Incidence and Levy of Tax under The Maharashtra Value Added Tax Act, 2002

The Maharashtra Value Added Tax Act, 2002 - INCIDENCE AND LEVY OF TAX

Contents :

1. Introduction

2. Incidence of tax : Section 3

3. Taxes payable : Section 4

4. Tax not applicable on certain goods : Section 5

5. Levy of tax : Section 6

6. Tax on packing material : Section 7

7. Introduction and Provisions for exemption of tax under Section : 8

Related Questions :

Q: Examine the provisions of the Maharashtra Value Added Tax 2002

regarding "Incidence and levy of Tax".

Q: Explain the provisions of incidence of tax as stated in Section 3 of the Act.

Q: How is the dealer taxed under the provision of the Act?

Q : What are the provisions of the Act regarding exemption of Tax ? 

Q : Short note on "Export Orient Unit".

Q : Short note on "Special Economic Zone".

Introduction -

The Incident of tax and levy of tax provides under Section 3 to 9 of

Maharashtra Value Added Tax 2002. The Section provides tax for the existing

dealers as well as to the Importer.

Section 3 is charging section it provides for incidence of tax, it provides that every dealer who holds certificate of registration which is in force immediately before the appointed day either under the old Act (B.S.T.ACT 1959) or under new Act shall be payable to tax. If his turnover of sales or purchases has, in the said year under any of such, earlier laws, exceeded Rs.5 lakh, or the case may be, who was an importer in the said year and his turnover of sales or purchases in the said year had exceeded Rs 1 lakh, liable to pay tax. The provisions in detail regarding the same are as below:

Incidence of Tax: Section 3 -

Section 3 (1) :

Every dealer, who, immediately before the appointed day, holds a valid or effective certificate of registration or license under any of the earlier laws or, as the case may be, who is liable to pay tax under any of the earlier laws, in the year ending immediately before the appointed day shall, If his turnover of sales or purchases has, in the said year under any of such earlier laws, exceeded Rs.5,00,000/- or as the case may be,

If he is an importer in the said year and his turnover of sales or purchases in the said year had exceeded rupees one lakh, shall be liable to pay tax, with effect from the appointed day, in accordance with the provisions of this Act, till his certificate or licence is duly cancelled under this Act.

Explanation :

For the purposes of this sub-section, the expressions "turnover of sales", "turnover of purchases" and "importer" shall have the respective meanings assigned to them under the relevant earlier laws.

1. Every dealer who immediately before 15 April 2005, holds a valid or effective certificate of registration or licence under any of the earlier laws, or who is liable to pay tax under any of the earlier laws, in the year ending immediately before the 1st April shall, if his turn over of sales or purchase has, in the said year under any of such earlier laws exceeded Rs 5,00,000/- be liable to pay tax with effect from 1st April 2005. Turnover of sales or purchases in the said year had exceeded Rs.1,00,000/-

Section 3(2) A dealer to whom sub-section (1) does not apply and whose turnover, of all sales made, during the year commencing on the appointed day or any year subsequent thereto, first exceeds the relevant limit, specified in sub-section (4), shall, until such liability ceases under sub-section.

Section 3(3) Be liable to pay tax under this Act with effect from the 1st day of April of the said respective year,

Provided that, a dealer shall not be liable to pay tax in respect of such sales as take place during the period commencing on the 1st day of April of the said respective year upto the time when his turnover of sales, as computed from the 1st day of April of the said respective year, does not exceed the relevant limit applicable to him under sub-section (4).

Turnover of Sales Limit as Prescribed : Under Section 3(4) -

Section 3(4) Every dealer who has become liable to pay tax under this Act, shall continue to be so liable until his registration is duly cancelled; and upon such cancellation his liability to pay tax, other than tax already levied or leviable, shall remain ceased until his turnover of sales again, first exceeds the relevant limit specified in sub-section (4) or, as the case may be, until he becomes liable to pay tax under sub-section (8) or (9).

Section 3(5) For the purposes of this Section, the limits of turnover shall be as follows :

a) Limit of turnover Rs.1,00,000/- :

In the case of a dealer, who is an importer, and the value of taxable goods sold or purchased by him during the year is not less than Rs. 10,000/-.

b) Limit of turnover Rs.5,00,000/- :

In any other case, where the value of taxable goods sold or purchased by him during the year is not less than Rs.10,000.

Section 3(6) For the Purpose of Calculating the Limit of Turnover for Liability to Tax :

a) Except as otherwise provided, the turnover of all sales shall be taken, whether such sales are of taxable goods or not.

b) The turnover of sales shall include all sales made by the dealer on his own account, and also on behalf of his principals whether disclosed or not.

c) In the case of an auctioneer, in addition to the turnover, if any, referred to in clauses (a) and (b), the turnover shall also include the price of the goods auctioned by him for his principal, whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal, if the price of such goods is received by him on behalf of his principal.

d) In the case of an agent of a non - resident dealer, in addition to the turnover, if any, referred to in clause (a), (b) or (C), the turnover shall also include the sales of the non-resident dealer effected in the State.

