Tax Assignment

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POINT OF TAXATION In exercise of the powers conferred under clause (a) and clause (b) of sub-section (2) of section 94 of the Finance Act, 1994, the Central Government hereby makes the following rules for the purpose of collection of service tax and determination of rate of service tax, namely,1. Short title and commencement.(1) These rules shall be called the Point of Taxation Rules, 2011. (2) They shall come into force on the 1st day of April, 2011. 2. Definitions.- In these rules, unless the context otherwise requires,(a) ―Act‖ means the Finance Act, 1994 (32 of 1994);

2 [(ba) ―change in effective rate of tax‖ shall include a change in the portion of value on which tax is payable in terms of a notification issued in the Official Gazette under the provisions of the Act, or rules made thereunder;] (c) ―continuous supply of service‖ means any service which is provided, 3[or to be provided continuously or on recurrent basis, under a contract, for a period exceeding three months with the obligation for payment periodically or from time to time], or where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition; (d) ―invoice‖ means the invoice referred to in rule 4A of the Service Tax Rules, 1994 and shall include any document as referred to in the said rule; (e) ―point of taxation‖ means the point in time when a service shall be deemed to have been provided;

5 [ 2A. Date of payment.— For the purposes of these rules, ―date of payment‖ shall be the earlier of the dates on which the payment is entered in the books of accounts or is credited to the bank account of the person liable to pay tax: Provided that — (A) the date of payment shall be the date of credit in the bank account when – (i) there is a change in effective rate of tax or when a service is taxed for the first time during the period between such

entry in books of accounts and its credit in the bank account; and (ii) the credit in the bank account is after four working days from the date when there is change in effective rate of tax or a service is taxed for the first time; and (iii) the payment is made by way of an instrument which is credited to a bank account, (B) if any rule requires determination of the time or date of payment received, the expression ―date of payment‖ shall be construed to mean such date on which the payment is received;] RULE 3. 6[Determination of point of taxation.- For the purposes of these rules, unless otherwise provided, ‗point of taxation‘ shall be,(a) the time when the invoice for the service 7[provided or agreed to be provided is issued:]

[Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994, the point of taxation shall be date of such completion of provision of the service.] (b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment. 2[Provided that for the purposes of clauses (a) and (b),(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to the service provider, the date of completion of provision of service; (ii) wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a).] Explanation .- For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.]. 4. Determination of point of taxation in case of 3[change in effective rate of tax]. - Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a 4[change in effective rate of tax] in respect of a service, shall be determined in the following manner, namely:-

(a) in case a taxable service has been provided before the 5[change in effective rate of tax],(i) where the invoice for the same has been issued and the payment received after the 6[change in effective rate of tax], the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or (ii) where the invoice has also been issued prior to 7[change in effective rate of tax] but the payment is received after the 8[change in effective rate of tax], the point of taxation shall be the date of issuing of invoice; or (iii) where the payment is also received before the 9[change in effective rate of tax], but the invoice for the same has been issued after the 10[change in effective rate of tax], the point of taxation shall be the date of payment; (b) in case a taxable service has been provided after the 11[change in effective rate of tax],(i) where the payment for the invoice is also made after the 12[change in effective rate of tax] but the invoice has been issued prior to the 13[change in effective rate of tax], the point of taxation shall be the date of payment; or (ii) where the invoice has been issued and the payment for the invoice received before the 14[change in effective rate of tax], the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or (iii) where the invoice has also been raised after the 15[change in effective rate of tax] but the payment has been received before the 16[change in effective rate of tax], the point of taxation shall be date of issuing of invoice. RULE 2[5. Payment of tax in case of new services.- Where a service is taxed for the first time, then,(a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable; (b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time.]

RULE 4[7. Determination of point of taxation in case of specified services or persons.--

