VISHNU DAYA & CO

Chartered Accountants

GF 7, Karuna Complex, Sampige Road, Malleswaram, Bangalore- 3. Ph 23312779, 23343983.

KARNATAKA VAT ACT AND OTHER ALLIED ACTS- CHANGES EFFECTIVE FROM

1.4.2010.

1. All goods which were subject to 12.5% would now be subject to tax of 13.5%.

2. Even the rate of tax in respect of the works contracts which were hitherto subject to

12.5% would now be subject to tax of 13.5%.

3. There is no change in the rate of tax under composition scheme. It would remain 4%

even for civil contracts etc.

4. All goods which were subject to tax earlier at 4% would now be subject to tax @ 5%.

Only the declared goods specified in 3rd schedule will continue to be subject to tax of

4% only. Items like steel will continue to be subject to tax of 4% only. However, the

classification problems could come up and hence, in such cases, kindly have your

classification of the goods reviewed, if you consider that the goods are covered in 3rd

schedule.

5. Even IT products, capital goods, packing materials, industrial inputs,

telecommunication equipments, used motor vehicles subject to certain conditions

which were earlier subject to tax of 4% will now be subject to tax @ 5%.

6. Specified goods sold to the canteen stores department earlier subject to 4% would

now suffer tax of 5%.

Even pharma products will suffer tax of 5% for the manufacturers. Only exception is

in respect of opening stock of pharma products which were in stock as on 1.4.2010 in

the hands of a wholesaler and retailer for a period of three months only. In other

words, the rate of tax would be increased to 5% w.e.f 1.7.2010 even in their hands

though, the goods had suffered tax of 4% earlier. This would apply even in the case

of goods on which MRP based tax is paid as those goods were not under exemption

scheme. Please note, this Notification shall not be applicable in case of manufacturers

and on goods purchased in the course of inter-state trade and held in stock but is
 restricted only to the aforesaid goods which have been subjected to KVAT at 4 % at

the time of their purchase and held in stock. Further, this concession shall be allowed

subject to the condition that the dealer claiming it shall have to discharge the burden

of proof that such goods were subjected to VAT at 4% on their purchases and held in

stock.

7. Basic exemption limit has been increased to Rs.5 lakhs, below which one need not

take registration. However, this is subject to certain exceptions.

8. Turnover limit for COT dealers has been increased to Rs.25 lakhs.

9. Limit for compulsory audit has been increased to Rs.60 lakhs.

10. Optional facility of payment of VAT on MRP basis which was hitherto available for

pharma and medicinal preparations has been extended to other products also.

11. Authority for Advance Rulings is proposed to be constituted with a view to clarify

the rate of tax, input credit, taxability of a transaction etc.

12. Filing of electronic return and e-payment is also proposed which would be made

mandatory for notified dealers.

13. Intimation to the checkpost regarding movement of goods electronically to facilitate

speedy movement of goods. This would be applied to the dealers to be notified.

14. Luxury Tax on room rents has been increased to 8% for rooms having rent from

Rs.1,001 to Rs.2,000.00 and 12% in respect of room rent above Rs.2,000.00.

15. Electric Generating Sets below 15KVA also will be subject to tax of 5%. Earlier, DG

sets above 15KVA was subject to 4%, which is now increased to 5%.

16. Rate of tax on all kinds of scraps and waste materials would be 5%. However, iron

and Steel scrap being declared goods would continue to be subject to 4% tax.

17. All kinds of masala powders whether mixture of spices and other materials will be

subject to 5% tax.
Entry Tax:

1. Entry tax on Tobacco products reduced from 4 % to 2 %.

2. Provision made for payment of entry tax on sugar by dealers to sugar factories at the

time of purchase by such dealers.

Should require any further clarifications please contact us.

Thanking you,

Yours truly,

Dated 31st March, 2010 at Bangalore

For Vishnu Daya & Co,

Chartered Accountants

INDIRECT TAX TEAM