| No.
C1.14593/2005/CT
|
Office
of the Commissioner Commercial Taxes
Thiruvananthapuram Dated. 04.04.05 |
CIRCULAR No.5 /05
|
Sub:
Kerala Value Added Tax Act, 2003(30 of 2004)
– |
salient
features |
The Kerala Value Added Tax Act, 2003(30 of 2004) was
passed by the Kerala Legislative Assembly in 2003.
It received the assent of the President of India on
the 10th December, 2004 and was published
in the Kerala Gazette Extra ordinary dated
As per notification issued in G.O.(P) No.19/05/TD
dated 9the February, 2005 and published as SRO.139/2005
in the Kerala Gazette Extraordinary No.315 dated 9th
February 2005, the Act came into force with effect
from the 1st day of April 2005. By section
7 of the Kerala Finance Act, 2005(10 of 2005), which
has been published in the Kerala Gazette Extraordinary
No.579 dated 18-3-2005, several amendments have been
made in the Kerala Value Added Tax Act mainly to incorporate
the various decisions taken by the Empowered Committee
of State Finance Ministers from 2003 onwards. The
salient features of the Act are discussed below:
2.
Section 2 of the Act defines important terms. Terms
which were defined under the Kerala General Sales
Tax Act, 1963(15 of 1963) and with which the officers
are familiar are not discussed here.
(i)
“Agriculturist” is defined as a person who cultivates
land personally for the purpose of agriculture. Company,
firm, society including a co-operative society or
association of individuals is specifically excluded
from the purview of the term.
(ii)
“Capital goods” means plant, machinery, equipments
including pollution/quality control, lab and cold
storage equipments used in manufacture, processing,
packing or storage of goods in the course of business
excluding such goods and civil structures as may be
notified. As per notification SRO. NO.324/2005 dated
31st March, 2005, the following items have
been kept outside the purview of the term capital
goods:
1.Air conditioners
2.Civil structure and immovable goods or
properties.
3. Vehicles other than goods delivery vehicles.
4. Office furniture and fixtures and fittings, and
office equipments.
5.Elevators(lift).
6. Computors other than those used for the purpose
in normal business.
7.
All kinds of cranes, earth movers, JCB, Excavators,
Road rollers, concrete mixing machine and other similar
machinery used in connection with supply of labour
and services.
8.
Building materials and fixtures used in construction
activities.
9.
Capital goods purchased prior to the date of commencement
of the Act.
(i)
“Importer” means a person who obtains or brings any
goods from any place outside the state or country
whether as a result of purchase or otherwise for the
purpose of business.
(ii)
“Input tax” means the tax paid by one registered dealer
to another registered dealer on the purchase of goods
in the course of business for resale or manufacture
of taxable goods or for the execution of works contact
or for use as containers or packing material of taxable
goods in the state.
(iii)
“Manufacture “ means producing, making, extracting,
altering, ornamenting, finishing, assembling or otherwise
processing, treating or adapting any goods and include
any process incidental or ancillary to such activities
but does not include any process or mode of manufacture
as may be prescribed.
(iv)
“Output tax” means the tax charged or chargeable under
the act by a registered dealer and includes reverse
tax.
(v)
“Reverse tax” means that portion of input tax of any
goods for which credit has been availed of but such
goods remain unsold at the closure of business or
are used subsequently for any goods other than resale
or manufacture of taxable goods or for execution of
works contract or use as containers or packing materials
of taxable goods within the state.
Eg. (1). A dealer in paint buys paint
intended for sale and claim input tax credit in respect
of the tax paid on purchase. Later he uses a portion
of the paint purchased for painting his own residential
building. In respect of the quantity of paint so appropriated
for personal purposes he is not eligible for input
tax credit and the input tax credit already availed
of in relation to the quantity so appropriated would
be “reverse tax” in the return period in which
such appropriation is made.
(2)A dealer is having goods worth Rs.five lakhs at
the closure of his business. Input tax already claimed
in respect of such goods will be reverse tax.
(3)Stock worth Rs.ten lakhs in the possession of a
dealer is destroyed by fire or otherwise or is damaged
and cannot be resold. The input tax already claimed
in respect of such goods will be reverse tax.
Rule
15 lays down the procedure for calculation of reverse
tax.
(vi)
“Turnover” includes even the proceeds of sale by a
Company or Firm registered under the Companies Act,
1956 and Indian Partnership Act, 1932 respectively
of agricultural produce.
(vii)
“Zero rate sale” means the sale of any goods on which
no tax is chargeable but in relation to which input
tax credit or refund of input tax paid is admissible.
3.
Sections 3 and 4 are identical to sections 3 and 4
of the KGST Act and describe the authorities under
the Act and also provide for the appointment of officers
and the Appellate Tribunal. Section 5 provides for
the appointment of the Settlement Commission.
4.
Section 6 is the charging section.
a.