Notwithstanding anything contained in these rules, the point of taxation in respect of the persons required to pay tax as recipients of service under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Act, shall be the date on which payment is made : Provided that, where the payment is not made within a period of six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist: Provided further that in case of ―associated enterprises‖, where the person providing the service is located outside India, that point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier.] 8. Determination of point of taxation in case of copyrights, etc. .- In respect of royalties and payments pertaining to copyrights, trademarks, designs or patents, where the whole amount of the consideration for the provision of service is not ascertainable at the time when service was performed, and subsequently the use or the benefit of these services by a person other than the provider gives rise to any payment of consideration, the service shall be treated as having been provided each time when a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier. RULE 5[8A. Determination of point of taxation in other cases.- Where the point of taxation cannot be determined as per these rules as the date of invoice or the date of payment or both are not available, the Central Excise officer, may, require the concerned person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account such material and the effective rate of tax prevalent at different points of time, shall, by an order in writing, after giving an opportunity of being heard, determine the point of taxation to the best of his judgement.] RULE 6[9. Transitional Provisions. - Nothing contained in 7[these rules] shall be applicable,(i) Where the provision of service is completed; or (ii) Where invoices are issued Prior to the date on which thses rules come into force. Provided that services for which provision are completed on or before 30th day of June, 2011 or where the invoices are issued up to the 30th day of June, 2011, the point of taxation shall, at the option of the taxpayer, be the date on which the payment is received or made as the case may be.]

Meaning Of Registration And Its Requirements As Under Maharashtra VAT:Registration – (1) No dealer shall, while being liable to pay tax under this Act, be engaged in the business as a dealer, unless he possesses a valid certificate of registration as provided by this Act: Provided that, the provisions of this sub¬section shall be deemed not to have been contravened, if the dealer having applied, within the prescribed time, for such registration as provided in this section, is engaged in such business: Provided further that, if any dealer, holds the certificate of registration granted under the Bombay Sales Tax Act, 1959, which is effective or valid immediately before the appointed day, it shall not be necessary for him to apply for a fresh certificate under this section so long as the said certificate is not duly cancelled under this Act: Provided also that, a dealer holding an effective certificate of registration or, as the case may be, a licence granted before the appointed day, under any laws other than the Bombay Sales Tax Act, 1959, shall, notwithstanding the fact that he is holding such effective certificate be required to apply for grant of certificate of registration under this section. (2) Every dealer, required by sub¬section (1) to possess a certificate of registration or one who voluntarily desires to get registered shall apply in the prescribed manner to the prescribed authority for grant of such registration. Provided that, in the case of an application made by a person who voluntarily desires to get registered, the certificate of registration shall not be granted unless the applicant has deposited an amount of Rs.25,000/¬in the Government Treasury as advance towards the tax, interest or penalty, if any, that may become due. The amount so deposited may be adjusted against the tax payable according to the return required to be filed in the year in which the registration is granted or in the succeeding year. The amount of deposit in excess of the amount due from him, by way of tax, interest or penalty, if any, shall be refunded as provided in section 50 or, as the case may be, section 51. (The above proviso is added by the Maharashtra Act No. XXV of 2007 Dt. 06.08.2007 ) (3) If the prescribed authority, after scrutiny of the application and after such inquiry as it deems fit, is satisfied that the application for registration is in order and the prescribed conditions , if any, are fulfilled, shall register the applicant and issue to him a certificate of registration in the prescribed form: Provided that, the prescribed authority, on finding that the application is not complete or that the information or documents prescribed for grant of

registration certificate have not been furnished, or, (…..) the prescribed conditions are not fulfilled, may, after giving the applicant a reasonable opportunity of being heard, reject the application for reasons to be recorded in writing. (4) The Commissioner may, after considering any information furnished under any of the provisions of this Act or otherwise received, amend from time to time, any certificate of registration. (5) A person or a dealer who has got himself registered shall be liable to pay tax during the period in which his registration certificate is effective, notwithstanding the fact that subsequently it is found that no registration certificate was necessary in his case. (6) Where,— (a) any business, in respect of which a certificate of registration has been issued under this section, has been discontinued or otherwise disposed of, or has been transferred or the place of such business is changed to a different local area, or (For the above subsection 6 (a) the following subsection 6 (a) is inserted by the Maharashtra Act No. XXXII of 2006 Dt. 05.08.2006 ) (a) any business, in respect of which a certificate of registration has been issued under this section, has been discontinued or otherwise disposed of, or has been transferred (b) the turnover of sales or the turnover of purchases of a registered dealer who has become liable to pay tax under section 3 has during any year not exceeded the relevant limit specified in sub¬section (4) of section 3, then in the case covered by clause (a), the dealer shall apply in the prescribed manner and within the prescribed time, for cancellation of his registration to the Commissioner, and in the case covered by clause (b), the dealer may apply, in the prescribed manner, for cancellation, of his registration to the Commissioner; and thereupon the Commissioner may, after such inquiry as he deems fit and subject to the rules, cancel the registration with effect from such date including any date earlier to the date of the order of cancellation as he considers lit having regard to the circumstances of the case. The registration certificate cancelled under this sub¬section shall be returned to the Commissioner within the prescribed time: Provided that, where the Commissioner is satisfied that any business in respect of which a certificate has been issued under this section has been discontinued or disposed of or the place of such business is changed to a different local area, and the dealer has failed to apply under clause (a) as aforesaid for cancellation of registration, the Commissioner may, after giving