Liability of Agents, Auctioneer, Non-resident Dealer or his Agent :

Notwithstanding anything contained in any contract or any law for the time being in force, but subject to the provisions of this Act, Section 3(7) any person covered by sub-clauses (a), (b), or (C) of clause (8) of Section 2 shall be liable to pay tax under this Act, whether or not the principal is a dealer and whether or not such principal is liable to pay tax under this act and whether or not the principals are disclosed.

Any person who at any time after the appointed day becomes liable to pay tax under the Central Sales Tax Act, 1956, but who is not liable to pay tax under the other provisions of this section shall be liable to pay tax on the sales and purchases effected by him on and from the day on which he becomes so liable to pay tax under the Central Sales Tax Act, 1956 and accordingly nothing contained in the

proviso to sub-section (2) shall apply to him in any year.

Liability of Person who is Transferee in Business :

Section 3(8) Where a dealer liable to pay tax under this Act is succeeded in the business by any person in the manner described in clause (a) of sub-section (1) or sub-section (4) of Section 44, then such person shall, notwithstanding anything contained in this Section, be liable to pay tax on the sales of goods effected by him on and after the date of such succession and accordingly nothing contained in the provision to sub-section (2) shall apply to him in any year.

Liability of Dealer who has Opted for Voluntary Registration :

Section 3(9) Any person who is not liable to pay tax under the foregoing provisions of this Section, but has been voluntarily registered under the provisions of this Act, shall be liable to pay tax from the date of effect of the certificate of registration duly granted to him and accordingly nothing contained in the provision to sub-section (2) shall apply to him in any year.

Taxes Payable : Section 4 :

Subject to the provisions of this Act and rules, they 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.

Section 4 is the charging Section of this Act. No tax can be levied or collected in India except under the authority of law. This Section gives such authority for charging of Value Added Tax in accordance with this Act and Rules.

Tax not Leviable on Certain Goods : Section 5 :

Subject to the other provisions of this Act, and the conditions or exceptions, if any, set out against each of the goods specified in column (3) of Schedule A, no tax shall be payable on the sales of any goods specified in column (2) of that schedule. Schedule A contains tax free goods and has 1 to 49 different items.

Agricultural implements manually operated or animal driven, Aids and implements used by handicapped persons, Betel Leaves, Books, Periodicals and journals, charcoal, condoms and contraceptives, Fresh Vegetables and Fruits, Glass Bangles, Meat, Fish, Prawns & unbranded salt etc.

Levy of Sales Tax on the Goods Specified in the Schedules : Section 6 :

There shall be levied a sales tax on the turnover of sales of goods specified in column (2) in the schedules B, C, D or, as the case may be, E at the rates set out against each of them in column (3) of the respective Schedule.

The schedules B.C.D. and E :

No.	Schedule	Particulars
1	B	List of goods for which the rate of Tax 1%. Schedule B includes 3 items i.e. Gold, Silver, and precious metals.
2	C	List of goods for which the rate of Tax 4% Schedule C includes 106 items. All declared goods covered under Section 14 of C.S.T. ACT includes in schedule C.
3	D	List of goods for which the rate of Tax 20%. Schedule D includes 13 items i.e. Foreign Liquor and Imported Liquor. It also includes list of motor spirits and has 13 entries. The rate may be changed by Trade Circular more than 20%.
4	E	List of goods not covered in any of the above schedules for which the rate of Tax 12.5%.

 

Rate of Tax on Packing Materials : Section 7 :

Where any goods are sold and such goods are packed in any material, the tax shall be leviable under Section 6 on the sales of such packing material, whether such materials are separately charged for or not, at the same rate of tax, if any, at which tax is payable on the sales of the goods so packed.

Provisions for exemption of tax under Section : 8

Introduction -

All sales which are in the course of Inter-State 'Trade or Commerce are exempted from levy under Maharashtra value Added Tax 2002. With reference to the Constitution of India, and the provisions of Central Sales Tax Act, the State Government has no power to tax on above sales. Following are the provisions under section 8 of the act for the exemption of tax.

Certain Sales and Purchases not to be Liable to Tax : Under Section 8 :

Section 8(1) :

Nothing in this Act or the rules or the notifications shall be deemed to impose or authorise the imposition of a tax or deduction of tax at source on any sale or purchase of any goods, where such sale or purchase takes place,

a) i) Outside the State.

ii) In the course of the import of the goods into the territory of India or the export of the goods out of such territory.

b) In the course of Inter-State trade or commerce, and the provisions of this Act and the said rules and notifications shall be read and construed accordingly.

Explanation : 

For the purpose of this Section, whether a sale or purchase takes place- outside the State, or in the course of the import of the goods into the territory of India or export of the goods out of such territory, or in the course of Inter-State trade or commerce, shall be determined im accordance with the principles specified in Sections 3, 4 and 5 of the Central Sales Tax Act, 1956.

2. In accordance with the notification issued by the Central Government in exercise of its powers under Section 3 of the Foreign Air Craft (Exemption from taxes and duties on Fuel) Act, 2002, no tax shall be levied on the sales of fuel and lubricants which are filled into receptacle forming part of any aircraft registered in a county other than India, if,

A) The said country is a party to the Convention on International and Civil Aviation, 1944.

