Indirect Tax Laws

1. Maharashtra value Added Tax (MVAT Act 2002) (Effective from 1 st April
2005) (State Act: Goods Moving within the state of Maharashtra,
Transaction covered under this Act
2. Central Sales Tax Act, 1956 (CST Act) (Central Act, common in whole of
India) (Central Govt i.e Finance Minister of India amends this Act)
(Goods Moving from one state to another state transaction covered
under CST Act)
3. Central Excise Act 1944 (Renamed as Cenvat Act 2000) (It is a Central
Act which is common in whole of india)
4. Customs Act 1962 (It is a Central Act which is common in whole of india)
5. Service Tax Act 1994 (Central Act)
Constitution of India has given powers to all the states to
Levy Taxes
Collect Taxes
Retain Taxes for the purpose of Meeting State Expenditures
VAT has replaced followings Act : 1/4/05
- Maharashtra Sales Tax Act 1959 upto 31/03/05
- Maharashtra works contract Act 1986 uptp 31/03/05
- Maharashtra Lease Act 1989 upto 31/03/05
All above three Acts are merged with VAT act 2002
- No Sorry word in the dictionary of Tax Laws
- Non payment of Taxes will attract payment
1. Taxes
2. Interest and Penalty or imprisonment or Both
Indirect Tax is a collectable Tax:
- Collection of Tax is not compulsory, but payment of tax to the
authorities is compulsory
- Since payment of Tax is compulsory, collection of Tax becomes
necessary
 What is VAT (Value Added Tax) state subject.
VAT is applicable on Sale of Goods which are Movable
Immovable goods are out of the ambit/purview of VAT (No Tax on
immovable goods). Exports are also free from all Taxes.
Definition of Sale
1. There must be a Buyer and a Seller
2. There must be physical transfer of Goods from Seller to Buyer
3. The sale must be for Value or Monetary Consideration
4. The Buyer and seller must be different
Seller = ABC
Buyer = XYZ It is sale
5. Barter Exchange : No sale, Hence no tax
6. Free samples : No sale, no monetary consideration hence no tax
7. Stock transfers from one state to another state to the same Entity
(No sale, hence no tax)
1. Schedule A : Tax Free goods or 0% Water, Milk, Curd, Butter milk, Electricity, Vegetable,
Fruits, Garlic, Ginger, Firewood, Glass bangles, Human blood, Raw wool, Meat, Fish, National
flag, Kumkum bindis, sindoor, Gandhi Topi, plants, idols of dieties, unprocessed salt, books
and periodicals, lassi, chalk, charcoal, charkha, kerosene.
2. Schedule :B: 1% VAT
Gold, Silver, Diamonds, Pearls
3. Schedule C : 5% VAT
Iron and steel goods, paper, plastic goods, cables, bricks, IT products, Medicine drugs,
Electrodes, Coir, Crude oil, Edible Oil, Tractors, Hides and Skins, ICE, Imitation Jewellery, lime
stones, Industrial Cables
4. Schedule D : 20% and above
i) Foreign Liquor 20%
ii) Indian made Foreign Liquor 20%

5. Schedule E : 12.50% VAT

Goods not covered above (under A, B, C, D. It will be covered under this schedule
Transactions covered under MVAT Act 2002
- Goods moving within the State of Maharashtra will be under MVAT
Act, 2002
B
INTRASTATE SALE Buyer Mumbai

C
A
Buyer Nashik
Seller
D
Mumbai
Buyer Pune
(Maharashtra)

Buyer Nagpur
 Transactions covered under Central Sales Tax Act, 1956 (CST)
B
Buyer Chennai (TN)

C
Bangalore
Buyer
A (Karnataka)
D
Seller
Buyer Uttar Pradesh

Mumbai E

(Maharashtra) Buyer Bihar

F
Movement of goods from Buyer Japan
one state to another
state is deciding factor E
(Interstate Sales OMS Buyer USA
Sales)
History of VAT (Global VAT)
(System of Indirect Taxation)
The Value added Tax (VAT) was 1st introduced in France in 1954
It is the result of France and other members of European Economic
community for simplification of commodity Taxes
At present, more than 130 nations in the world have adopted VAT
system for Indirect Taxation
Except for America and India, most of the major countries are VAT
compliant Including China, Pakistan, Bangladesh, Srilanka etc.,
All over the world VAT is payable on both Goods & Services. Excise
duty, Sales Tax & Service Tax are merged into single VAT (only one
tax). But in India all the above Taxes are charged separately
having separate Acts
All over the world in VAT nations, the seller of goods and service
provides charge single VAT to the customers and avail full input tax
credit/Setoff credit and differential Tax/VAT to the Govt
Definition of Dealer : Means a person who is engaged in the
business of buying and selling goods in the state

Importer Railways
Manufacturer Customs department
Trader, retailer, whole sellers, Port Trusts
distributors, Central Government
Clubs Insurance companies
Societies Banking and financial
Association of persons Institutions
Auctioneers B Municipal Corporation
Local Authorities
A is a importer ra
a s ht
a har %
D M 12.50
VAT
Ch
en
na M aha B
i es
Sal
2 . 5%
1
ha se Importer VAT
Pu rc
Ba
ng
n a lor
pa e
Ja 2%
CS
T

VAT + CST will be paid to Maharashtra Government

 B is a trader

Seller/Trader
Trader Trader
12.50% 12.50%
B C D

C will claim full setoff/input tax paid to B

D will claim full input Tax credit paid to C and so on
Manufacture
T)
a le (VA
Imp lS
o rt 0 oca
% L Sale
CST ST)
Manufacture CST (C
Ex
2% po 0% T
.50 rt ax

