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MVAT - Maharashtra Value Added Tax.

INTRODUCTION
MVAT Act, 2002, has been introduced in the state of Maharashtra
w.e.f. 01042005.As the name suggests, VAT i.e. Value Added Tax is a
tax upon every value addition. Prior to 01042005, Maharashtra had first
stage singlepoint levy system of taxation implemented through the
Bombay Sales Tax Act, 1959. Under that system, only manufacturers and
importers were required to pay the tax on the first sale taking place in the
state. As against this, VAT system contemplates tax at every stage in the
entire chain of transactions relating to the same goods. The concept has
become quite familiar with our fellow brothers and need not be explained
further with the help of examples etc. Suffice it to say, VAT is leviable on
each sale happening in respect of the same goods.
A question frequently is asked whether positive value addition at
every stage is necessarily required under VAT. The scheme of MVAT Act,
2002, does not require such value addition at every stage. Even if the
seller sells the goods at cost price, without adding any margin for his
expenses or profit etc., VAT is leviable on that sale. Value addition also
does not mean enhancement of the intrinsic value of the goods. To give
an example, A purchases motor car and fits accessories therein like air
conditioner, music system etc. In this case, there is positive value addition
to the intrinsic value of the goods and VAT is certainly applicable on the
sale of such motor car.
In another case, A purchases the said motor car and sells in the
same condition without any refurbishment. In that case too, VAT is
payable on the sale of such car although there is no value addition made
by the seller therein.

MVAT - Maharashtra Value Added Tax.

Value addition can also be in the nature of expenses incurred on the


procurement of the goods and marketing thereof without adding anything
into the intrinsic value of the goods such as selling expenses, advertising
expenses, transport etc. Even in such cases, VAT is applicable on the sale
of such goods. Another frequent query is in respect of the case where
goods are sold at a loss. In that case too, VAT is applicable on the sale
price although offsetting the purchase tax against such sales tax may
result into a refund. There is no express prohibition under MVAT Act to
claim refund in such cases.

MVAT - Maharashtra Value Added Tax.

The MVAT Act, 2002.


Introduction of MVAT Act, 2002:
The Maharashtra Value Added Tax 2002 (Herein after called as MVAT
Act) has replaced the Bombay Sales Tax Act, 1959 on & w. e. f. 1st April
2005 and now the sales tax is collected by the Maharashtra government
under MVAT Act, 2002.
When the sales tax was collected under The B. S. T. Act, 1959,
What was the reason to introduce the new MVAT Act, 2002?
What is the difference between the two Acts?
Why the government felt the need to replace the B. S. T. Act?
The basic difference is the charging of sales tax. Under the B.S.T. Act,
1959 it was a single point levy of tax i.e. tax collection was at first
stage and other stages are allowed as resales and no tax payable on
subsequent stages.
However to increase the revenue, the Govt. of Maharashtra in the BST
regime.
Introduced resale tax which was maximum at 0.5 percent on
sales. Under the MVAT Act, 2002 the concept of collection of sales tax
has changed and now the sales tax is collected at every stage of value
addition till the goods reaches to the end user or consumer.

MVAT - Maharashtra Value Added Tax.

Scope Of MVAT.
The MVAT Act, 2002 deals with the law relating to the levy of tax
on the sale or purchase of certain goods in the State of Maharashtra. The
word State wherever used in the MVAT Act means the State of
Maharashtra.
Registration Liability:
Section 3 (4) prescribes the limits of turnover of sales for the
purpose of attracting registration liability. It must be borne in mind that it
is only the turnover of sales which has to be computed for this purpose
and not the turnover of purchases. The said limits are as under:
Category Of Dealer Limit Of Turnover Of Sales
Other Conditions
Importer Rs. 1,00,000/ Value of taxable goods sold or purchased during
the year is not less than Rs. 10,000/ Others Rs. 10,00,000/ Value of
taxable goods sold or purchased during the year is not less than Rs.
10,000/
Importer, here, means as defined u/s. 2(13) and is a dealer who
brings any goods into the state or to whom any goods are dispatched from
any place outside the state. Thus, he can be a dealer who receives the
goods from other states either by way of stock transfers or by way of
interstate purchases or by importing the goods from a foreign country.
The condition of minimum value of imported goods is conspicuously
absent in this section as compared to the corresponding section under the
BST Act. Therefore, a dealer who is an importer in the sense described
above, even for a negligible amount, would be liable for registration if his
turnover of sales exceeds Rs. 1,00,000/.