Under sub-section (1), the liability to tax is on
every dealer whose total turnover for a year is not
less than ten lakh rupees on his sales or purchase
of goods as provided in the Act. This limit is not,
however, applicable to importers, casual traders and
agents of non- resident dealers who will have to pay
tax whatever be their turnover.
i. Goods included in
the first schedule to the Act are completely exempted
from tax. Goods included under this category includes
Agricultural implements, Aquatic feed, poultry feed
and cattle feed, Books meant for reading (Account
books , note books etc. will come under 4% category),
Journals and periodicals, Cotton and silk yarn in
hank (Yarn in cones will be outside the purview of
this), Curd, Lussi, Buttermilk & separated milk,
Fishnet & Fishnet fabrics, Life saving medicines,
Organic manure, Sugar, Tobacco and Textiles, 21 products
of Khadi and Village Industries Commission (at the
point of sale by the manufacturing unit whose annual
turnover does not exceed Rs.twenty five lakhs), Products
of Kudumbasree units whose annual turnover does not
exceed twenty five lakh rupees etc..
ii. Goods included in
the second schedule are taxable at the rate of 1%.
Items included in this schedule include jewellery
of gold, silver and platinum group metals, rice, wheat,
paddy etc.
iii. Goods included
in the third schedule are taxable at the rate of 4%.
Items included in this schedule include medicines,
I.T goods included in list A of the schedule, industrial
inputs included in list B of the schedule, declared
goods other than sugar, Tobacco and textiles (Sugar,
Tobacco and Textiles will continue to be exempted
under the frist schedule. In the case of transfer
of right to use any goods, tax is levied at the rate
of four percent irrespective of the schedule in which
the goods fall. In the case of medicines the Hon’ble
Minister for Finance has announced in the Assembly
that a system of payment of tax on the MRP will be
introduced. The amendment therefor is expected shortly.
iv. Goods included in
the Fourth schedule are totally outside the purview
of the Act. Petrol, High Speed Diesel, Aviation Turbine
Fuel, Other motor Spirits, Liquor, Ganjz and Opium
are included in this schedule. None of the provisions
of this Act will therefore be applicable to those
goods and they will continue to be under the provisions
of the Kerala General Sales Tax Act. The sale proceeds
of those goods will not be turnover for the purposes
of the VAT Act.
v. Goods, which are
not included in any of the schedules to the Act, are
taxable at the rate of 12.5%.
Tax
is levied at all points of sale or transfer as the
case may be. In the case of transfer of goods involved
in the execution of works contract where the transfer
is in the form of goods, tax will be levied at the
rate applicable to the goods under the second or third
schedule or at the rate of 12.5%, as the case may
be. Where the transfer of goods takes place not in
the form of goods but in some other form, tax will
be levied at the rate of 12.5%.
b.
Sub-section (2) provides for the levy of purchase
tax. Tax is levied under this sub-section where a
dealer purchases taxable goods from any person other
than a registered dealer. But no tax will be
leviable under this sub-section where the seller is
a registered dealer even if he is not liable to tax
by reason of his turnover being below the taxable
limit. Even though the general turnover
limit for attracting tax liability is ten lakh rupees,
a dealer will be liable to pay purchase tax under
sub-section (2) if his total turnover for an year
is not less than five lakh rupees.
Eg. A registered dealer A purchases rubber from an
agriculturist.
The dealer becomes liable to tax under section
6(2) if his
total turnover is not less than five lakh rupees.
If the turnover of dealer A is less than five lakh
rupees, he does not become liable to tax under section
6(2). Where another dealer B purchases such rubber
from dealer A, he does not become liable to tax under
section 6(2) even though the goods has not suffered
tax at the hands of dealer A.
c.
Sub-section (5) provides for payment of presumptive
tax. The following conditions should be fulfilled
if a dealer wants to opt for payment of presumptive
tax:
i. the annual turnover
of the dealer should not exceed fifty lakh rupees;
ii. he should not be
an importer or have first taxable sale of goods;
iii
he should not be liable to purchase tax under sub-
section (2) of section 6;
The rate of presumptive tax is 1% on the taxable turnover
of the dealer. The Hon’ble Minister for Finance has
announced in the Legislative Assembly that the rate
will be reduced to 0.5%. The amendment to the Act
to achieve this is expected shortly.
Illustration:- (1) A dealer having a turnover
of forty five lakh rupees in respect of goods included
in the First schedule and four lakhs in respect of
taxable goods covered by the VAT Act. All his purchases
are from registered dealers within the state only.
He will be eligible to opt for presumptive tax and
will be liable to pay tax @1% on Rs.4 lakhs.
(2) A dealer having a turnover of Rs.30 lakhs in
respect of goods included in the first schedule and
Rs.ten lakhs in respect of taxable goods purchased
from registered dealers within the state. He had
effected purchases of taxable goods for Rs.ten thousand
from unregistered dealers. Since he becomes liable
to tax under section 6(2) in respect of the purchases
amounting to Rs.ten thousand he will not be eligible
for presumptive tax under section 6(5).