the dealer a reasonable opportunity of being heard, cancel the registration with effect from such date as he may fix to be the date in accordance with the rules, if any, from which the business has been discontinued or disposed of or changed to a different local area, as the case may be: (For the above para the following para is inserted by the Maharashtra Act No. XXXII of 2006 Dt.05.08.2006 ) Provided that, where the Commissioner is satisfied that any business in respect of which a certificate has been issued under this section has been discontinued or disposed of and the dealer has failed to apply under clause(a) as aforesaid for cancellation of registration, the Commissioner may, after giving the dealer a reasonable opportunity of being heard, cancel the registration with effect from such date as he may fix to be the date in accordance with the rules, if any, from which the business has been discontinued. Provided further that, where the Commissioner is satisfied that any person who has voluntarily got himself registered has not commenced business within six months from the date of registration, the commissioner may, after giving the dealer a reasonable opportunity of being heard, cancel the registration certificate with effect from such date as he may fix in accordance with the rules. (The above proviso is added by the Maharashtra Act No. XXV of 2007 Dt. 06.08.2007 ) Provided also that, the cancellation of a certificate of registration on an application or otherwise shall not affect the liability of the dealer to pay the tax including any penalty, amount forfeited and interest due for any period ending on or before .the date of cancellation whether such tax including any penalty, amount forfeited and interest is assessed before the date of cancellation but remains unpaid, or is assessed thereafter. (In the above proviso for the word ―Provided further that‖ the words ―Provided also that‖ are substituted by the Maharashtra Act No. XXV of 2007 D t. 06.08.2007 ) Explanation. —For the purposes of this section, local area means the area to which the Post and Telegraph authorities have assigned a Postal Index Number (PIN). (The above explanation is deleted by the Maharashtra Act No. XXXII of 2006 Dt. 05.08.2006 )

(7) The Commissioner shall, by such date as he may notify in the Official Gazette, prepare a list of all registered dealers and may amend the list, from time to time. Any person may make an application in the prescribed form to the Commissioner for a certified copy of any extract from the list and thereupon the Commissioner, shall furnish a copy of the extract to the applicant. (8) Save as otherwise provided in sub¬section (9), a certificate of registration granted under this section and any certificate that may he granted under this Act, shall be personal to the dealer or person to whom it is granted, and shall not be transferable. (9) Where a registered dealer,— a. effects a change in the name of his business, or b. is a firm, and there is a change in the constitution of the firm without dissolution thereof, or c. is a trustee of a trust, and there is change in the trustees thereof, or d. is a guardian of a ward, and there is a change in the guardian or termination of guardianship, or e. is a Hindu Undivided Family and there is a change of Karta, or f. is a private limited company which is converted into a public limited company, then, merely by reason of occurrence of any of the changes aforesaid, it shall not be necessary for the dealer, or the firm with the changed constitution, or the new trustees, or new guardian or the ward or the new Karta or the public limited company to apply for a fresh certificate of registration and on information being furnished in the manner required by section 18, the certificate of registration shall, where necessary. be amended and any other certificate granted under the Act, rules or notifications shall also continue to be valid and be amended where necessary with effect from the appropriate date. The registration number, which used to be referred to as Registration Certification No. (R.C. No.) has been changed to TIN (Tax Payers‘ Identification Number) and hence the R.C. No. is now referred to as VAT TIN (Tax Payers‘ Identification Number). This change is effective from 1 -4-2006. The limits for registration are as under: Threshold Turnover Limit: Notes: i. Reference of turnover of Rs.1,00,000 or Rs.5,00,000 is with respect to sales only. Sales will include sales of both, tax-free goods as well as taxable goods. ii. No turnover limit for import is specified for importer. Even an import of