MVAT - Maharashtra Value Added Tax.

INCIDENCE OF TAX
The charging section is contained in section 4 which reads as
under: Subject to the provisions of this Act and rules, there shall be paid
by every dealer or, as the case may be, every person, who is liable to pay
tax under this Act, the tax or taxes leviable in accordance with the
provisions of this Act and rules. Thus, it is clear that every dealer/person
who is liable to pay tax is required to pay taxes in accordance with the
provisions of the Act and rules. The term person liable to pay tax has not
been expressly defined under the Act. However, considering the
provisions of section 3, 4, 5 and 6 collectively, one can infer that VAT is
payable only on the sales of goods where the threshold limit of turnover
of sales is crossed by the dealer. It is pertinent to note that there is no
provision for purchase tax under MVAT Act.

MVAT - Maharashtra Value Added Tax.

SCHEDULES AND RATE OF TAX

All the goods are classified under Schedules 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, precious stones and


imitation jewellery. Goods covered by Schedule B are subject to tax at
1%.

Goods covered by Schedule C are subject to tax @ 5%. Schedule


C covers items of daily use or raw material items like drugs, readymade
garments, edible oil, utensils, iron and steel goods, non-ferrous metal, IT
products, oil seeds, paper, ink, chemicals, sweetmeats, farsan, industrial
inputs, packing materials etc.

Schedule D covers liquor which was subject to 20% tax up to 30th


June, 2009. With effect from 1st July, 2009, rate of tax is increased to
25%. 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%.
VI. EXEMPTIONS
Following sales transactions are exempt from payment of tax under
MVAT Act:

MVAT - Maharashtra Value Added Tax.

Interstate sale is exempt from payment of sales tax and it may be


liable to tax under C.S.T. Act. [Section 8(1)]

Sales taking place outside the state as determined under Section 4


of the C.S.T. Act. [Section 8(1)]

Sales in the course of import or export [Section 8(1)]

Sales of fuels and lubricants to foreign aircrafts. [Section 8(2)]

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)]

Sales to any class of dealers specified in the Import and Export


Policy notified by the 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.

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.

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.

Sales effected by manufacturing units covered by Package Scheme


of Incentives and under exemption mode are exempt from payment of
tax u/s. 8(4).

MVAT - Maharashtra Value Added Tax.

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, other
specified telephone service providers and telecom infrastructure
providers.

One more notification dated 29th June, 2009 is issued by the State
Government u/s. 8(5) by which sale of certain specific goods for
satellite launch system to the Department of Space; Government of
India is exempted from payment of tax with effect from 1st July, 2009.

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

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, if the retail outlet purchases the same from
registered dealer.

VII. SET-OFF (INPUT TAX CREDIT)


Section 48 of the MVAT Act provides for grant of input tax credit to any
registered dealer in respect of any tax paid on his purchases subject to
conditions provided in the rules made in this behalf by the State
Government. The provisions for grant of set-off are contained in Rules 52
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MVAT - Maharashtra Value Added Tax.

to 55 of the MVAT Rules, 2005. There are changes in rules from time to
time. The updated position of set-off Rules as on 01.07.2009 can be
summarized as under.

Important conditions:
1.

To be eligible for set off, a dealer must be registered under MVAT


Act at the time of purchase of goods, except as provided in 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. Entry tax paid under Maharashtra Entry Tax
on Goods Act as well as Maharashtra Entry Tax on Motor Vehicles Act.

MVAT - Maharashtra Value Added Tax.