No form has been prescribed for filing
option for payment of presumptive tax. A person getting
newly registered (including those who are registered
dealers under the KGST Act) who wants to opt for presumptive
tax can exercise the option by filing the application
for registration in form No. 1A. Rules 9 and 10 deals
with computation of total and taxable turnover respectively.
5.
Section 7 provides that if a dealer allows any trade
discount in terms of quantity in goods in relation
to any sale effected by him, the quantity so allowed
as trade discount shall be deemed to be a sale by
the dealer who allow such discount or incentive and
a purchase by the dealer who receives such trade discount
or incentive and that such sale shall form part of
the sale in relation to which such trade discount
or incentive is allowed.
Illustration: Dealer A sells 100 television
sets to another dealer B for Rs.15 lakhs and
allows a trade discount of five television sets without
charging any amount additionally. The five television
sets given as trade discount will also be deemed to
be a sale by A to B. But since A
has not charged any amount additionally for these
5 television sets, the turnover of A in respect
of this transaction will be only Rs.15 lakhs. But
if it is proved subsequently that the dealer had realized
any amount from B towards the price of these five
television sets either through debit notes or in any
other form, that amount will be added to the turnover
in respect of the above sale by A. But as far
as B is concerned, the quantity purchased will
be 105 units and not 100 units. When B effects sales
he will have to account for the sales of all these
105 units, unless he allow quantity discount in the
above manner.
6.
Section 8 provides for the payment of compounded tax.
The following categories of dealers are eligible for
payment of tax at compounded rates:
a.
Works contractors
b.
Mechanized granite metal crushing units
c.
Dealers in cooked food and beverages
d.
Video cassette or CD lending libraries
In respect of items (ii) and (iv) the scheme of compounded
tax is the same as those existed under the KGST Act.
In the case of works contractors the rates are as
follows:
i. Where the contractor
is not an importer or having first taxable sale :
2% of the whole contract amount (irrespective of the
nature of contract)
(b) In other cases: 6% of the whole contract amount.
The Hon’ble Minister for Finance has announced in
the Legislative Assembly that the rate will be reduced
to 4%. The amendment to the Act to achieve this is
expected shortly.
The
rate under item (b) above will not be available to
electrical, refrigeration or air conditioning contracts
or contracts relating to supply and installation of
plant, machinery, rolling shutters, cranes, hoists,
elevators (lifts), escalators, generators, generating
sets, transformers, weighing machines, air conditioners
and air coolers, deep freezers, laying of all kinds
of tiles (except brick tiles), slabs and stones (including
marbles). Section 8 does not prohibit a works contractor
from opting for the payment of presumptive tax under
sub-section (5) of section 6 if he is otherwise eligible.
In the case of cooked food and beverages the rate
of compounded tax is one per cent of the taxable turnover.
The benefit is not, however, available to a dealer
supplying cooked food or beverages to any airline
service company or institution or shipping company
for serving in air craft, ships or steamer or served
in air craft, ship, and steamer, bar attached hotel
or star hotel.
7.
Section 10 provides for deduction of tax at source
by awarder. Every awarder is expected to deduct the
actual tax payable by a contractor from every payment
made by him to the contractor, including advance payments
and remit it to Government within five days of such
deduction. The deduction will be on the basis of a
declaration given by the contractor. But the awarder
will have to obtain from the contractor quarterly
certificates issued by the assessing authority showing
the liability of the contractor. However, before
making the final payment the awarder will have to
obtain a liability certificate in respect of the contractor
from the assessing authority.
8.
(i)Section 11 provides for granting input tax credit.
Input tax credit is the process of deduction of input
tax from the output tax.
(ii)
Input tax credit is available only to a registered
dealer other than a dealer paying presumptive tax
or compounded tax in respect of the tax paid on the
purchases of goods within the state intended:
1.
for resale;
2.
for use in manufacture of taxable goods for sale;
3.
for use in the execution of works contract; or
4.
for use as containers or as packing materials of
taxable goods in the state for sale.
(iii) The following categories of dealers are not
eligible to claim input tax credit:
>
unregistered dealer;
>
dealers paying presumptive tax/compounded tax;
>
dealers whose certificate of registration is suspended
(on the
purchases made during the period of suspension);
>
dealers whose certificate of registration is cancelled;
>
dealers who are exempted from payment of tax(dealers
whose total
turnover
is below the taxable limit/dealers whose product is
exempt from tax)
>
dealers who transfer the right to use the goods purchased.
(iv) The following purchases also do not qualify for
input tax credit:
> from an un-registered dealer;
> from a dealer paying presumptive tax/compounded
tax;
> of goods from outside the state;
> of goods used in the manufacture/processing/packing
of goods
outside VAT/ exempted from tax;
> of goods used as fuel in motor vehicles or
as stores;
> from a dealer whose certificate of registration
is suspended/cancelled.;
>
not supported by tax invoice in the prescribed form
in which the tax is
separately charged.
