Wednesday, December 4, 2013

CHANGES IN MVAT AUDIT REPORT FORM 704 VERSION 2.0.0-AN ANALYSIS


on Wednesday, December 4, 2013

Changes in Form-704- Version 2.0.0-An Analysis CA Mayur R. Parekh

In this article I have tried to analyze changes made in Form-704 Version-2.0.0 introduced vide Notification No. VAT/AMD/2013/1B/ADM-8 dated 23-08-2013.


I] Letter Of Submission



A] Under this dealer is expected to give details of VAT/CST paid based on his acceptance of VAT Auditor’s Recommendations.

B] Under earlier version of form 704 version 1.3.0 the dealer was supposed to submit Balance sheet, Profit & Loss a/c, Statutory/ Tax Audit Report, Trial Balance in case of Multi-State activities and Part-I of e-704 duly signed by the VAT Auditor as it was called for by way of enclosures under letter of submission and Part-I. However, by way of Trade Circular 16-T of 2011, date-11/11/2011 Filling Of Audit Report in Form 704 electronically for the period 01-04-2010-31-03-2011 the requirement for submission of Balance sheet, Profit & loss a/c, Statutory/Tax Audit Report and Trial Balance in case of Multi State activities was done away with and dealer was only required to submit :
i)  A statement of submission of audit report in the format given in the Circular dated 1/10/2009.
ii) A duly signed copy of Acknowledgement generated after uploading of audit report in form 704.
iii) A copy of Part-I of the form-e-704 alongwith, certification duly signed by the Auditor.
But now under new version of Form-704 they have deleted “Enclosures” in Letter of Submission as well as in Part-I. But however as per instruction no.27 dealer is required to submit
i)  A statement of submission of audit report duly signed by the Dealer.
ii) A duly signed copy of Acknowledgement generated after uploading of audit report in form 704.

It seems that requirement of submission of copy of Part-I of Form e-704 along with certification duly signed by the VAT Auditor is inadvertently being removed which is the main crux of Form e-704. I hope that sales tax department may come out with clarification for the same by way of trade circular.
1] In serial no. I (A) the word “ we hereby annex a copy of our/their Tax Audit report dated along with all the annexures to those reports and copies each of the audited (*) Profit And Loss Account / Income And Expenditure Account for the year ended on” has been replaced with the word “ We have taken on record Tax Audit Report dated along with all the annexures to those reports and copies each of the audited (*) Profit And Loss Account / Income And Expenditure Account for the year ended on”
2] In serial no. 1(B) & 1(c) the words “And annexed here with” are removed.
3] In table-1, serial no.5(a)(ii) return in form 424 is inserted along with form 405.

Under certification part the following changes have been made :

a) In table-1, serial no. 2(B)(b) the selection of schedules and annexures as applicable to the dealer, annexure J-3 and j-4 have been removed.

b) In table-1,serial no.2(B) clause (c) & (d) are clubbed as clause (c).

c) Clause (d) and clause 7 below table 5 are newly introduced as “on the basis of an information available on the website of department the period under audit involves no issue in case of this dealer in which a decision against the State Government or the Commissioner was delivered by the Tribunal and the Reference and/or Appeal therein is pending before appropriate forum except detailed in table 7 herein below, if applicable.

                This clause has been inserted by virtue of section 23(8) of MVAT Act,2002. But according to me this is Herculeun  task cast on the VAT auditor which is not practical as well as justifiable. It is a job of Assessing officer and not VAT Auditor. If references/appeals are filed by the State Government or the Commissioner before appropriate forum  it is the Assessing officer who must be aware about the same. But the VAT Auditor is not supposed to certify of references/appeals  filed by the State Government or Commissioner in respect of similar matter pertaining to auditee. Presently, 863 references/appeals  have been filed by the State Government or the Commissioner before appropriate forum as listed on MAHAVAT  Website. To certify the said matter every VAT Auditor must go through all references/appeals  filed which is practically not possible and feasible. The said list of references/appeals  will also be updated on regular basis on MAHAVAT Website then how VAT Auditor will keep track of the same while signing VAT Audit Report. At the most if legislature wants VAT Auditor to certify the said matter than it should be restricted to only references/appeals  filed by the State Government or the Commissioner in respect of auditee only and not in general.

              Under clause 7 below Table-5 a table has also been inserted wherein details of references/appeals have been  filed by the State Government or the Commissioner in case of similar issue is involved  in the case of dealer under Audit where a decision against State Government or the Commissioner was given by the Tribunal and the references/appeals are pending before the appropriate forum as listed on MAHAVAT Website  have to be furnished in the said clause.
      d] Enclosures at the end of Part 1 are deleted.