Registration Under MVAT Act


WHY TO OBTAIN REGISTRATION CERTIFICATE?
1 Obtaining of registration certificate is statutory obligation of every
dealer, who is liable to pay tax under the Act.
2 It empowers the dealer to collect tax.
3 A registered dealer gets the benefits of set off (input tax credit)
4 Business without registration invites penalty/prosecution.
5 Nobody would like to buy goods from unregistered dealer.
Who should apply for the registration?
The dealer who attains or crosses prescribed turnover of purchase or sale
should apply for registration under VAT Act within 30 days from the date
on which turnover crossed the prescribed limit.
Note: Once a dealer exceeds the prescribed turnover and fulfils the
conditions as mentioned in table below, then the liability to pay taxes
under the Act commences from the time of transaction by which the
turnover exceeds the prescribed limit.
What happens if not applied in time for registration?
When a dealer does not apply within 30/ 60 days from the date of
exceeding the prescribed turnover of purchases or sales than certificate of
registration will be issued with effect from the date of uploading of the
application. Therefore, from the date of starting of business till the date of
uploading of the application, the dealer will be treated as unregistered.
Provisions of Penalty for unregistered dealers:
If dealer does not apply in time and remains unregistered, it is an offence
under the Act.
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MVAT - Maharashtra Value Added Tax.

Benefits of Registration:
i. He can claim set off of tax paid on the purchase if eligible to get any.
ii. He can issue various declarations prescribed C.S.T. Acts like Form C
etc.
iii. Registered dealers are preferred while awarding the government
contracts. The above mentioned benefits are denied to an unregistered
dealer.
Disadvantages of non registration:
1 Unregistered dealer is liable to pay tax on the sales affected by him but
he cannot collect tax.
2 He cannot claim any set off or refund of the tax paid by him.
3 Purchases at concessional rate of tax not available to him. He cannot
issue forms or declarations like Form C etc.
4 No authenticity in the market as majority of dealers purchases goods
from registered dealers only.
5 Possibilities of non consideration for awarding the government contract.
6 Imposition of penalty and prosecution for remaining unregistered.

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MVAT - Maharashtra Value Added Tax.

New Composition scheme for MVAT


Dealer & Its Applicability
Deputy Chief Minister of the Maharashtra state announced the new
composition scheme for retailers in his budget speech. The sales tax
department comes with the trade circular No. VAT/AMD/2014/8/ADM-8
dated 20/09/2014 regarding the new retailers composition scheme. The
old composition scheme is expired with effect from 30thSeptember 2014.
The new composition scheme will be effective from 1st October 2014.
Who is the eligible dealer for the new composition scheme?
Following is the list of the conditions for the eligible dealer for
composition scheme.
1. The dealer should be register under MVAT act 2002
2. Applicant dealer should be a retailer, as explain in section 42 (1) (b) of
MVAT Act. At least 90% of sales should be to the end user (i.e. to the
person who is not dealer)
3. The applicant dealer should not be a manufacture or an importer.
4. The turnover of sales of goods should not exceed rupees fifty lack in
the previous year in which new composition scheme is applied. While
calculation the turnover the turnover of sales of goods, turnover of sale of
high speed diesel or any other kind of motor sprit covered by entry 5 and
10 of the SCHEDULE D of the MVAT act and furnishing fabric covered
by entry 101 of SCHEDULE C of MVAT act is not considered.
5. The goods should be purchase from register dealer. However, this
condition is not applicable to the tax-free goods, packing material used
for packing of the goods, resold by him.
6. The dealer who is opt composition scheme from 1st October 2014
should be liable to file six monthly returns during the year 2014-2015.

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MVAT - Maharashtra Value Added Tax.

The dealer who is liable to file monthly or quarterly return during the
year 2014-15 shall not eligible to opt composition scheme.
What is the rate of Composition amount?
There are two options provided for payment of composition money.
Option 1 If dealer opt to pay composition amount on total turnover of
sales, then he shall pay 1% on entire turnover of sales including tax free
goods.
Option 2 If dealer opt to pay composition amount on turnover of sales
of taxable goods only, then he shall pay 1.5% on such turnover of sales.
What are the consequences after application of composition scheme?
1.