St sf
2 s

Tr
1

o c er
an
T
VA

k
0%
Ta
x
Registration of Dealers
Every person who is engaged in the business of buying and selling the goods in the
state of Maharashtra are required to get registered under MVAT Act 2002
Every person who is not suppose to pay tax, only those who are doing business on a
regular bases are liable to pay tax
Turnover limit for Registration
Every dealer whose turnover of all sales or purchases exceeds the prescribed limit of
turnover are required to obtain registration certificate knows as RC and will be
termed as Registered Dealer RD
Importer
1. Turnover limit of all sales or purchase exceeds Rs.1,00,000 in any financial year
2. And value of taxable Goods sold or purchased during the year exceeds Rs.
10,000/-
Manufacturer
Same as above
Others
1. 5,00,000 sales or purchases
2. Value of goods sold or purchased should not be less than Rs.10,000/-
Registration formalities
1. Application form 101
2. Copy of partnership deed or memorandum and Articles of
Association
3. Proof of Permanent Address
4. Copy of Rent Receipt
5. Antecedents of proprietor/partners/directors
6. Copy of rationing card of proprietor
7. Invoice copies of sales or purchase bills
8. Details of Bank Account
9. Income order if any
10.Two photographs
Voluntary Registration
Dealer who do not fulfill the T/o criteria can apply for voluntary
registration without any deposit
Whom to approach
Maharashtra Vikrikar bhavan, Maigaon, Mumbai 1st floor
To Whom : Registration Branch
History of VAT
VAT is modern and progressive tax system. Over 130 countries are under
VAT regime
India has decided to adopt VAT system from 1st April 2005
All states in India are under VALUE ADDED TAX regime
What types of Businesses are liable to VAT

1. Importers

2. Manufacturers

3. Distributors / Resellers

4. Whole sellers / Traders

5. Retailers

6. Works contractors

7. Lessors

Only registered dealers are suppose to collect tax and pay tax.

Unregistered dealer are not liable to pay VAT, nor they should/can collect tax

VAT is applicable only to those who are doing regular business of buying and
selling goods

And

Achieve the prescribed turnover limits of sales or purchases

Claiming of Credit Notes Refund
What is credit Note?
It is an accounting document. It is an intimation to the buyer
in respect of credit given to him
When credit notes are issued?
When goods are rejected (Sales return)
When price difference given to the buyer
How to claim VAT benefit on account of Credit Notes
issued?
For goods rejections: Goods must be rejected within six
months (beyond six months no benefit)
Price difference: There is no time limit for price difference.
Seller can claim at any point with proper proof
Setoff / Input Tax Credit (MVAT ACT 02)
1. Setoff is benefit available to registered dealers only
2. Setoff is refund of VAT paid on Purchases
3. Setoff is granted to avoid double taxation
4. Setoff is granted only on purchases effected from Maharashtra state and MVAT
is paid on such purchases
5. Setoff is granted the moment purchases are effected from Maharashtra
suppliers
6. No on to one co-relation required with sale
7. Setoff is to be adjusted against VAT & CST liability only. Excess setoff can be
carried forward in the subsequent months.
8. No setoff granted on purchases effected from outside Maharashtra purchases
(i.e OMS or CST)
9. 100% exporters can apply for cash refund
10. Setoff can be claimed only based purchases Tax invoice. Normal invoice no
setoff is granted.
11. Unregistered Dealers cannot claim Setoff
Set off is catagorised as : Set off on
1. Inputs
2. Capital Goods
Inputs : All goods on which MVAT is paid on purchases effected from Maharashtra
and such purchases are debited to profit and loss Account (they are not treated as
Capital assets)
100% setoff is granted provided:
1. If goods sold in Maharashtra state
2. If goods are sold directly from Maharashtra to other state
3. Exports from Maharashtra
Eg. If tax paid on purchases (12.50% full setoff available)
Scenerio : If goods are 100% stock transferred to depots outside Maharashtra,
setoff available will be in excess of 2% i.e. 12.50 2 = 10.50 setoff
If goods are sold from Maharashtra and stock transferred then proportionate will
be applicable
Capital Goods : No retention. Full setoff available
Payment of Taxes (Return)
1. Every dealer who is registered under VAT ACT and Central Sales
Tax Act is required to File VAT return and CST return in the
prescribed form.
2. Basis of filing Return and payment of Taxes
Monthly return
Quarterly return
Half yearly return
Revised return
Monthly return : Dealer whose annual Tax liability (MST+CST) has
exceeded Rs. 1 Lakh in the previous year. Dealer is required to file
monthly return on or before stipulated time (within 21 days from
the month end). April 2005 to be on or before 21th May 2005.
Delay in filing the return would attract interest @ 1.25 p.m.
 Quarterly Return: Dealer whose annual tax liability has
exceeded Rs.12,000/- but below Rs.1 Lakh in the previous
year is required to file quarterly return. April 05 to June 05
to be filed on or before July 25th.
Half yearly return : Dealer whose liability is below Rs,
12,000/- in the previous year is required to file half yearly
return. April to Sept 05 to be filed on or before 25th October
05
Revised Return: Any Dealer who has filed original return,
through over sight omits any transaction, dealer can file
revised return for the particular month before completion of
VAT Audit.
If payment is involved than dealer is required pay interest @
1.25 p.m. from due date till the date of filing of revised
return