(v) Where a VAT dealer is selling the goods through
his selling agents, the selling agent will not be
eligible for input tax credit where the principal
has claimed input tax credit or vice versa. Input
tax credit will also not be allowable in respect of
the purchase of goods which remain as closing stock
at the time of closure of business or in respect of
the purchase of goods used in the manufacture of other
goods and the manufactured goods remain as closing
stock at the time of closure of business.
(vi) In respect of capital goods also input tax credit
is allowable. But input tax credit will be allowed
only from the date of commencement of commercial production
using the capital goods or from the date from which
such capital goods are put to use whichever is earlier.
Input tax credit will be allowed in thirty-six equal
monthly installments commencing from the dates specified
above. No input tax credit will be allowed in respect
of capital goods purchased prior to 01.04.05.
(vii)
Sub-section (13) of section 11 provides for allowing
input tax credit to a registered dealer in respect
of tax paid under the KGST Act on the goods held as
opening stock on the date of coming into force of
the Act. Input tax credit will be allowed subject
to the conditions specified under sub-sections (4)
to (7) of section 11 and also the conditions stipulated
in rule 12. Goods in respect of which bills were
issued and entrusted to a carrier prior to 01.04.05
but delivered to the dealer’s claming input tax credit
on or after 01.04.05 will be treated as goods purchased
prior to 01.04.05 for the purpose of sub-section (13).
Where a dealer submits the statements and other records
as stipulated in rule 12, the dealer will be permitted
to avail of input tax credit in respect of the opening
stock commencing from the return for the month of
May 2005 onwards in three equal monthly installments.
The assessing authorities receiving the applications
for allowing the input tax credit and the statements
and other documents shall verify the claim with reference
to the records of the dealer for the preceding two
years. If any inconsistency is noticed in the claim
or if the opening stock value of the goods appears
to be inflated or if the dealer had been in the habit
of showing accumulation of closing stock, the assessing
authority shall report the details to the intelligence
wing and the Deputy Commissioner (VAT Audit) for appropriate
action.
(viii)
Where the input tax credit to which a dealer has become
eligible in a month is more than the output tax payable
for the month, the excess input tax credit available
to the dealer will be carried over to the subsequent
return period for being set off against the output
tax for that return period and so on till the end
of the year. If at the end of the year there is excess
input tax crdit such excess credit will be carried
forward to the subsequent year. If at the end of
the subsequent year also the input tax credit carried
forward from the previous year the asmount of input
tax credit so remaining unadjusted will be refunded
to the dealer at the end of the second year.
Illustration:
At the end of the year 2005-2006 there is an input
tax credit of Rs.five lakhs remaining unadjusted.
This will be carried forward to the year 2006-2007.
If the total output tax for the year 2006-’07 is only
Rs.4.5 lakhs, an amount of Rs.fifty thousand will
be refunded at the end of the year 2006-’07. On the
other hand, if the output tax for the year 2006-’07
is greater than or equal to Rs.Five lakhs, no refund
will be admissible.
9.
Section 12 provides for special rebating in respect
of purchase tax paid under sub- section(2) of section
6 and also the entry tax paid under section 3 of the
Kerala Tax on Entry of Goods into Local Areas Act,
1994(15 of 1994). Special Rebating is allowed when
the goods in respect of which purchase tax is paid
is subsequently resold or used in the manufacture
of taxable goods for sale or used in the execution
of works contract or used as containers or packing
materials of taxable goods in the state. Since payment
of the tax in respect of which special rebating is
claimed is a pre-condition for availing the special
rebate, in the case of purchase tax under section
6(2), special rebate can be claimed by a dealer only
in the month in which the tax is actually paid and
not in the month in which the purchase is made. Where
the purchase is made in April 2005, the tax in respect
of such purchase becomes payable only along with the
return for April to be filed on or before the tenth
of May. Special rebate in respect of such purchase
can be claimed only in the return for the month of
May to be filed in June.
10.
Section 13 provides for refund of input tax. Refund
is provided for where the goods in respect of which
input tax is paid or the taxable goods manufactured
out of such goods is sold in the course of export
or sold in the course of interstate trade or sent
outside the state. Where the goods or the manufactured
goods are sent outside the state other wise than by
way of interstate trade or export, the refund of input
tax will be limited to any amount paid in excess of
4%. Input tax for the purposes of this section would
include purchase tax paid under section 6(2), tax
paid under the KGST Act in respect of goods held as
opening stock on 1-4-2005 in respect which input tax
credit is allowed under section 11(13) and also the
entry tax paid under section 3 of the Kerala Tax on
Entry of Goods into Local Areas Act, 1994. The term
“Sale in the course of Export” has the same meaning
as under section 5 of the CST Act, 1956.
Illustration:
1. Dealer A in Thrissur makes a sale of
goods purchased by him in the State from a VAT dealer
to an exporter B in Kochi and files all the documents
required by the CST Act and rules. A’s sale to B
will be exempt as being a sale in the course of export
under Article 286 of the Constitution read with section
5(3) of the CST Act and dealer A will be eligible
for refund of the input tax paid in respect of the
goods which are sold to the exporter.
2.