Composition amount or tax shall not be collected separately by

composition dealer
2.

Composition dealer cannot issue the tax invoice. However, he can

issue the cash memo, sales bill, etc. if value of goods sold exceeds Rs.
fifty.
3.

Composition dealer shall not eligible to claim set-off under MVAT

rule 2005 in respect of purchase of goods, for which composition has


been availed. Set-off of packing material used for packing of the goods
for which composition scheme is applied is not available. However, it is
clarified that dealer can claim set-off on purchase of capital assets,for
which benefit of composition is not availed.
4.

A dealer opting for composition scheme is not eligible for set off.

Therefore, dealer opting for composition scheme shall be required to


reverse the set off, already claimed, on the purchase of the goods held in
stock on the day of opting for new composition scheme. For example, is
there is a closing stock of Rs. 5 lacks and set off of Rs. 25000. The dealer
is required to pay Rs.25000 in addition to composition amount in his first
composition return. The reversal of the set-off is required to show in the

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MVAT - Maharashtra Value Added Tax.

row (e) of box 14 of the returns in Form 232 or row (e) of box 13 of the
returns in Form 233, as the case may be.
5.

The composition dealer is required to file six monthly return.

When and how dealer can join composition scheme?


A dealer can join new composition scheme from 1st October 2014 or
from 1st April of any subsequent year. An eligible dealer, whether old
composition dealer or fresh applicant desiring to opt for new composition
scheme would be required to upload an application in Form 4A on
http://mahavat.gov.in on or before 31st October 2014.
If dealer is desire to opt for new composition scheme for the year 201516 or thereafter shall upload an application in Form 4A on
http://mahavat.gov.in on or before 30th April of the respective year. From
financial year 2015-16 newly register dealer shall indicate his option in
From 101 itself for application of new composition scheme.
Is composition scheme is really beneficially to the dealer?
It is depends upon the dealers turnover, gross profit ratio and normal tax
rates applicable to the goods.

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MVAT - Maharashtra Value Added Tax.

Compositing Works Contracting


The provisions relating to composition schemes are given in
Section 42 of MVAT Act. Subsection (3) of section 42 specifically
provides for two types of composition schemes for works contractors.
These two schemes are as follows:
1. Composition Scheme for Construction Contracts: (5%
Composition Scheme)
Under this scheme, dealer has to pay VAT @5% on the total
contract value. However, this option can be exercised only in case of
construction contracts notified in Notification No. VAT.1506/CR134/Taxation-1 dt. 30/11/2006. The notified construction contracts are as
follows for which 5% composition scheme can be opted:
(A) Contracts for construction of,i. Buildings,
ii. Roads,
iii. Runways,
iv. Bridges,
v. Railway overbridges,
vi. Dams,
vii. Tunnels,
viii. Canals,
ix. Barrages,
x. Diversions,
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MVAT - Maharashtra Value Added Tax.

xi. Rail tracks,


xii. Causeways, Subways, Spillways,
xiii. Water supply schemes,
xiv. Sewerage works,
xv. Drainage,
xvi. Swimming pools,
xvii. Water Purification plants and
xviii. Jettys
(B) Any works contract incidental or ancillary to the contracts mentioned
in paragraph (A) above, if such work contracts are awarded and executed
before the completion of the said contracts.
If the dealer opts for 5% composition scheme, input credit in excess of
4% of purchase price can be availed i.e. there will 4% retention in setoff
according to Rule 53(4)(b) of MVAT Rules
and balance setoff can be availed.
2. Composition for all types of Works Contracts: (8% Composition
Scheme)
Here, dealer may choose to pay VAT @8% on total contract value less the
amount paid towards works contract executed by a registered subcontractor. In case dealer opts for 8%
composition scheme, 36% percent of total setoff amount is disallowed
and balance 64% setoff can be availed as per Rule 53(4)(a) of MVAT
Rules.

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MVAT - Maharashtra Value Added Tax.