Re. 1 is sufficient to treat the dealer as an importer. iii. The dealer who is liable to pay tax is required to apply for registration under the Act within 30 days from the date on which prescribed limit of turnover exceeds. In case of change in ownership or constitution, an application for new registration certificate (TIN certificate) is to be made within 30 days from the date of such change. In case of death of a dealer, an application for new registration for transfer or succession of business can be made within 60 days from the date of death of dealer. If so applied in time, registration certificate will be granted from the date of liability, otherwise from the date of application. One TIN number will be issued for whole state of Maharashtra, which will cover all the places of business of the dealer. iv. With effect from 8th September, 2006, if there is a shifting of place of business from one place to another place, there is no need to cancel the existing number and apply for new number. The existing TIN will continue. However, the event of shifting should be intimated to the registration authority of the old place within 30 days. v. The dealer can also apply for voluntary registration by paying registration fees of Rs. 5,000/-. Registration certificate in such case will be granted with effect from the date of application, which should be accompanied by challan of payment of Rs. 5,000/-. Apart from registration fee of Rs. 5,000/- , a dealer is also required to deposit Rs. 25,000/-. This deposit is in the nature of security deposit and it is not adjustable towards tax, interest, Penalty or any other liability w.e.f. 01.05.2011. The Security deposit is refundable in the manner and time and on fulfillment of such condition as is prescribes in the rules. The dealer may apply for refund with 4 years from the date of registration but after completing 3 years from the date of registration. vi. The application for registration (VAT TIN) is to be made in Form No.101 and in Form A for C.S.T TIN. Following documents are required to be submitted along with the application: • Two passport size photographs of the proprietor/any one partner of the firm/any one director of private limited company. This requirement is not applicable in case of Public Ltd. Co., public trusts, corporations or a local authority. • The mode of payment is hereby changed w.e.f 01.01.2009, Now the applicant should make payment of fees & deposit by the way of Demand draft, drawn on nationalized bank. However the fees of Rs.500 may be paid by the dealer at his option by way of court fee stamp. For Mumbai location, Demand draft should be drawn in favour of ―Bank of Maharashtra A/c MVAT‖ and for the rest of Maharashtra demand draft should be in favour of SBI A/c. MVAT • Bill wise statement of sales and purchases from the beginning till the date on which turnover of sales or purchases exceeds the prescribed limit for registration. However, the same is not required in case of application for TIN under voluntary registration scheme.

• Copy of partnership deed/memorandum and articles of association/trust deed etc. • Proof of address of place of business and residence of applicant, partners, directors etc.(copy of maintenance bill, electricity bill, property card, leave licence agreement etc. — any one proof of above for place of business.) • Copy of passport/Electricty bill/Municipal tax receipt /driving license/voter card of applicant/partners/directors.(any two proof is required for proof of residence) • Copy of license or certificate issued under any other Act, if any. • Income Tax PAN of the applicant/company/firm/partners/HUF and Karta. • Profession tax number of the proprietor/Company/Partners/Directors. • Proof of bank account of the applicant, Firm or Company. • Copy of proof of filing of last return and assessment order, if any (applicable only in case of application for registration due to change in constitution or change in ownership of the concern).

WHY TO OBTAIN REGISTRATION CERTIFICATE ? 1Obtaining of registration certificate is statutory obligation of every dealer, who is liable to pay tax under the Act. 2It empowers the dealer to collect tax. 3A registered dealer gets the benefits of set off (input tax credit) 4Business without registration invites penalty/prosecution. 5Nobody would like to buy goods from unregistered dealer. Who should apply for the registration The dealer who attains or crosses prescribed turnover of purchase or sale should apply for registration under VAT Act within 30 days from the date on which turnover crossed the prescribed limit. Note: Once a dealer exceeds the prescribed turnover and fulfils the conditions as mentioned in table below, then the liability to pay taxes under the Act commences from the time of transaction by which the turnover exceeds the prescribed limit. What happens if not applied in time for registration? When a dealer does not apply within 30/ 60 days from the date of exceeding the prescribed turnover of purchases or sales than certificate of registration will be issued with effect from the date of uploading of the application. Therefore, from the date of starting of business till the date of uploading of the application, the dealer will be treated as unregistered. Provisions of Penalty for un-registered dealers: If dealer does not apply in time and remains unregistered, it is an offence under the Act. Benefits of Registration:

i. He can claim set off of tax paid on the purchase if eligible to get any. ii. He can issue various declarations prescribed C.S.T. Acts like Form C etc. iii. Registered dealers are preferred while awarding the government contracts. The above mentioned benefits are denied to an unregistered dealer. Disadvantages of non registration: 1Unregistered dealer is liable to pay tax on the sales effected by him but he can not collect tax. 2He cannot claim any set off or refund of the tax paid by him. 3Purchases at concessional rate of tax not available to him. He cannot issue forms or declarations like Form C etc. 4No authenticity in the market as majority of dealers purchases goods from registered dealers only. 5Possibilities of non consideration for awarding the government contract. 6Imposition of penalty and prosecution for remaining unregistered. REGISTRATION & PROCEDURAL ASPECTS. TURNOVER LIMITS FOR REGISTRATION SECTION 3(2) & 3(4): CLASS OF DEALER TURNOVER OF SALES TO EXCEED Importer – Sale or purchase of taxable goods should be Rs.10,000 or more. Rs. 1,00,000 Others (including manufacturers and resellers)- Sale or purchase of taxable goods should be Rs.10,000 or more. Rs. 5,00,000 Section 3(5) - Following items specifically covered for registration limits: aTurnover of all items, whether taxable or tax free is to be considered. bTo include turnover on own account as well as on accounts of principal, whether disclosed or not. cIn case of auctioneer turnover should include turnover of goods, price of which is received by him. dIn case of agent of non-resident dealer, sales of such non resident dealer. aSection 3(8) contains provisions to make successor in business liable to tax. bChange in constitution or change in ownership - Time limit for application is 30 days. cChange in ownership due to death – Time limit is 60 days. dSection 3(9)- Dealers under voluntary registration scheme- No Basic deduction- liable from date of registration. FEES FOR REGISTRATION: Under Voluntary Registration Scheme (VRS): Registration fess of Rs. 5,000/is required for VAT TIN and Rs. 25 for CST TIN. With effect from 16-08-2007,

dealer applying under VRS is also required to deposit Rs. 25,000 as an advance payment of tax [proviso to Section 16(2)]. Such advance payment of tax can be adjusted against tax liability, interest or penalty for first and second financial year. New Registration in case of Shifting of Business: New Registration Certificate was required on shifting of place of business, if place of business is shifted from one pin code number to other pin code number. However, from 1-6-2006 change of place of business does not require new registration. An application on letterhead alongwith proofs of new address is sufficient. An application is required to be made to the registration branch within the jurisdiction of new place of business. TIN will remain the same. A new proviso has been inserted in Section 16(6) which empowers the department to cancel the registration granted to a dealer who has opted for voluntary registration, if the department is satisfied, after giving the dealer a reasonable opportunity of being heard, that the person has not commenced business within six months from the date of registration. New Registration- when change of Constitution: New registration certificate is required if there is a change in constitution of business, For eg. change in constitution from partnership to proprietorship or proprietorship to Private Limited Co. etc. Application is to be made within 30 days form the date of change. Advantages of Central Sales Tax Registration: A dealer registered under C.S.T Act can purchase goods from outside the state of Maharashtra at a concessional rate of tax @ 2% against declaration in Form `C'. Scheme of Voluntary Registration: Certificate of registration can be obtained without exceeding the turnover limit as per voluntary registration Scheme. However fees of Rs. 5000/- and an advance payment of Rs. 25,000/- is payable in such case. Such payment is to be made in by way of handing over the Demand Draft or Pay Order alongwith chalan in Form 210 to the registration officer. Demand draft or pay order is required to be prepared in favour of ―Bank of Maharashtra – A/c. MVAT‖ in case of Mumbai region and ―State Bank of India – A/c. MVAT‖ for other regions. IImportant Points to Remember: i. Any dealer having more than one place of business in different locations within the State is required to make a single application in respect of all such places.. ii. Whenever dealer adds any other place of business or godown etc. he has to inform the registration branch about it within 60 days and get his registration certificate amended to that effect. There is no specific form for

making an application for amendment in TIN certificate. An application on letterhead alongwith the specified proof of addition is sufficient. iii. When dealer starts dealing in different commodities which are not mentioned in registration certificate, he should inform the registration branch about it within 60 days and get his TIN certificate amended to that effect. iv. Any dealer opening a new place of business is entitled to get additional copy of TIN certificate at no extra cost. v. Every dealer is required to furnish a declaration stating the name of the person who shall be deemed to be Manager in relation to the business in the State of Maharashtra.

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