Dealer C purchases goods taxable @12.5% for Rs.one
lakh after paying input tax of Rs.12500. C sends the
goods to his principal D outside the State. C will
be eligible for refund of Rs.8500, i.e. the input
tax paid by him in excess of 4%.
Rules
46 and 47 prescribe the procedures for allowing refund
in the case of interstate sale/stock transfer and
sales in the course of export respectively. While
in the case of input tax credit under section 11 the
dealers claim the set off at the time of filing the
returns and pay the tax after deducting the input
tax credit, in the case of refund under section 13,
refund will be allowed only after pre-verification
of the genuineness of the claim by the assessing authority.
However, refund will be allowed without pre-verification
in cases where the dealer claiming refund furnishes
bank guarantee as provided under the above rules.
Where the dealer submits all the documents required
by the rules in support of the claim, the assessing
authority has to issue the refund order within three
month from the date of submission of the application
and the other records. In case of delay interest
will be payable by the department which may be recoverable
from the officers causing the delay.
However, where any amount is due to any dealer as
refund under this section, the assessing authority
is free to adjust such amount due as refund towards
any tax or other amount due from the dealer under
the VAT Act, the KGST Act, CST Act or the Kerala Tax
on Entry of Goods into Local Areas Act, as the case
may be.
11.
Section 14 provides for the reimbursement of tax collected
from any foreign diplomatic mission or consulate,
U.N or other international body or any consular or
diplomatic agent of any mission or the U.N. or such
other body. The reimbursement will be made within
two weeks from the submission of an application in
the form prescribed under Rule 49 along with the invoice
or bill evidencing collection of the tax.
12
(a) Section 15 and section 16 deals with registration
of dealers. The provisions are identical to the provisions
under the KGST Act. Rule 17 prescribes the procedures
for granting registration. The turnover limit for
compulsory registration is two lakh rupees (Casual
traders, importers and agents of non-resident dealers
will be liable for registration irrespective of the
turnover. The Hon’ble Minister for Finance has announced
in the Assembly that the turnover limit will be raised
to five lakh rupees. So registration need not be
insisted upon in the case of dealers, other than casual
traders, importers and agents of non-resident dealers,
whose annual turnover is less than five lakh rupees.
(b)
In the case of a dealer applying for registration
as a presumptive tax dealer no security will be insisted
upon and the registration will be granted as expeditiously
as possible, once the dealer furnishes the documents
prescribed under sub-rules (7) and (8) of rule 17.
(c)
In the case of dealers already registered under the
provisions of the KGST Act who apply for registration
under the VAT Act, submission of application will
be required, but no security or registration fee under
sub-section (1) of section 16 will be insisted upon.
Only the fee for renewal of registration will be insisted
upon in such cases. However, where a security had
already been furnished under the KGST Act, that may
be converted as a security under the provisions of
this Act. But where a registration is granted
to such dealers under this Act and the assessing authority
has reasons to believe that the dealer is likely to
make default in payment of tax or other amount due
under the Act, the authority will be fully justified
in demanding security or additional security as the
case may be in accordance with the provisions of section
17 read with rule 19. All assessing authorities shall
forward the security already furnished by dealers
to the VAT Officers before 15..04..05 for getting
the security converted as above. The application
to be submitted by such registered dealers shall be
in Form No. 1 where the dealer has to pay tax under
section 6(1) (i.e. VAT dealer) and in form No.1A where
the applicant is eligible for payment of tax
under section 6(5). Where the turnover of the applicant
for the year 2004-05 was above the limit prescribed
under section 6(5) he will not be eligible for payment
of presumptive tax.
(d)
In the case of dealers carrying on business, who have
submitted applications for registration under the
KGST Act, where enquiry under section 14 of the KGST
Act has been completed, decision on such application
will be taken immediately. If registration is to be
granted under the KGST Act, such dealers will also
be permitted to apply for registration in accordance
with the proviso to sub-section (1) of section 16.
If the application for registration is rejected for
valid reasons, such dealers will not be permitted
to apply for registration under the VAT Act such dealers
may not be treated as dealers covered by the proviso
to sub-section (1) of section 16. They may, if necessary,
apply afresh for registration and such cases may be
decided on merits and the registration fee payable
in such cases will be that prescribed under sub- section
(1) of section 16.
(e)
The following procedures will be followed in granting
registration under the Act:
i)
The applications for registrations will be received
by the assessing authorities (including Assistant
Commissioners) themselves. They will process the
applications and if they are in order send them to
the Inspecting Assistant Commissioner of the area.
ii)
In the case of applications received from Commercial
Tax Officers, the Commercial Tax Officer attached
to the office of the Inspecting Assistant Commissioner
will scrutinize the applications and issue the registration
certificate.
iii)
In the case of applications received from dealers
in the Special Circles, the Inspecting Assistant Commissioner
concerned will issue the registration certificate.
iv)
Separate series of registration numbers will be adopted
for VAT dealers and dealers opting for presumptive
tax /compounded tax.
v)
The series to be adopted for each office will be communicated
from this office shortly. All assessing authorities
will forward the R.C. files relating to the dealers
already registered under the KGST Act to the VAT officers
before 15.04.05.