3. Composition scheme for Builders and Developers: (1%


Composition Scheme)
Under this scheme, registered dealers undertaking construction of flats,
dwellings or buildings or premises may choose to pay VAT @1% of the
agreement amount specified in the agreement or agreement value adopted
for stamp duty purposes whichever is higher. If he chooses to opt for this
scheme, he cannot avail any input tax credit in respect of purchases
effected by him. Further, he is not allowed to make any purchase against
C form. Also, he cannot issue tax invoice and also not eligible for to
issue Form No. 409 to the subcontractor.
Works Contract TDS:
As per provisions of Rule 40 of MVAT Rules, notified employers are
required to deduct TDS, known as works contract TDS or WCT TDS
from the amount payable to the contractor. The rate of TDS shall be 2% if
the contractor is a registered dealer. If the contractor is unregistered, rate
of tax deduction shall be 5%. The deductor needs to file WCT TDS return
in form No. 424 before 30th June every year.

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MVAT - Maharashtra Value Added Tax.

Composition Scheme for Bakers


Composition scheme under VAT regime can be said to be a simplified
scheme for calculating, charging, collection and payment of sales/vat tax.
The basic idea of introducing the scheme is to enable small business men
in resale and retails business to carry business without maintaining
detailed accounts, enabling easy calculation of tax payable by them. This
saves them from rigors of regular scheme under MVAT law. Section 42(1)
of Maharashtra Value Added Tax Act, 2002 (MVAT, 2002) empowers
State Government to Notify Composition Scheme for dealers in State of
Maharashtra who are engaged in business of resale and retail. State
Government has notified Composition Scheme vide notification No. VAT1505/CR-105/Taxation-1 dated 1st June 2005 and amended form time to
time.
Separate scheme have been notified in the above mentioned
notification as applicable to:
1. Restaurants,

Eating

House,

Refreshment

Room,

Boarding

Establishment, Factory Canteen, Clubs, Hotels and Caterers


2. Bakers
3. Retailers
4. Dealers in Second-hand Motor Vehicles
Composition Scheme under section 42(1) shall not apply to a dealer
1. who is a manufacturer or
2. who is an importer or

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MVAT - Maharashtra Value Added Tax.

3. who purchases any goods from a registered dealer whose sales of the
said goods are not liable to tax by virtue of the provisions contained
in sub-section (1) of section 8 or
4. who sells at retail liquor including liquor imported from out of India,
Indian Made Foreign Liquor or Country Liquor except as provided
in sub-section (2)
Scheme as Applicable to Bakers
(a) What are class of sales and purchases which are eligible for enabling
benefit under this scheme ?
(b) What is Composition Amount Payable (Tax payable)
1. % of the first Fifty Lakh rupee of the total turnover of sales of
goods referred above in (a) goods imported out of Maharashtra
State, if any, including bread in loaf, rolls, or in slices, toasted or
otherwise,
2. in the case of a registered dealer and 6 per cent. of the first Fifty
Lakh rupee of the total turnover of sales of goods referred to in (a)
above and goods imported out of Maharashtra State, if any
including bread in loaf, rolls, or in slices, toasted or otherwise
(c) Conditions in which this scheme will be applicable to retailers
i.

The claimant dealer shall be certified by the Joint Commissioner


for the purpose of claiming benefit under this entry,

ii.

The claimant dealer shall not be entitled to claim any set off under
the MVAT Rules, in respect of the purchases corresponding to any
goods which are sold or resold or used in packing of goods referred
in (a) above,
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MVAT - Maharashtra Value Added Tax.

iii.

The turnover of sales of bakery products including bread has not


exceeded rupees Fifty Lakh in the year previous to which the
composition is availed and if the dealer was not liable for
registration under the BST Act, 1959 or under MVAT Act, 2002, in
the immediately preceding year, then he shall be entitled to claim
the benefit of the scheme in respect of the first Fifty Lakh rupees of
the total turnover of sales in the current year,

iv.

The claimant dealer shall apply in the Form-3 appended to this


notification to Joint Commissioner of Sales Tax (Registration) in
case of dealers in Mumbai and in other Cases with Joint
Commissioner of Sales Tax (VAT Administration),

v.

