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VAT – AN OVERVIEW
Maharashtra Value Added Tax, 2002 (MVAT)
INTRODUCTION
What is VAT?
VAT is a modern and progressive Tax System which provides uniformity in tax collection, payment,
assessment and administration and is used in over 130 countries around the world. It is charged and collected
by every dealer on goods sold to other dealers at every stage and to the customer. VAT paid by dealers on
their purchases is usually available for set-off against the VAT collected on sales.
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COMPOSITION SCHEME
Who are eligible
The alternative method of calculating VAT is available to dealers who – (a) are Retailers - reselling goods at
retail counters or (b) run a restaurant, eating house, club, hotel (other than star hotels), refreshment rooms or
boarding establishment or (c) are caterers and serve food with non-alcoholic drinks or (d) run bakeries or (e)
are dealers in second hand passenger motor vehicles or (f) are engaged in executing works contracts.
SET-OFF PROVISIONS
a. Only registered dealers and dealers who are not covered by composition scheme can claim set-off.
b. Set-off which now called Input Tax Credit (ITC) can be claimed only if VAT is collected on sales by
issuing the specified VAT Invoice.
c. ITC can be claimed on taxes paid under – Maharashtra Value Added Act 2002, i.e VAT; Entry for
Motor Vehicles into Local Areas Act, 1987, i.e Entry Tax; Entry of Goods into Local Areas Act, 2003, i.e
Entry Tax but not on CST.
d. To claim ITC – you must be registered for VAT; you must not be paying tax by way of composition;
you must hold a valid tax invoice for the goods purchased in which the VAT must be shown separately;
you must maintain an account of all purchases in chronological order on which you are claiming set-off
TRANSISTIONAL RELIEF
Is Relief available for Stocks as on 1-4-2005?
Yes. Transitional Relief can be claimed in respect of the following taxes paid: · Sales Tax / Purchase Tax paid
under the Bombay Sales Tax Act, 1959. · Tax paid separately under the Maharashtra Sales Tax on the
Transfer of Property in Goods involved in the Execution of Works Contract Act (Re-enacted) Act, 1989 · Tax
paid separately under the Maharashtra Sales tax on the Transfer of the Right to use any goods for any
Purpose Act, 1985 · Tax paid separately under the Bombay Sales of Motor Spirit Taxation Act, 1958 · Entry
Tax paid under the Maharashtra Tax on Entry of Motor Vehicles into the Local Areas Act, 1987 · Entry Tax
paid under the Maharashtra on Entry of Goods into the Local Areas Act, 2002. You must arrange to take stock
of the goods you have on hand at the close of business on 31 March, 2005. And then submit a claim to your
local Sales Tax Office on or before 30 April, 2005.
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VAT RETURN
When & by what date VAT Returns are to be filed?
a. Monthly – if your total net tax liability in the previous year was more than Rs.1 lakh, you must file your
returns monthly.
b. Quarterly – if your total net tax liability in the previous year exceeded Rs.12,000 but was Rs.1 lakh or
less, you should file your returns quarterly for the periods to 30th June, 30th September, 31st December
and 31st March.
c. Six-monthly – if your total net tax liability in the previous year was Rs.12,000 or less, you should make
your returns every six months for the periods 1st April to 30th September and 1st October to 30th March.
d. Dealers who are retailers and who opt for a composition scheme must file six-monthly returns. Other
composition dealers must follow the rules for filing of return set out above.
e. Annual Returns are no longer required to be filed.
f. You are required to file a Nil Return even though there is no business activity during the period.
You must file your return for January on or before the 20th February and your return for February on or before
the 20th March and all other returns by the 25th day of the following month.
Consolidated Return
If you have several places of business in Maharashtra, you can file a consolidated return but only with prior
approval of the Commissioner of Sales Tax. However, you cannot file a consolidated return for a place of
business for which you hold a Certificate of Entitlement under any of the Package Schemes of Incentives
(except the Power Generation Promotion Policy, 1998).
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d. Purchases – To enable you to complete your VAT return, your records should enable you to calculate
· the total turnover of all purchases (including any tax paid or payable); the total of all purchases made at
each different rate (excluding tax); tax paid on purchases at each different rate; amount of tax not
available for set-off · total tax available for set-off; total of tax-free purchases; total of imports from outside
India; total purchases made from outside Maharashtra; total consignment transfers; total of local
purchases from registered dealers; total of local purchases from unregistered dealers.
TAX INVOICE
What is a tax invoice?
A tax invoice is the document you must · obtain when you purchase goods for your business and on which
you have paid tax. · give to your customers who are registered dealers and to whom you charge VAT.
When you issue a tax invoice, it must show (a) your name, address and Registration Certificate number (b)
your customer’s name and address.
Bill or Cash Memorandum (not a tax invoice) can be issued by a registered dealer wherein the tax amount is
not shown separately by dealers paying tax under composition (other than works contractors). A bill or cash
memo must show all the following information (a) name of the business, address and Registration Certificate
number (b) a serial number (c) particulars of the goods sold (d) sale price of the goods (e) date of issue (f)
your signature (g) a declaration certificate (as above).
BENEFITS / INCENTIVES
(a) Business friendly tax system. (b) Simple, transparent & progressive. (c) Mainly only 2 tax rates, hence
simplicity in administration. (d) Elimination of “tax on tax” existing in the present sales tax system. (e) Full set-
off available on most business purchases. (f) Simplification of tax forms & procedures. (g)Greater reliance on
self assessment and voluntary compliance by dealers. Incentive Schemes – There are broadly two types of
incentive schemes for an “Eligible Unit” in the form of an “Entitlement Certificate”. The first category is an
exemption scheme where a dealer is exempt from the payment of tax on sales as well as on purchases of raw
materials purchased against prescribed form, for a fixed period or/and up to a monetary limit. The second
category is a deferment where a dealer is allowed to postpone the payment of tax on sales and purchase tax
payable on raw materials purchased against prescribed form, for a fixed period or/and up to a monetary limit.
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