Maharashtra’s VAT: Add Value to your Tax
VAT Act 2005 and VAT rules came into existence in the Indian Taxation System by replacing the General Sales Tax laws, in April 2005. Initially Gujarat, Rajasthan, Tamil Nadu, Chattisgarh, Madhya Pradesh, Uttarakhand, Jharkhand, and Uttar Pradesh, did not adopt VAT Taxation system but later on, they also joined hands. Till June 2014, only Union Territories and States left where VAT taxation wasn’t adopted was Lakshadweep Island, Pondicherry, and Andaman and the Nicobar Islands.
Maharashtra and VAT
Maharashtra was like the majority of states implemented the Value-added Tax system in 2005. The registration of VAT was carried out electronically and every dealer is liable to register for VAT and pay taxes as per MVAT provisions, to do business in Maharashtra. The Department of State tax is responsible for VAT implementation.
The tax rate is as follows;
- Schedule ‘A’- Essential products (Tax-free)- NIL
- Schedule ‘B’- Silver, Gold, Pearls, Precious stones, etc- 1.2%
- Schedule ‘C’- goods Declared and other Specified Goods- 6%
- Schedule ‘D’- Country Liquor, Foreign Liquor, Motor Spirits, etc- 20% and more
- Schedule ‘E’- other products not covered above – 13.5% with effect from 17th September 2016
Incidence and Tax
Maharashtra Value Added Tax Act, 2002 states the tax is paid by the dealer based on sales turnover within the State. Section 2(8) of the Act defines the term dealer in detail. All persons or people who sell or buys goods in Maharashtra, whether for remuneration or commission or in connection with or in the course of business or incidental to or significant to engage in such business, are included. it includes commission agent, Broker, Public Charitable Trusts, Auctioneer, Associations of Persons, Clubs, Customs, State Government and Union Government Department, port Trusts, Insurance and Financial Corporation, Railways, Local Authorities, Airlines, Shipping and Construction Companies, Advertising Agencies and anybody or Authority, any company or corporation, which is constituted, owned by, or subject to administrative control, any State Government, Central Government or Local Authority. However, an Educational Institution, Agriculturist, and transporters do not consider a dealer.
Liable Tax for Dealers
- All those dealers who happen to have a registration certificate as per earlier laws and whose turnover of purchase or sales reaches the specified limits during the fiscal year 2004-05 were deemed registered under MVAT and will pay tax w.e.f 1st April 2005.
- All those dealers who opted to continue with their registration certificate but whose purchase or sales turnover doesn’t exceed the specified limit will also be deemed registered under MVAT and accountable to pay tax with effect from 1st April 2005.
- All newly registered dealers commencing after 2005 and whose sales or purchase turnover is more than the prescribed limits are liable to pay tax under MVAT.
- In 2012, with the introduction of Purchase Tax on certain goods prescribed as per Section 6A, 6B, the meaning of ‘Turnover of Sales” is changed to “turnover of either sales or purchase”.
Registration under Section 16, Rule 8
Dealers can seek registration online within 30 days from the liability date. If there is a succession in business as per section 8(3) i.e. succession due to proprietors’ death, 60 days is given for applying.
Maharashtra VAT tax Act, 2005
According to No.Vat-1519/CR-89/Taxation-1—the Maharashtra Government finds the circumstances that demand immediate actions regarding the amendment of MVAT tax Rules 2005. Therefore, as per sub-section(4) provision under Section 83 of the MVAT tax Act, 2002, conditions of previous Publications were dispensed.
The following rules were made as an amendment in MVAT Tax Act, 2005 by the powers of sub-section (1), (2) and (3) and provided under sub-section (4) as per Section 83;
- They can also be called Maharashtra Value Added Tax (Third Amendment ) Rules, 2019.
- They will be implemented on 1st April 2019.
- Rule 2 of MVAT Tax Rules, 2005, will incorporate the following clause;
– The term “annual” is the twelve months taken from 1st April to 31st March of the concerned fiscal year
- Rule 17 will add-
-In sub-rule (4) (e), the ‘Quarterly or six-monthly or annually or as the case may be” will be substituted.
– Subrule namely (4B) will be inserted after the sub-rule (4A) stating the provisions of rule 18 except for rule (4) and (4A) where every dealer whose tax accountability in the past year;
- Is less than 25000, will file yearly return within 21 days from the end of the year to which it relates.
- If it is more than 25000, but less than 10 lakh or whose refund entitlement does not exceed 1 crore will file quarterly return in 21 days from the month to which return relates.
- Is more than 10 lakh and his return entitlement is more than 1 crore for the previous year will file monthly return immediately after the quarter to which return recounts
- The provisions in sub-rule (4) of Clause (e) and explanations I and II shall apply to this rule.
Calculation of VAT
Value Added Tax is different for different State Government based on sales transactions taking place in the states. For Example:
If the VAT is 10% on a good in a particular state and in that state Dealer B bought good from Dealer A for Rs 1000 then-
Sale Price = rs 1000
VAT -1000*10% =100
Price Paid by B = Rs 1100
The VAT paid by A to the government on the good sold = Rs 100
Now Dealer ‘B’ changed the price to 1500 and sold it to dealer ‘C’ at a profit of Rs 400. Now VAT at 10% will be –
Sale Price= Rs 1500
Dealer ‘B’ further sold same goods to Dealer ‘C’ for 1500 (adding 400 profit margin); VAT – 10%
Sale Price – 1500
VAT – 1500*10% = 150
Input Credit Available-100 (
Final Price for ‘C’= 1500+150= Rs 1650
The VAT paid by B to Government = 150-100= Rs 50 (As Rs 100 has been paid by ‘A’)
Now based on the above calculation, it is concluded that the actual cost for ‘B’ is Rs1000 and not Rs1100 as ‘B’ will get paid credit of Rs100 on. Technically profit for ‘B’ becomes 500 at a VAT of 10%.
Hence 500*10%=50 (VAT Paid by B). Value Added Tax as the name suggests is all about adding value to its which was done by B in the above example.