The to join composition will effective from the date of registration


if the dealer applies for Composition Scheme at the time of
Registration,

vi.

If the Dealer opts for Composition Scheme form 1st April, 2011 he
shall apply from on or before 30th June 2011,

vii.

If the Dealer opts for composition at any time on or after 1st April
of any year then the option shall be effective only form the
beginning of next financial year,

viii.

The application should be made to the assessing authority who was


in charge of the case on 31st March 2005 before 15th June 2005 or
as the case may be, to the registering authority at the time of
application for Registration Certificate under the Act,

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MVAT - Maharashtra Value Added Tax.

ix.

Subject to condition (iii), if the option to join the composition


scheme is exercised, in any year then it can be changed only at the
beginning of the next year,

x.

The claimant dealer shall not be eligible to issue Tax Invoice in


respect of sales of goods referred in (a) above,

xi.

The claimant dealer shall not be eligible to recover the composition


amount from any customer separately,

xii.

Before 1st April 2011 the turnover limits were Rupees Thirty
Lakhs

Composition Scheme for Retailers


Composition scheme under VAT regime can be said to be a
simplified scheme for calculating, charging, collection and payment of
sales/vat tax. The basic idea of introducing the scheme is to enable small
business men in resale and retails business to carry business without
maintaining detailed accounts, enabling easy calculation of tax payable
by them. This saves them from rigors of regular scheme under MVAT
law.
Section 42(1) of Maharashtra Value Added Tax Act, 2002 (MVAT,
2002) empowers State Government to Notify Composition Scheme for
dealers in State of Maharashtra who are engaged in business of resale
and retail. State Government has notified Composition Scheme vide
notification No. VAT-1505/CR-105/Taxation-1 dated 1st June 2005 and
amended form time to time.
Separate scheme have been notified in the above mentioned
notification as applicable to:
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MVAT - Maharashtra Value Added Tax.

1. Restaurants,

Eating

House,

Refreshment

Room,

Boarding

Establishment, Factory Canteen, Clubs, Hotels and Caterers


2. Bakers
3. Retailers
4. Dealers in Second-hand Motor Vehicles
Composition Scheme under section 42(1) shall not apply to a dealer
1. who is a manufacturer or
2. who is an importer or
3. who purchases any goods from a registered dealer whose sales of
the said goods are not liable to tax by virtue of the provisions
contained in sub-section (1) of section 8 or
4. who sells at retail liquor including liquor imported from out of
India, Indian Made Foreign Liquor or Country Liquor except as
provided in sub-section (2)
Scheme Applicable to Retailers
Who is dealer engaged in Retailing ?
For the purpose of composition scheme for retailers, a dealer shall be
considered to be engaged in the business of selling at retail if 9/10th of
his turnover of sales consists of sales made to persons who are not
dealers. In case of any question arises to determine whether any particular
dealer is a retailer or not, then the question shall be referred to the Joint
Commissioner, who shall after hearing the dealer, if necessary, decide the
question. The order made by the Joint Commissioner shall be final.
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MVAT - Maharashtra Value Added Tax.

What are class of sales and purchases which are eligible for enabling
benefit under this scheme ?
The scheme shall be applicable to total turnover of sales made by
a registered dealer, who is a retailer as provided in section 41 (and
explained above), of any goods excluding the turnover of resales if any,
effected by him, of the following goods:1. Foreign liquor, as defined in rule 3(6)(1) of the Bombay Foreign
Liquor Rules, 1953.
2. Country liquor, as defined in Maharashtra Country Liquor Rules,
1973.
3. Liquor imported from any place outside the territory of India as
defined, from time to time, in rule 3(4) of the Maharashtra Foreign
Liquor (Import and Export) Rules,1963.
4. Drugs covered by the entry 29 of the Schedule C appended to the
Act.
5. Motor Spirits notified by the State Government under subsection
(4) of section 41 of the Act.
Composition Amount (Tax payable)
The composition amount shall be, calculated on the,
Excess, if any, of the total turnover of sales, including turnover of
sales of tax - free goods but excluding liquor, Drugs, and Motor
Spirits referred above, in respect of any six monthly period
over the turnover of purchases including turnover of purchases of
tax free goods, but excluding liquor, Drugs, Motor Spirits referred
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MVAT - Maharashtra Value Added Tax.

