• A brief Introduction of MVAT

- By Chinmay Gangwal
WHAT IS VALUE ADDED TAX (VAT) ?
• VAT (Value Added Tax) is a multistage tax system for collection
of sales tax.

• VAT is a tax on Value addition made at each stage and benefit

of Setoff will be continued from manufacture up to retailers,
so that ultimate Consumer should bear the tax.

• Prior to 1-4-2005, the system for levy of tax in Maharashtra

was, in general, single point tax system. As a consequence to
national consensus for introduction of VAT, the earlier
Bombay Sales Tax Act, 1959 is replaced by Maharashtra Value
Added Tax Act, 2002. The Act has come into force with effect
from 01/04/2005.
• Rules for levying VAT :-
There are two conditions required for
levying Vat i.e. possession and use of goods.

Ex: - VAT is also charged on rental of

machinery because in that transaction
ownership is not transfer but possession and
use of goods happens.
 • Goods

Includes:-
1) All Movable Excludes:-
Property. 1) Newspaper
2) Livestock's 2) Actionable claim
3) Growing crops 3) Money
4) Trees 4) Stock
5) Plant including the 5) Shares
produce of. 6) Securities
6) Property in such 7) Lottery Tickets
attached to or
forming part of
the land
How does sale price is to be calculated
under MVAT Act...??

• Sale price means the amount of valuable consideration paid

or payable to a dealer for any sales made including any sum
charged for anything done by the seller in respect of goods at
the time of or before delivery thereof, other than the cost of
insurance for transit of installation, when such cost is
separately charged.
Which dealers are covered under MVAT
Act...??

• A dealer is liable to pay tax on the basis of turnover of sale

within the state. The term dealer has defined u/s 2(8) of the
Act. It includes all person or persons who buys or sells of
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.
 • Dealer

Includes:
Excludes:
1) Traders
1) Agriculturist
2) Companies
2) Educational
3) Brokers
insititution
4) Commission Agent
3) Transporter
5) Auctioneer
6) PWD
7) Department of Union
& State Government.
Types of Works Contract
 Divisible Contract
• In Divisible Contract, There are three Option for calculating VAT and these are as
follows:
• 1) Normal Taxation after deduction as per books from contract value. ( Deduction of
all expenses such as planning, designing or artichect’s fees, depreciation Etc. is allowed
only if proper accounting is made)

• 2) Normal Taxation after % Wise deduction from contract value. ( Installation of Plant
and Machinery-15%, Fixing of marble slabs, polished granite stones and tiles -25%, Civil
contract of building -30%, Any other Works Contract-25%)

• 3) Composition Scheme
• ( a) Tax @ 5% on Construction Contract s ( As Notified) – Setoff on Inputs is available
subject to retention @ 4% ,as provided in rule 53.
• (b) Tax @ 8% on the total contact value ( After Deducting there form the amount paid
towards sub contract ) – Setoff on Input is available subject to retention @ 36%.
 Indivisible Contract

In Indivisible Contract , the dealer and builder has option to pay

the tax on the basis of the composition scheme.

VAT is to be charged either on agreement to sale or sale deed whichever is earlier and
Rate of vat is 1% on the contract value.

This option is also available to Sub Contractor.

Note : If Principal Contractor opted for stated above option then sub contractor has
to be this option.
 TDS IN WORKS CONTRACT
• Any Person paying any sum exceeding of Rs 5 Lac’s to dealer for execution
of works contract in a particular year then WCT-TDS shall be deduct on it.

• In the case of Registered Dealer ,2% of total amount payable is to be

deducted as WCT- TDS and for unregistered Dealer it is 5 %.

• Return of WCT – TDS is E File as in Form 424.

And the Form 402 is to be given as certificate of Tax deduction by dealer to

Works Contractor. Otherwise Works Contractor does not get benefit of WCT –
TDS for paying the tax Liability.
 INPUT TAX CREDIT (ITC) (SET OFF)
• All registered dealers, whether manufacturer or traders, are eligible to take full set off of the
taxes paid on inputs; i.e., Value Added Tax paid, within the State of Maharashtra, on
purchases of Raw Material, Finished Goods and Packing Material, or any goods debited to
profit and loss account.

Sr.No Particulars Rate of Reduction

1) ITC on Capital Goods ( Furniture, Office Equipment, 3%

Computer )
2) ITC on Profit & Loss A/c Item Full Setoff Available

3) Fuel 3%

4) Tax free 2%

5) Packing Material used in the Packing of tax free 2%

6) OMS Branch Transfer 4%

 Registration Limit
• The Dealer has threshold Limit for VAT registration is Rs 10 Lac.