13
Section 17 deals with furnishing of security.
The various forms of security are prescribed under
Rule 19. The provisions are generally identical to
the related provisions under the KGST Act. Rule 19,
however stipulates that where a security is furnished
in the form a Bond in Form.6, the sureties should
be solvent enough for the amount assured. Rule 19
further stipulates that where a person who stood as
surety desires to withdraw from the bond, he has to
intimate the dealer and the assessing authority in
advance and the withdrawal shall be operative only
from the date on which a fresh security is furnished
by the dealer concerned.
14
Section 18 deals with suspension of registration.
Rule 20 prescribes the procedures to be followed in
the case of suspension of registration. Rule stipulates
issue of notice to the dealer before suspension of
registration. Further where a registration is suspended
the matter has to be published in newspapers and also
in the website of the department. The suspension
will take effect only from the date of publication.
Since input tax credit under section 11 will be denied
to a dealer buying goods from a dealer whose registration
is suspended, Deputy Commissioners should ensure that
this provision is scrupulously followed.
15
Section 19 deals with issue of permits. The provision
is identical to the provisions of section 15 of the
KGST Act. Rule 21 prescribes the procedures.
16
Section 20 deals with filing of returns. Rule 22
prescribes the forms and the procedures for submission
of returns. In the case of a VAT dealer monthly return
is prescribed. Even though for availing of input
tax credit original tax invoice is to be furnished,
such original invoice need not be submitted along
with the return. They need be furnished only at the
time of audit. Along with the return the dealers
are expected to submit only the documents prescribed
under sub-rules (3) and (6). Rule 23 prescribes the
procedures for filing of return by casual traders
and rule 24 prescribes the procedures for the submission
of quarterly return. Quarterly return is applicable
in the case of dealers paying presumptive tax, those
dealing exclusively in goods exempted from tax and
also by works contractors. Where a cheque presented
along with the return is dishonored, the assessing
authority has to follow the procedure prescribed under
rule 28 to restrain the dealer from availing of the
cheque facility for a period of six months or such
further time as may be fixed by the authority.
17
Section 21 deals with self-assessment. Where return
is submitted under Rule 22 along with the documents
prescribed, the assessing authority receiving the
return shall conduct a preliminary scrutiny to verify
whether the return complies with the requirements
of the Act and the rules. The scrutiny at this stage
will be limited to the correctness of the entries
and the conformity of the documents submitted to the
entries made in the return. If the entries tally
the officer shall issue an acknowledgement to the
dealer. Once the officer acknowledges the receipt
of the return, the assessment is deemed to have been
completed. No separate intimation regarding assessment
is required.(Rule 36)
18
Section 22 provides that where the return is
found to be prima facie incorrect, the officer shall
reject the return. Where the return is submitted in
person, the officer need not accept such defective
return. Where it is received through post or through
electronic means, the assessing authority shall give
an intimation regarding rejection of return, within
fifteen days from the date of receipt of the return.
Where the return is submitted in electronic form,
the officer shall follow the procedure prescribed
under sub-rule (4) of rule 34. Where the dealer does
not file a return or fails to submit a corrected return
even after receipt of the notice mention under rule
35, the officer shall estimate the turnover and complete
the assessment for the return period to the best of
its judgment. It should, however, be ensured that
in every case where best judgment is resorted to,
the estimate is based on some valid data to be gathered
by the assessing authority. The previous returns
filed by the dealer, information on the business transactions
of the dealer gathered from other sources etc., check
post data etc. may form the basis of such estimate.
In no case should the estimate be based on surmises
and assumptions of the authority concerned.
19
Section 23 provides for audit. Dy. Commissioner (Audit
Assessment) will be the designated officer specified
under section 23. Detailed manual is being separately
issued on VAT audit. Till the audit manual is ready,
the Dy. Commissioner (Audit Assessment) and the audit
officers working under his directions shall take instructions
from the Commissioner regarding the procedures to
be followed in Audit. Procedure for audit visit is
laid down under rule 37.
20
Section 24 deals with audit assessment in cases where
any irregularity is found in audit. The procedure
for the assessment is prescribed under rule 39. Where
the irregularity found on audit relates to one return
period only, and does not disclose any pattern of
suppression, the best judgment assessment will be
restricted to one return period. Where the irregularity
detected is the failure to prove the claim of input
tax credit or refund claimed the best judgment assessment
will be limited to the disallowance of the claim of
input tax credit or refund as the case may be. Where
suppression of taxable turnover is detected and a
pattern of suppression is established, the best judgment
assessment shall be in respect of all the return periods
to which the pattern is applicable. Where the best
judgment assessment is done after the expiry of the
year in which the return periods fall, the assessment
shall be made by a single order. But where the return
periods fall under two different years, separate assessments
will have to be completed for each year.
21
Section 25 deals with assessment of escaped turnover.
