K.VAITHEESWARAN ADVOCATE & TAX CONSULTANT

Flat No.3, First Floor,

No.9, Thanikachalam Road,

T. Nagar,

Chennai - 600 017, India

Tel.: 044 + 2433 1029 / 4048

402, Front Wing,

House of Lords,

15/16, St. Marks Road,

Bangalore – 560 001, India

Tel : 080 22244854/ 41120804

Mobile: 98400-96876

E-mail : vaithilegal@yahoo.co.in / vaithilegal@gmail.com

www.vaithilegal.com

Major amendments have been carried out to the TNVAT Act and Rules and the amendments are effective from 29.01.2016.

This presentation summarizes the key changes and it is advisable to examine the text of the relevant amendments before taking any decision.

The amendments are significant and are far reaching in nature.

Originally input tax credit on eligible purchases can be claimed based on a valid invoice issued by the vendor.

In terms of the new definition ‘input tax’ means the tax paid under this Act in the manner specified by a registered dealer to another registered dealer on the purchase of goods including capital goods in the course of his business.

Originally the definition covered ‘tax paid or payable’ and the amendment has deleted ‘payable’.

Section 19(1) is being amended whereby the expression ‘tax paid or payable’ is substituted with the expression ‘tax paid’.

A registered dealer who claims ITC shall establish that the tax due on purchase of goods has actually been paid in the manner prescribed by the registered dealer who sold such goods and the goods have actually been delivered.

In respect of tax deferred under Section 32, it shall be deemed to have been paid for the purpose of Section 19(1).

Originally under Rule 10(2) of the TNVAT Rules input tax credit can be claimed based on the original tax invoice in respect of purchase of goods.

New Rule 10(2A) provides that every registered dealer who claims ITC to the extent of tax paid on purchases of taxable goods specified in the First Schedule from other registered dealer shall establish whenever it is deemed necessary by the assessing authority that the tax due on such purchase of goods has actually been remitted into the Government account.

Rule 10(2B) provides that the amount of set off or refund on any purchase shall not exceed the amount of tax in respect of the same goods actually paid into the Government Treasury except to the extent where purchase tax is payable by the claimant dealer on the purchase of the said goods.

Amendments have been made to Section 19(4), Section 19(5)(b), Section 19(9) in order to reflect tax paid as against the earlier tax paid or payable.

The impact of this amendment is significant and may not be appropriate at this point of time when neighbouring States do not cast such onerous responsibility.

Similar provisions were introduced in the Maharashtra VAT Act and while the provisions were upheld in the context of tax paid, the Court also took on record the undertaking that the Department would identify the defaulters who have not paid the tax; refund would be given to the dealer claiming set off where there is a final recovery from the defaulter even without a refund application being made and details of defaulters would be uploaded in the website.

Section 18(1) is being amended whereby in so far as sale of goods to SEZ is concerned, the new provision covers sale of goods to any registered dealer located in SEZ in the State for the purpose of use in manufacture, trading, production, processing, assembling, packaging or for use as packing material or packing accessories if such registered dealer has been authorised to establish such units by the authority specified by the Central Government in this behalf.

The amendment seeks to restrict the scope compared to the earlier provision which is still the subject matter of litigation specifically in the context of contractors executing works contracts for SEZ.

Whether the benefit of zero rating is applicable to contractors executing work for SEZ is pending before the Division Bench of the Madras High Court.

A dealer who makes zero rated sales is entitled to refund of input tax paid by him on purchase of those goods which are exported as such or consumed or used in the manufacture of other goods that are exported as specified in Section 18(1)

G.O. No.Ms.15, Notification-IV provides for an exemption in respect of tax payable by any dealer on the sale of goods by such dealer to a registered dealer for the purpose of setting up, operation and maintenance of a unit located in SEZ subject to a certificate being obtained in the prescribed format.

Exemption under Section 30 of the TNVAT Act – No input tax credit.

Section 6 of the TNVAT Act, 2006 deals with compounding scheme and originally the scheme was not available where a dealer purchases on CST basis or imports goods.

The scope is now being widened whereby even a dealer who receives the goods from outside the State is not eligible.

The Supreme Court in the case Indian Dairy Machinery Company Vs ACCT (2008) 12 VST 386 has held that where the language in the Section provides that the scheme is not applicable to a dealer who purchases or receives goods from outside the State, then the benefit is not available where the Appellant receives the goods by way of stock transfer.

The provisions of Section 6 of the TNVAT insofar as it restricts inter-State purchases and imports has been challenged before the Madras High Court and the matter is pending.

The AP High Court in the case of Maruthi Constructions has struck down a provision which takes away the benefit of compounding when goods are purchased outside the State.

