dealer or department may chose lump-sum deductions if books are not intelligible.
Construction contracts of flats: cost of land is also allowed as deduction. Ready reckoner rates
on 1st Jan of the year in which the agreement to sell the flat is signed.

Set Off:
Set-off (Input Tax Credit) Set off is the back bone of the VAT system. Section 48 of the Act
provides for grant of set off (also referred to as input tax credit) to any registered dealer in
respect of any sales tax paid on his purchase subject to conditions provided in the rules made in
this behalf by the State Government. Rules 51 to 58 of the MVAT Rules, 2005, provide for grant
of set off. Rule 51 provides for set off on opening stock as on 1.4.2005. However, being of
limited interest not elaborated here.
Important Conditions:
1. To be eligible for set off, a dealer must be registered under MVAT Act at the time of purchase
of goods. However, set off is also available on purchases effected as URD subject to the
condition that the goods are purchased in the financial year in which the registration certificate is
obtained and the goods so purchased are capital goods which are otherwise eligible for set off.

31
Set off is available on other goods also if they are in stock as on the date of registration. (Rule
55(1)(a))
2. As per rule 52 set off is available on RD purchases of goods being capital assets and goods the
purchases of which are debited to Profit and Loss Account or Trading A/c.
3. Following sums are eligible for set off:
i. Tax paid separately on purchases effected within the State and supported by `Tax Invoice`.
ii. Entry tax paid under Maharashtra Entry Tax on Goods Act as well as Maharashtra Entry Tax
on Motor Vehicles Act. Note: CST paid on interstate purchase is not eligible for set off.
4. Set off is allowable as and when purchase is made, irrespective of its disposal. However set off
in certain circumstances are subject to time limits of disposals, as discussed below. Set off is
subject to the reductions specified in Rule 53 and negative list contained in Rule 54.
Retention (Reduction) in set off (RULE 53):
The Claimant dealer shall deduct the amount required to be reduced under this rule from the
amount of set-off available in respect of the period in which the contingency specified in this rule
occurs and claim only the balance amount as set-off and when the amount so required to be
deducted exceeds the said amount of set off available in respect of that period, he shall pay an
amount equal to the excess in return for the said period. [Rule 53(8)].
Non-Admissibility of Set off Negative List (Rule 54)
Following purchases of goods are not eligible for set off:
1. Passenger Motor vehicles, if treated as capital assets & their parts components and
accessories. However, a dealer dealing in sale of motor vehicles or leasing of motor vehicles is
entitled to set off. Rule 54(a).
2. Motor spirits, as notified u/s. 41(4) unless it is resold or transferred to branch or agent outside
the State. Rule 54(b).
3. Crude oil described in Section 14 of the C.S.T Act, if it is used by refinery for refining. Rule
54(c).
4. If a dealer is principally engaged in job work or labour work and where only waste/scrap is
sold then no set off will be granted on consumables and capital assets. Rule 54(d).
5. Unit covered by package scheme of Incentives under exemption scheme or deferment scheme
is not entitled for set off of tax paid on raw materials as defined in Rule 80 [Rule 54(e)].
However, it can claim refund of tax paid on such purchases as per Rule 79.
6. Incorporeal or intangible goods like trademark, patents, are not eligible for set off. Import
licenses, sim cards, export permits license/ Quota ,DEPB and duty free replenishment certificates
are eligible for set off. Software packages are eligible for set off in the hands of trader of
software. Copyright, which is resold within 12 months of the date of purchase, is eligible for set
off. Rule 54(f).
7. Purchases effected by way of works contract where the contract results in immovable property,
other than plant and machinery. Rule 54(g).
8. Purchase of any goods, if the same are not transferred but are used in erection of immovable
property, other than plant and machinery. Rule 54 (h).
9. Purchases of Indian Made Foreign Liquor or of country Liquor if the dealer has opted for
composition under sub-Section (2) of Section 42. Rule 54(i).
10. With effect from 20.06.2006 Purchases of mandap, tarpaulin, pandal, shamiana, decoration of
such mandap, pandal or shamiana, and furniture, fixtures, lights and light fittings, floor
coverings, utensils and other articles ordinarily used alongwith a mandap, pandal or shamiana if

32
the purchasing dealer has opted for composition of tax under sub-Section (4) of Section 42. Rule
54(j).
11. Purchases made on or after 1st April 2005 by a hotelier, which are treated by him as capital
assets and which do not pertain to the supply by way of or as part of service or in any other
manner whatsoever of goods, being food or any other article for human consumption or any
drink [whether or not intoxicating] where such supply or service is made or given for cash,
deferred payment or other valuable consideration. Rule 54(k).