Sr. No. Category of Dealer Total turnover of sales Turnover of sale or

to exceed purchases of taxable
goods
1) Importer: ` 1,00,000/- Not less than `
10,000/

2) Others (Including ` 10,00,000/- (With Not less than `

manufacturer, reseller, effect from 10,000/-
liquor dealer, works 01/07/2014 and Rs.
contractors, leasing etc.) 5,00,000 up to
30/06/2014)
3) Voluntary Registration - NA- - NA-
 What are the rates levied under MVAT
Act...??
• In MVAT act, there are following rates are charged on selling
of goods.
Sr.No Particular Rate Applicable

1) Schedule A Nil Rate Tax-free goods i.e. necessary goods

2) Schedule B 1% Bullion, Jewellery, precious stones,

diamond Etc

3) Schedule C 2,3,5% IT Product, Declared goods, Cloth,

Drugs and Pharmacy, Medicines Etc

4) Schedule D 20% to 34% Liquor, Motor Spirit, ATF Etc

5) Schedule E 12.5% Residuary Entry

 Which form is required for Filing of E-
Return in MVAT & CST..??
• There are six forms which are applicable to the Different categories of dealer for
filing of E return under MVAT & CST Act and these categories are as follows:

Sr.No Name of Form Applicable

1) Form 231 Regular Dealer

2) Form 232 Composition dealer in second hand motor vehicles, retailer, works Contract,
restaurant, club, caterers Etc
3) Form 233 Dealer who are in the business of executing works contract, leasing etc

4) Form 234 Dealer who are PSI units holding Entitlement Certificate.

5) Form 235 Dealer notified oil companies & also any other dealer effecting sales of motor
spirits.
6) Form III E Dealer who is dealing in interstate sales.(No CST Return is to be filed if interstate
sale is NIL in period, as per trade Circular 15T of 1981,52T of 2007 & 15T of 2009.)
 How many Different forms under CST
Act...??
• There are Ten forms required for claiming the concessional rate, application of Registration
Etc and these are as follows:-

Sr.No Form Description Frequency

1) A Application for registration Once
2) B Certificate of registration Once
3) C Declaration by purchasing registered dealer to To be obtained for every
obtain goods at concessional rate quarter and submitted on
quarterly basis.
4) D Form of certificate for making government No Question arise after 01-
Purchases ( D Form cannot be issued in case of 04-07
sale made to government on or after 1-4-2007)
5) E-I /E-II Certificate for sale in transit To be obtained for every
quarter and submitted on
quarterly basis.
Sr.No Form Description Frequency

6) F Form by branch/ Consignment agent for To be obtained for every month and
goods received on stock transfer submitted on Monthly basis.

7) G Indemnity Bond when C Form Lost When required

8) H Certificate of Export To be obtained for every quarter

and submitted on quarterly basis.

9) I Certificate by SEZ Unit Not Specified in rules (But should be

submitted before assessment)

10) J Certificate to be issued by foreign Up to the time of assessment by

diplomatic Mission or consulate in India first assessing authority.
or the UN Agency
 What is the due date for Payment and
Return under MVAT & CST...??
• According to the periodicity, due date for payment and filing of return under MVAT and CST
Act is depends. So that following table are helpful for understanding of due dates.

Sr.No Periodicity Due Date for Due Date for Filing

Payment of Return

1) Monthly 21st of the Next 10th day from the

Month date of Payment

2) Quarterly 21st of the Next 10th day from the

Month from End of date of Payment
Quarter.
3) Half yearly 30th of the Next 10th day from the
Month from End of date of Payment
half year.
 On what basis, Periodicity is to be
Determined...??
Sr. No. Category Periodicity
1. A) Newly registered dealers (up to 30/4/10)

B) Retailers opted for composition Scheme

Half yearly

C) Tax liability, in the previous year, up to Rs. 1 lakh or Refund entitlement

up to Rs. 10 lakhs.

2. A) Dealers under Package Scheme of Incentive

B) Tax liability, in the previous year, exceeds Rs. 1 lakh but up to Rs. 10
Quarterly
lakhs or refund entitlement exceeds Rs. 10 lakhs but up to Rs. 1 crore.
C) Newly registered dealers (w.e.f. 1-5-10)

3. All other dealers whose tax liability, in the previous year, exceeds Rs. 10 lakhs or Monthly
refund entitlement exceeding Rs. 1 crore.
 MVAT Audit
• Applicability:
MVAT Audit is applicable to the dealer whose turnover is exceeding of
Rs 1 Crore's. Form 704 is e File as MVAT Audit Report under MVAT
Act,2002.

Due date of filing of MVAT Audit : 15 – Jan

Manual Submission date of MVAT Audit :

10th Day after the due date of E-file of MVAT Audit.
 What are the Penalties under MVAT
Act...??
• In MVAT Act , there is a penalty levied in the form of late fees for MVAT Return and Interest
is charged for late payment and these are as follow :-

Sr.No Particular Amount

1) Late filing Fees Rs 1000 if Return is filed within one month after due date
(Return is not filed otherwise Rs 5000.
within due date)

2) Interest u/s 30(2) Late Payment interest rates slab wise viz for delay of first
(Payment is not made month @1.25% P.M, for Next two Months @1.5% P.M and
within due date) thereafter @2% P.M ( As Per latest Amendment)

3) Non Filing of MVAT 0.1 % of Sales Turn Over .

Audit U/S 61 (2)