Section 13 deals with TDS on Works Contract. Section 13A is being inserted in order to provide that any person liable to make

deduction of tax under Section 13 shall apply to such authority in such manner as may be prescribed and shall obtain a tax deductor identification number.

Rule 9(1)(a) provides that a person liable to make deduction and payment under Section 13 shall apply to the registering authority having jurisdiction for a Tax Deductor Identification Number (TDIN) in electronic Form XX and such application must be made within 30 days on and from 29.01.2016.

Tax deducted under Section 13 has to be electronically paid to the assessing authority having jurisdiction along with a statement in electronic Form R on or before 20th day of every succeeding month along with proof of electronic payment.

Electronic Form S shall be generated by the assessing authority after satisfying that the dealer has paid the tax or the dealer has no liability to pay tax.

Form-T has been substituted with electronic Form-T.

Section 27(4) provided for 50% of the tax as a penalty in the case of first detection of escaped turnover or wrong availment of input tax credit and 100% penalty for second or subsequent detections.

In terms of the amendment, in addition to the tax determined under Section 27(2), Section 27(4) provides that the assessing authority shall direct the dealer to pay as penalty a sum which shall be 300% of the tax due in respect of such claim.

Harsh and stiff penalties.

Section 2(12A) is being inserted as a new definition whereby by a C&F Agent is defined to mean any person who is engaged in providing any service either directly or indirectly connected with clearing and forwarding of goods in any manner to any other person.

Section 70(2) of the TNVAT Act deals with the issue of ‘Transit Pass’ in respect of goods specified in the Sixth Schedule. The effect of the amendment is that the transit pass will have to be obtained by the seller or consignor or transferor or clearing & forwarding agent.

New Section 67-A contemplates production of advance inward way bill by a driver or any other person incharge of the goods vehicle entering the State from a place outside the State to a destination within the State carrying goods that may be notified.

G.O. Ms. No.15, Notification-III provides for a list of notified goods which includes refrigerators, air-conditioners, air-coolers, cement, electrical goods, and various other items.

Section 11 which provided for levy of tax on last purchase of sugarcane omitted. Section 3(4) which allows payment of 0.5% of the turnover by small dealers

having a turnover of less than Rs.50 lakhs amended to cover only such dealer who effect sales of goods purchased from the registered dealers within the State.

In respect of casual traders and for dealers in respect of whom the relevant assessment year is the first or last year of business, assessment shall be on the basis of scrutiny of returns with reference to books, records, etc.

The time limit for assessment of sales shown in the accounts at low prices is increased to 6 years from 5 years.

Books of account have to be maintained for 6 previous years as against 5 previous years.

Time limit for rectification of errors apparent on the face of the record increased from 5 years to 6 years.

Existing dealers having IEC required to furnish IEC to the registering authority along with proof within 2 months from 29.01.2019 (error in year and corrigendum likely)

All forms converted into electronic mode and new elaborate formats introduced.

Taxes, fees and other amounts due under the Act shall be paid by electronic payment into SBI or other authorised bank through the website of Commercial Taxes Department.

All forms prescribed should be submitted only in appropriate forms generated through the website along with digital signature certificate of the dealer or authorised person.

Where digital signature certificate is not available then the form should be filed electronically and hard copy should also be filed within the due date prescribed.

Companies shall submit applications and connected documents only in electronic form with digital signature.

Appeals can be filed either manually or electronically in prescribed forms. Where appeal is filed manually, it shall be in duplicate along with two

copies of the original order appealed against, one of which shall be a certified copy.

Where appeal is filed electronically, a copy of the electronically filed appeal along with the original order appealed against should be filed before the appellate authority.

Similar provisions introduced for revision applications, review applications, enhancement petitions, etc.

Application under Section 48A for advance ruling shall be in electronic Form VV.

Audit Report should be filed in electronic Form-WW. Section 79A introduced to enable application of provisions under the

Information Technology Act for aspects such as digital signatures, electronic governance, attribution, acknowledgement and dispatch of electronic records, etc. G.O. Ms. No.15, Notification No.II, has been issued in exercise of this power.

K.VAITHEESWARAN ADVOCATE & TAX CONSULTANT

Flat No.3, First Floor,

No.9, Thanikachalam Road,

T. Nagar,

Chennai - 600 017, India

Tel.: 044 + 2433 1029 / 4048

402, Front Wing,

House of Lords,

15/16, St. Marks Road,

Bangalore – 560 001, India

Tel : 080 22244854/ 41120804

Mobile: 98400-96876

E-mail : vaithilegal@yahoo.co.in vaithilegal@gmail.com