This corresponds to section 19 of the KGST Act. However,
the procedure prescribed under rule 39 will be followed
in the case of assessment under section 25 also.
22
Section 26 deals with protective assessment. This
provision is identical to section 19C of the KGST
Act.
23
Section 27(assessment of legal representatives), section
28(Liability of firms), Section 29(Dissolution of
firms or discontinuance of business) are identical
to the provisions under the KGST Act.
24
Section 30 deals with collection of tax. Only registered
dealers are permitted to collect tax. But unlike
the KGST Act, all registered dealers are not authorized
to collect tax. Dealers who, even though registered,
are not liable to tax under sub-section (1) of section
6 and dealers paying presumptive tax or compounded
tax
are
also not permitted to collect tax.
25.
Section 31 deals with payment and recovery of tax.
Where any tax or other amount is demanded, the authority
concerned has to allow not less than fifteen days
to the dealer to make the payment. But this is not
applicable in the case of casual traders. Interest
on delayed payments has been reduced to 12% simple
interest. Related rules are Rules 51, 52. 53 and
54. Rule 51 allows the assessing authority to grant
not more than six monthly installments for the payment
of any amount demanded on the request of the dealer.
Where the request of a dealer is rejected he should
be given a reasonable opportunity of being heard.
25.
Section 32 authorizes the Government to order,
by notification, to defer payment of the whole or
any part of the tax payable by any industrial unit
in respect of which exemption in respect of the tax
payable under the KGST Act, 1963 or the Kerala Surcharge
on Taxes Act, 1957 had been granted under the industrial
policy of the State. But the exemptions or concessions,
if any, granted under notification SRO.1730/93 to
industrial units will continue. As per Notification
SRO.321 /2005 dated 31-3-2005, the period of
deferment and the amount of tax to be deferred shall
not exceed the un availed portion of the period and
quantum sanctioned to the unit under the earlier notifications.
The unit, which wants to avail of this deferment,
has to apply to the Deputy Commissioner of the District
concerned (in the case of SSI Units) or to the Dy.
Commissioner (General) as the case may be. The amount
so deferred shall not attract any interest till the
period of deferment is over. Thereafter the amount
deferred shall be repaid with 12% interest in sixty
equal monthly installments. The amount to be deferred
under this section will be the net tax payable by
the dealer in accordance with Rule 16.
26.
Section 33 which authorizes Government to appoint,
by notification any Assistant Commissioner to exercise
the functions of a Collector under the Kerala Revenue
Recovery Act, 1968 corresponds to section 23AA of
the KGST Act. Procedures to be followed in such cases
will be the same as communicated in circular No. C1-57179/97/TX
dated 10-12-’98 (No.32/98/TX)
27.
Section 34(Recovery of penalty), section 35(Further
mode of recovery), section 36(Recovery of tax when
business is transferred), section 37 (restrictions
on transfer of assets), Section 38(Tax payable to
be first charge on the property) and section 39(Liability
of directors of a Private Company) corresponds to
section 24, 25, 26, 26A, 26B and 26C respectively
of the KGST Act.
29.Section
40 deals with maintenance of true and correct accounts
by dealers. Rule 58 prescribes the various accounts
and records to be maintained. Purchase register
should contain the details of purchase price and input
tax and the sales register should contain the details
of sale price and output tax separately. The rule
also prescribes the format of the invoices/bills to
be issued by various categories of dealers, manufacturers,
VAT dealers, presumptive tax/compounded tax dealers
etc. This format will not be mandatory for a period
of three months from the date of implementation of
the rules, but the invoice/bill issued should contain
the particulars prescribed. Similarly the number
and format of other forms (Delivery note etc.) are
also being changed. Until such time the forms are
printed, the dealers will be permitted to use the
forms prescribed under the KGST Act so as to ensure
smooth movement of goods. By notification No. 323/2005
dt.31.03.05 the following forms prescribed under the
KGST Rules 1963 have been permitted to be used for
a period of 3 months from 01.04.05.
i)
Declaration in form No. 18A
ii)
Delivery note in form No. 26
iii) Certificate of ownership in form No. 27A
iv) Transit pass in form No. 27C
v) Permit in form No. 29
vi) Notice in form No. 50
vii) Form of summons in form No. 51
In
the case of sales return credit notes are to be issued.
Rule 59 prescribes the format of credit notes and
debit notes. Deduction will be allowed in respect
of sales return only if such sales return is supported
by credit notes in the prescribed form. The period
of retention of accounts and other records is five
years from the expiry of the year to which the assessment
relates or two years from the date of disposal of
the appeal or revision arising out of such assessment
or from the date of completion f any other proceedings
under the Act connected with such assessment appeal
or revision, whichever is later. Rule 62 makes the
dealer obtaining any statutory forms from the assessing
authority to ensure safe custody of such forms. In
cases of loss of any such forms the dealer has to
follow the procedure prescribed under rule 62. The
Deputy Commissioners have been vested with the power
to invalidate such lost forms in accordance with the
procedure laid down in the said rule.
30.