Refund:
Return Forms and Payment of Tax:
From 1st April 2009, all dealers, whether required to file monthly, quarterly or six monthly
returns, have to submit their returns in electronic format only.There are separate return forms
prescribed for various categories of dealers, i.e., Form Nos. 231 to 235. A dealer has to use
appropriate form as may be applicable to him. All these forms have to be submitted
electronically within the prescribed due date. A dealer shall first make payment of tax due in to
the Government treasury through challan Form No. 210, (Form MTR-6 for payment of CST
dues), and thereafter upload the return in appropriate form as may be applicable. A grace period
of 10 days has been permitted for uploading of e-returns but the tax due, if any, has to be paid
within the prescribed due date.It may further be noted that from 1st June, 2010 it is now
mandatory for the dealers required to file monthly returns to make payment of taxes
electronically.In case of delayed payments, interest is payable @ 15% p.a. Such interest is
mandatory and shall be paid before filing of return. Refunds of any period can be adjusted in the
return/s for subsequent or any other period/s within the same financial year. As per the provisions
of MVAT, refund cannot be adjusted against liability of the subsequent year; i.e., refund cannot
be carried forward to the next financial year. However, for refunds relating to financial years
2005-06 as well as for 2006-07, the Commissioner has issued Trade Circulars whereby the
refund for these financial years could be carried forward to the subsequent year. The
Commissioner of Sales Tax has also issued a Trade Circular (No. 15T of 2010 dated 15-4-2010)
whereby the dealers have been permitted to adjust the refund due for financial year 2009-10
against tax payable for the current year; i.e., financial year 2010-11, provided that the refund due
as per return for the period ended 31st March 2010 is less than rupees one lakh and the dealer has
not filed an application for refund (in Form 501) for such refund.
Revised Returns
Revised return, for any period, can be filed within 9 months from the end of the year in which
such tax period falls or before receipt of notice for assessment, whichever is earlier. [Sec. 20(4))

Case Study & Illustration:

VAT CREDIT IN CASE OF INPUTS/SUPPLIES

Illustration 1

1. A dealer purchases the following goods in a State during the month of March 20x6:

Particulars Total Amount (Rs.) Input Tax Paid (Rs.) Net Amount (Rs.)

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4% VAT Goods 10,40,000 40,000 10,00,000

12.5% VAT Goods 9,00,000 1,00,000 8,00,000

VAT Exempt Goods 2,00,000 - 2,00,000

Total 21,40,000 1,40,000 20,00,000

2. The input tax paid on purchase of goods is eligible for VAT credit.

Suggested Accounting Treatment

1. The dealer passes the following entry to record the goods purchased and input tax paid
thereon:

4% VAT Goods Purchase A/c Dr. Rs. 10,00,000

12.5 % VAT Goods Purchase A/c Dr. Rs. 8,00,000

VAT Exempt Goods Purchase A/c Dr. Rs. 2,00,000

VAT Credit Receivable (Inputs) A/c Dr. Rs. 1,40,000

To Bank A/c Rs. 21,40,000

(Being goods purchased and input tax paid)

2. The dealer passes the following entry to record the goods sold and VAT collected thereon:

Bank A/c Dr. Rs. 24,06,500

To 4% VAT Goods Sales A/c Rs. 11,00,000
To 12.5 % VAT Goods Sales A/c Rs. 9,00,000
To VAT Exempt Goods Sales A/c Rs. 2,50,000
To VAT Payable A/c Rs. 1,56,500
(Being goods sold and VAT collected)

Business Audit, Penalty & Interest Under MVAT:

