What is VAT

VAT is tax on value addition. It is multistage levied but is implemented in such a way that the tax is paid by the dealer to government only on value addition. Methodology Tax is to be charged on gross sale price and input credit / setoff is granted of tax paid on purchases. This is an invoice based credit method available at the point of purchase.

VAT example
Dealer

Purc Value Sales Tax Input Net hase add price @10 credit Tax price % 1000 1000 100 1500 150 1800 180 1900 190 0 100 150 180 100 50 30 10

RM Mfg Whole sale Semiwhole sale Retailer Total

1000 500 1500 300 1800 100

1900 100 2000

2000 200

190

10 200

Advantages of VAT
Integrated levy on goods and services Uniformity in tax system Uniformity in tax rate Transparent levy makes export and domestic sale of competitive goods Eliminates tax barriers, No Forms Eliminates cascading effect of tax Reduces evasion through self policing mechanism

Disadvantages of VAT
High compliance cost for business Stringent documentation requirement Cash flow implication in view of multipoint levy Break in link results in loss of input Inefficiency in administration mechanism results in revenue leakages

Acts Merges & Act continued

Acts Merged - The Bombay Sales Tax Act, 1959 - The Maharashtra sales Tax Act - Lease Act - The Bombay Sales of Motor Spirit Taxation Act, 1958 Acts Continued - Central Sales Tax Act - Profession Tax Act - Entry Tax Act - Sugar cane Purchase Act - Luxuries Tax Act.

Definitions
Business [S. 2(4)]PP

Provision of S. 2(4)PIP Includes Service, Trade, Commerce, Manufacture [STCM] Adventure or Concern in STCM Irrespective of Profit Motive / Accrual

Expln.To S. 2(4)PP Deemed to Include Raising Man-Made Forests, Seedlings or Plants Related Transaction in Capital Assets Purchase Debited / Sale Credited to P & L A/c Transaction for Commencing / Closure of STCM / Adventure / Concern

Dealer

[S. 2(8)]PP Excludes Exceptions to S. 2(8) Agriculturist Educational Institution Transporter Hirer

Means & Includes Prov. Of S. 2(8) Buys / Sells Goods in State in course of Business Factor/Broker/Agent Auctioneer Non-resident Dealer Society, Club, AOP Dealing with Members

Deemed to Include Explanation to S. 2(8) Customs Departments Govt. Departments Local Authorities Port Trust / Public Charitable Trust
Railways / Konkan Railway

Societies, Clubs, AOP

Insurance/ Financial Corporations / Scheduled Banks

MSRTC
Shipping/Construction/ Air Transport / Airlines/ Advt. Agencies

Govt. Corp. / Bodies

Importer
Importer means a dealer who brings any goods into the state or to whom any goods are dispatched from any place outside the state

Manufacture
Manufacture includes producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods. Every manufacture involves a process; but each and every process carried on in regard to the goods is not a manufacture. The process must be such that the resultant goods are commercially different from the original goods.

Goods

Goods means every kind of movable property not being newspapers, actionable claims, money, stocks, shares, securities or lottery tickets and includes live stocks, growing crop, grass and trees and plants including the produce thereof including property in such goods attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

Goods [S. 2(4)]PP

Includes Every Kind of Movable Property Livestock Growing Crops, Grass, Trees, Plants, their Produce Things Attached to Land, Severed Before / Under Agreement

Excludes Newspapers Actionable Claims Money Stocks, Shares, Securities Lottery Tickets

Sales [S. 2(4)]PP

Means [Prov. Of S. 2(24)] Sale of Goods, Within State, for Consideration But Excludes mortgage, hypothecation, charge, pledge (I) (II) (III) (IV) (V) (VI)

Includes Expln.To S. 2(4) Sale within State u/s 4 of CST Act Transfer of Property in Goods Not Under Contract Transfer of goods in a works contract Delivery of goods on hire purchase or installment sale Transfer of right to use goods Supply of goods by AOP / BOI to Members Supply of Food, Drinks, Article of Human Consumptions

Sale Price [S. 2(25)]PP

[Prov. Of S. 2(24)] Consideration for Sale Including Charges for anything done to goods at / before delivery But Excludes Insurance for transit / installation (I) (II)

Expln.To S. 2(4) Includes Excise / Custom / Prohibition Duties Excludes MVAT due to a seller

(III) Includes Deposit Incidental to Sale

Purchase Price [S. 2(20)]PP

[Prov. Of S. 2(20)] Consideration for Purchase Including Charges for anything done to goods at / before delivery But Excludes Insurance for transit / installation (I) (II)

Expln.To S. 2(20) Includes Excise / Custom / Prohibition Duties Excludes MVAT due to a seller

(III) Includes Deposit Incidental to Purchase

T urnover of Sales[S. 2(33)]PP

[Prov. Of S. 2(33)] Total Sale Price Received / Receivable Less Sale Return within 6 months Deposit refunded within 6 months (I) (II)

Expln.To S. 2(33) Price Received or Due & Payable for HP/Sale on Instalment / Use of goods Price of Sales Before Cancelling R. C.

Liability for Registration[S. 3]PP

Based on Turnover Dealer Importer Reaching Limits on / after 1-4-2005 Non-Importer Reaching Limits after 1-4-2005

Limits Sales Exceed Rs. 1,00,000 Taxable Sales / Purchase at Least Rs. 10,000 Sales Exceed Rs. 5,00,000

Sale / Purchase Not Liable to T ax (S.8)

1 2

Exempted by Law Exempted by Central Govt.

Sale/Purchase Outside Maharashtra Exports / Imports Sale/Purchase in course of inter state trade Fuel for Foreign Air-crafts Unit in Special Economic Zone (SEZ) Developer of SEZ Export Oriented Unit (EOU)

Exempted by State Govt.

Unit in Software Technology Park (STP) Unit in Electronic Hardware Tech. Park (EHTP) Goods specified in Import / Export Policy Goods sold to/by Army / Navy Canteens Specified Textile Goods Units Entitled to Package Scheme of Incentives Sales by RD to Govt., Power Co., Telecom. Co.

Composition of Tax S.42

Composition schemes are simple schemes providing simple procedures of tax for the benefit of small dealers. For the purpose of this section, a dealer shall be considered to be engaged in the business of selling at retail if 9/10th (90%) of his turnover of sales made to persons who are not dealers. Manufacturer, Importer, Purchaser from Exempt units not eligible. Schemes for hotels, caterers, bakeries, 2nd Hand Car Dealers, or liquor vendors