Section 44 deals with the power of officers to order
production of accounts and of inspection of business
places and residential accommodation. Rules 63 and
64 lays down the procedures. Even though officers
have been vested with the power of inspection and
search, it is to be borne in mind that the stem of
VAT works on the system of self-assessment, which
reposes confidence on dealers. While every care has
to be taken to ensure that unscrupulous dealers do
not defraud revenue, it is equally important to ensure
that in the process of preventing fraud no avoidable
harassment is caused to honest dealers. Inspections
and searches should therefore be based on proper investigations.
Every assessing authority should keep track of the
activities of the dealers under its jurisdiction.
Every officer of the Intelligence Wing proceeding
for inspection or search should keep proper record
of the investigations conducted by him and the details
gathered through such investigations, which should
be available for scrutiny by senior officials, if
necessary.
31.Section
45 provides for the purchase of goods to prevent under
valuation. This section corresponds to section 28
A of the KGST Act. Rule 65 stipulates that before
ordering the purchase of the goods the person from
whom the goods are purchased should be given an opportunity
of being heard.
32.
Section 46 and section 47 provides for establishment
of check post and checking of goods in transit. These
sections correspond to sections 29 and 29A of the
KGST Act. Related rules are rules 66 and 67. The
minimum value of goods for which documents as prescribed
have to be carried has been raised to one thousand
rupees. Permit for a notified goods is in Form No.
7C. In cases attempt of evasion of tax is suspected
in respect of goods under transport, the officer inspecting
the vehicle/ vessel has to issue notice to the person
in charge to prove the bonafides of the transport.
If the officer is satisfied as to the bonafides of
the transport, he can release the goods. The rules
offer certain special facilities to a dealer holding
an electronic identity card. If on the basis of a
mobile alert received by such a dealer or on the basis
of a telephonic information received from the officer
in charge of the notified area, such dealer intimates
such officer using the e-mail I.D. furnished by the
dealer or the one allotted to the dealer along with
the Electronic Identity Card issued to him that the
consignment in respect of which such information is
received by him is bogus or that it does not relate
to him or that the name of the consignor or consignee
, as the case may be, shown in the documents accompanying
the consignment is not genuine, such officer shall
treat the goods as not covered by the documents prescribed,
or the consignment as bogus and proceed accordingly
under the rules.
33.
Section 48 corresponds to section 30B of the KGST
Act and deals with the issue of transit pass. Sub-section
(4) of the section has been substituted by the Kerala
Finance Act, 2005. As per the substituted provision,
where goods are transported into the state from another
state and there are no proper records as prescribed
by section 46 or where the particulars furnished in
the documents are found to be false or the consignor
or purchaser noted in the documents are found to be
bogus or where the transporter fails to prove the
genuineness of the documents, it can be presumed hat
the goods have been sold in the state by the consignor
or the person in charge of the goods or the transporter
or the owner or the person in charge of the vehicle
or the person in charge of the goods or all of them
and they shall be jointly and severally liable to
pay tax on such sales.
34.
Section 49 and 50 deals with confiscation of goods
and vehicles and corresponds to section 30E of the
KGST Act. The relevant rules are rules 69 and 70
35.
Section 49A empowers an officer conducting any inspection,
search or seizure under the Act to seek police assistance
in case of necessity and thereupon the police office
is bound to render necessary assistance. The relevant
rule is rule 99.
36.
Section51 (Possession and submission of records by
owners of vehicles and vessels), 52(Submission of
returns by forwarding agency), section 53(Submission
of returns by Banks) correspond to section 31, 32
and 33 of the KGST Act.
37.
Section 54 provides for furnishing of details by warehousemen
and banks when so required by officers for the purposes
of any proceeding under the Act.
38.
Sections 55 to section 60 deals with appeals and revisions
before various authorities including the Appellate
tribunal. The procedures are generally similar to
those available under the KGST Act. But in the case
of an appeal filed against a best judgment completed
against a dealer who failed to file return, the appeal
will be entertained only if the entire tax assessed
is paid. Rules 76 and 77 deals with abatement of proceedings
in case of death of appellant/respondents while proceedings
are pending before the authorities. Rule 77 deals
with setting aside of abatement. Section 61 deals
with settlement of cases by the Settlement Commission.
Sections 62, 63 and 64 deals with appeals and revisions
before the High Court.
39.
Section 65 prescribes the fees for various interlocutory
petitions filed before various authorities under the
Act.
40.
Section 66 authorises any authority under the Act
to rectify any error apparent from the face of the
record of such proceedings. While section 43 of the
KGST had restricted application, section 66 of the
VAT Act has wide application.
41.
Section 67 deals with the power of the authorities
under the Act to levy penalty for violation of the
various provisions of the Act. The following acts
or omissions on the part of any person have also been
made specific offences apart from those which were
covered by section 45A of the KGST Act:
1. making any bogus claim of input tax credit or refund;
1.
continuing business during the period of suspension
of registration;
2.
failure to surrender unused statutory Forms and declarations
after cancellation