Business Audit is a new function of the Sales Tax Department. This will be conducted by the
Sales tax officials ordinarily at the dealer's place of business. This audit is independent from the
audit by a Chartered Accountant. Business Audit is however, not an activity of enforcement for
search and seizure at dealers' business premises.
Objectives of Business Audit
The objective of a Business audit is to close any possible gap between the tax declared by' a
dealer and the tax legally due. It aims to ensure optimum revenue collection and voluntary

34
compliance. The aim of Business audit is to encourage the highest possible level of voluntary
compliance in a system of self-assessment.
Selection for audit
The main purpose of an audit is to ensure tax compliance, cross check of transactions and initiate
corrective actions, if necessary. The returns filed by the dealers will be examined for
discrepancies. Based on such examination and pre-determined criteria, some dealers will be
selected for audit. Generally, cases selected for audit will include those dealers
who file its returns late
in whose case they have reason to believe that the return may not be correct or a detailed
scrutiny is necessary
chosen randomly, on the basis of certain criteria. 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.
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.
Additional tax demand
If any additional tax is due, the auditor will issue a notice explaining the additional demand. If
the dealer accepts the additional demand shown, then they should file a revised return along-with
the payment of tax. However, if the dealer disagrees with the findings of the auditor, then they
may proceed to assess their case and issue an assessment order unless they are able to provide
evidence and convince the audit officer not to assess them for additional demand. The
assessment order will also include interest due from the date they should have paid the tax to the
date of the assessment. In addition, they may also impose a penalty. They should pay the dues as
per the assessment order or they may prefer an appeal against this order.
Time limit for audit
There is no time limit prescribed for conducting Business Audit. Normally, they may carry out an
audit within two years of filing the return. They may follow the timelines as prescribed for
completion of assessments under the MVAT Act and MVAT Rules
Financial penalties or fines
There are various financial penalties, each depending on the nature of the offence:
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,

35
 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/-. 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.
Interest: Section 30:
1) Unregistered Dealer: Interest for Unregistered dealer period is to be levied for each month or
part thereof for the period commencing on the 1st April of the respective year to the date of
payment of tax. If as a result of any order passed under the Act amount of tax is reduced, the
interest shall be reduced accordingly and where the said amount is enhanced, it shall be
calculated upto the date of such order. Interest levied under this sub-Section shall not exceed the
amount of tax found payable for the respective year.

2) Registered Dealer: Failure to pay tax within time specified by or under this Act shall be
visited with interest after last date by which he should have paid such tax. Rule 88: Rate of
interest is presently notified for Section 30 is one and quarter percent of amount of tax for each
month or for part thereof.

CONCLUSION
The system of Value Added Tax (VAT) has been implemented, in the State of Maharashtra, w.e.f.
1st April, 2005. As per the provisions of MVAT, a dealer is liable to pay tax on the basis of
turnover of sales within the State. MVAT, a dealer is liable to pay tax on the basis of turnover of
sales within the State. The term dealer has been defined u/s. 2(8) of the Act. It includes all person
or persons who buys or sells goods in the State whether for commission, remuneration or
otherwise in the course of their business or in connection with or incidental to or consequential to
engagement in such business.
The term includes a Broker, Commission Agent, Auctioneer, Public Charitable Trusts, Clubs,
Association of Persons. Draft model of VAT legislation has been prepared by the National
Institute of Public Finance and Policy. The circulation of papers on VAT will certainly be
creating the atmosphere towards readiness to accept VAT. Every dealer, who becomes liable to

36
pay tax under the provisions of MVAT, shall apply electronically for registration to the prescribed
authority, in Form 101, within 30 days from the date of such liability.
The provisions relating appeals under MVAT Act 2002, which is in force in Maharashtra State,
are discussed in the article N.T.Nirale, Advocate In a leading case of Hoosier Kamas Dada the
Supreme Court has pointed out that the right to appeal is not merely a matter of procedure; it is a
matter of substantive right. [4 STC 114]. Right to appeal is vested in a dealer when the return is
filed or on the date, the return was due.

BIBLOGRAPHY
www.mahavat.gov.in
www.caclubindia.com
www.wikipedia.com
www.indiataxes.com/Information/VAT/Introduction.htm
www.business-standard.com/.../penalty-waived-for-late- mvat-audit-
repor...www.revenue.com

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