to in column (3) of this entry , in respect of the said six month


period.
The turnover of purchases shall be increased by the amount of tax
collected by the vendor of the retailer separately from the retailer.
The Tax payable on amount so calculated above is
1) at the rate of 5 per cent for the retailers whose aggregate of the
turnover of sales of goods, covered by schedule A and goods
taxable at the rate of 4 per cent., if any, is more than 50 per cent. of
the total turnover of sales; excluding the turnovers of liquor, drugs
and motor spirits referred to columns 3 of this entry
2) at the rate of 8 per cent. in any other case.

Conditions in which this scheme will be applicable to retailers


i.

The selling dealer does not collect tax separately in respect of the
sales specified above.

ii.

The claimant dealer shall not be entitled to claim any set off under
the Maharashtra Value Added Tax Rules, 2005, in respect of the
purchases corresponding to any goods which are sold or resold or
used in packing of such goods sold.

iii.

The turnover of sales of such goods does not exceeded rupees fifty
lakh in the year previous to which the composition is availed of
and if the dealer was not liable for registration, in the immediately
preceding year, then he shall be entitled to claim the benefit of the

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MVAT - Maharashtra Value Added Tax.

scheme in respect of the first fifty lakh rupees of the total turnover
of sales in the current year
iv.

The turnover of purchases referred to above shall be reduced by the


amount of every credit of any type received by the selling dealer
from any of his vendors whether or not such credit is in respect of
any goods purchased by the selling dealer from the said vendor.

v.

In respect of the six monthly period starting on the 1st April 2005,
for calculating the excess, 5/6th of the turnover of sales of the six
monthly period is to be considered instead of the entire turnover of
sales for that period.

vi.

The claimant dealer shall apply in the Form-4 appended to the


notification for exercising the option to pay tax under the
composition scheme. The application should be made to the
assessing authority who was in charge of the case on the 31st
March 2005 before the 15th June 2005 or as the case may be, to the
registering authority at the time of application for Registration
Certificate under the Act.

vii.

Subject to condition (iii), if the option to join the composition


scheme is exercised, in any year then it can be changed only at the
beginning of the next year.

viii.

The claimant dealer shall not be eligible to recover composition


amount from any customer separately.

ix.

The claimant dealer is not a manufacturer or importer.

x.

The taxable goods resold are purchased from registered dealers.

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MVAT - Maharashtra Value Added Tax.

xi.

Purchases of tax free goods may be from registered dealers as well


as from unregistered dealers.

xii.

Any other purchases from unregistered dealers are meant only for
packing of goods resold.

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MVAT - Maharashtra Value Added Tax.

Conclusion
In nutshell, it can be stated that a person effecting sales has to
ascertain that whether he is doing so in the capacity of a dealer having
regard to the frequency, continuity, regularity, volume etc. of the
transactions. Refer Supreme Court judgment in the case of State of
Gujarat vs. Raipur Manufacturing Co. Ltd. (19 STC 1).
Once it is established that he is a dealer carrying on a business
having regard to the peculiar definitions of the terms under the MVAT
Act, he has to ascertain the total turnover of sales so as to determine his
registration liability. The incidence of tax will be on the transactions of
sales effected during the course of business by the dealer and not
otherwise. The liability of tax has to be discharged taking into
consideration the rates of tax as per schedules.
Although the Act nowhere confers an express right to collect the
taxes from the buyers, there is no prohibition to recover the taxes form
the buyers as well. Considering all the provisions of the Act
harmoniously, it can be concluded that the dealer can collect the taxes
separately through the invoices only equal to his liability of tax on the
said transaction.

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MVAT - Maharashtra Value Added Tax.

Webliography

www.finance.indiamart.com
www.caclubindia.com
www.servicetax.gov.in
www.management paradise.com
www.tax4india.com
www.wisegeek.com
www.wikipedia.com

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