III] SCHEDULE – I
a)   In Serial No. 3Computation of Purchases  eligible for set-off

 Under  clause (j) deduction from Total Turnover of Purchases regarding Purchases within the State of Maharashtra from unregistered dealers exclusion has been made for Purchases from unregistered dealer liable for Purchase Tax.
                The said changes has been made due to insertion of section 6A and 6B w.e.f. 01-05-2012 wherein Purchase tax will be payable on Purchase of cotton or oil seeds respectively from unregistered dealer and transferred to OMS Branches or Agents or used  in manufacturing of tax free goods or taxable goods & goods so manufactured are transferred to OMS Branches or Agents.

b) In Serial no. 3 clause-O, for Balance Taxable Purchases eligible for set-off, instead of word “Balance- within the State Purchases of Taxable Goods from registered dealers eligible for Set-off” the words “from registered dealer” are removed. The said changes have also been made in Serial No – 5 clause (a) –Table for Computation of set-off claimed for the period under audit.
Similarly, the abovementioned changes have also been made in Schedule – III, IV and V.

This changes was required to give effect to allow set-off on Purchase Tax payable/paid. But according to me may be inadvertently, Table is not provided for calculation of Tax rate wise breakup of Purchases liable for Purchase tax as well as Tax rate wise breakup of Purchases eligible for set-off liable for Purchase Tax. Due to this mismatch of figure will occur between Serial No. 3 clause - O and Serial No. 4.

c) Under Serial No. 6B clause - (a1) has been newly inserted to provide for Purchase Tax payable.
     The said changes have also been made in Schedules  III, IV and V.

d)      Under Serial No. 6B clause (f1) has been newly inserted to provide for any other  e.g. Purchase Tax, Late fee (please specify).

     The said changes have also been made in Schedules III, IV and V.

     According to me the word “Purchase Tax” should not come here as specific clause (a1) has been inserted for the same. Regarding late fee the said changes has been made due to introduction of sub-section (6) of section 20 was made by Maharashtra Value Added Tax Act No. 8 of 2012, dt. 25-04-2012 w.e.f. 01-08-2012 as per Notification No. VAT/152/C.R. 65/ Taxation-1, dt 04-07-2012.



IV ] ANNEXURE- E

      Instead of heading “Computation of Set-off claim on the basis of tax paid Purchases effected from Registered Dealers” it has been replaced with “Computation of Set-off claim on the basis of Tax Paid Purchases”.

       The said changes have been made to give effect to allow set-off on Purchase Tax Payable/Paid on URD Purchases as applicable.
a] Section 1: Heading “ Total Tax Paid Purchases Effected From The Local Supplier During The Period Under Audit  (Including Capital Assets) ” has been replaced with “ Total Tax Paid And URD Purchases Effected From The Local Supplier During The Period Under Audit  (Including Capital Assets) and total purchase tax paid ”.
       New row has also been inserted to incorporate purchase tax payable.
b] Section 2:
New row has been inserted to incorporate purchase of taxable goods from registered dealer on which set-off is not claimed.
                          I failed to understand why such details was incorporated. When dealer has not claimed the set-off on purchases why such details are being called off. Here the question may also arise whether any  expenses in the nature of purchases on which set-off is not claimed the details of the same are to be given or still clarification given by the Honorable Commissioner in Trade Circular No. 26T of 2006 dated  18-09-2006 will prevail.

C] Section 4 : The row no. 3 under old form-704 has been divided into row no.3- sub rule  53(3)(a) Branch transfer and sub rule 53(3)(b) Branch transfer (D-schedule goods) in new form 704 to provide details of retention.
d] Section 5 : The new row has been provided to furnish details of total tax paid purchases effected from registered dealers on which set-off is calculated and allowed under Rule 52A and Rule 55B along with Rule 52.

V] Annexure G: Additional rows are inserted upto 5000 in place of 1000.

VI] Annexure I: Additional rows are inserted upto 5000 in place of 1000.

VII] Annexure J1 & J2: Additional rows are inserted upto 5000 in place of 1000.

VIII] Annexure J3 & J4: Both the annexure have been removed in new form 704. According to me it was not required because it was convenient for both the Sales Tax Department and the Tax practitioner to know about the details of debit note & credit note pertaining to goods return, rate difference etc and to cross verify GTO of sales and purchases with respective schedules.

               Friends, in this article I have tried to incorporate and analyze the changes in new Form 704 Version 2.0.0. Please pardon me if any of the changes have not been incorporated herein above.



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