B) The said country has entered into Air Services agreement with India.

C) The aircraft is operating on a schedule or non-scheduled service to or from India.

Section 8(2)(1) :

The State Government may by general or special order and Subject to such conditions and restrictions as may be specified in the said order, exempt from payment of tax any class or classes of sales of goods made by any unit in the,

1. Special Economic Zone

2. A developer of the Special Economic Zone

3. Any 100% export unit

4. Any unit in the Software Technology Park

5. Electronic Hardware Technology Park

6. An establishment situated within the Special Economic zone

Explanation : 

For the purposes of this sub-section,

a) "A unit in the Special Economic Zone" means a unit :

1. Situated in a zone which the Central Government or, as the case may be the State Government.
2. Which has been certified in this behalf by the Commissioner.

b) "A unit in the Software Technology Park" means a unit :

1. Set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry.
2. Which has been certified in this behalf by the Commissioner.

c) "A unit in the Electronic Hardware Technology Park" means a unit :

1. Set up in accordance with the Electronic Hardware Technology Park Scheme notified by the Government of India in the Ministry of Commerce and Industry.
2. Which has been certified in this behalf by the Commissioner.

d) "A export oriented unit" means a unit :

1. Which has been approved as a export oriented unit by the Board appointed in this behalf by the Central Government in exercise of the power conferred by Section 14 of the Industries (Development and Regulation) Act, 1951 and the rules made under that Act.
2. Which has been certified in this behalf by the Commissioner.

e) "A developer of the Special Economic Zone" means a developer :

1. Undertaking development, repairs, maintenance and improvement of the Special Economic zone.
2. Who has been certified by the Commissioner.

f) A unit includes an establishment situated within the Special Economic Zone. Section 8(2).

Section 8(3A) :

The State Government may, by general or special order, published in the Official Gazette, and subject to such conditions, exceptions and restrictions as may be specified in the said order, exempt from payment of tax any class or classes of sales of goods made by any registered dealer to any class of dealers specified in the Foreign Trade Policy notified from time to time, by the Government of India.

Section 8(3B) :

The State Government may, by general or special order, published in the Official Gazette, and subject to such conditions, exceptions and restrictions, as may be specified in the said order, exempt fully or partly, from payment of tax any class or classes of sales of goods made by,

a) Any registered dealer to the Canteen Stores Department or the Indian Naval Canteen Services.

b) The Canteen Stores Department or the Indian Naval Canteen Services to the unit run canteens or members of the armed forces.

Explanation :

For the purposes of this sub-section, "members of the armed forces" includes ex-servicemen and families of the deceased personnel of the armed forces.

Section 8(3C) :

The State Government may, by general or special order published in the Official Gazette, and subject to such conditions, exceptions and restrictions as may be specified in the said order, exempt fully from payment of tax with effect from the

date specified in the order, the transfer of property in goods which are involved in the processing of textiles described in column (3) of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

Section 8(4) :

The State Government may by general or special order published in the Official Gazette, on this behalf and subject to such conditions and restrictions as may be specified in the order, provide for exemption from payment of the whole of tax in respect of any class or classes of sales of goods effected by a unit holding a Certificate of Entitlement as, defined under Section 88, to whom incentives are granted under any Package Scheme of Incentives, by way of exemption from payment of tax.

Section 8(5) : 

The State Government may, by general or special order, published in the Official Gazette, and subject to such conditions and restrictions, if any, as may be specified in the said order, exempt fully or partly, from payment of tax, any sales or

classes of sales of goods made by any registered dealer to,

a) The State Government

b) The Central Government

c) A generating company, as defined in the Electricity Act, 2003 for use in generation of electricity

d) A registered dealer, holding a licence for transmission under the Electricity Act, 2003, for use in transmission of electricity

e) A registered dealer, holding a licence for distribution of electricity under the Electricity Act, 2003, for use in distribution of electricity

f) The Mahanagar Telephone Nigam Limited

g) The Bharat Sanchar Nigam Limited

h) Any telephone service provider, holding a license granted under the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933, to establish, install, operate and maintain.

1. Telephone services up to subscribers terminal connections.
2. National long distance service network.
3. International long distance service network.

i) Telecom Infrastructure provider who has been granted registration certificate by the Department of Telecommunications, as Infrastructure Provider Category-1(IP-1).

Amendment of Schedule :

1. The State Government may, from time to time, by notification in the Official Gazette -

a) Amend the Schedule by adding or modifying or deleting any entry therein and thereupon the Schedule shall stand amended accordingly for the purpose of levy of tax.

b) Provide for reducing or enhancing the rates of tax or for specifying the rates of tax where NIL rates are specified and thereupon the Schedule shall stand amended for the purposes of this Act.

Provided further that, notification which provides for enhancement of rate of tax shall be issued after the expiry of the period of two years from the appointed day and not more than one such notification shall be issued within such period. (2) The provisions contained in sub-section (6) of Section 83 regarding rules made by the State Government shall apply mutatis mutandis to any notification issued under sub-section (1) as they apply to the rules made by the State Government.