The Odisha Value Added Tax (Amendment) Act, 2015

The Government of Odisha Vide its notification no 9848-I-Legis 5/2015-L dated 24th September 2015 has notified ‘THE ODISHA VALUE ADDED TAX (AMENDMENT) ACT, 2015, (Odisha  Act  7  of  2015),  an  act  to  further  amend  ‘THE  ODISHA  VALUE  ADDED  TAX,  ACT 2004’.

Further the Act has been assented by the honorable Governor of Odisha on 21st  September 2015.

The Department of Finance, Vide notification no 28080 dated 19th  October 2015 has stated that the deemed date for amended act to be enforceable shall be 1st  of October, 2015.

A   gist   of   the   said   amendment   with   explanation   has   been   enlisted   below   with   the corresponding sections of the earlier Act.

Section 2 (Amendment of Section 9)

According to the old act, small retailers who have an annual gross turnover not exceeding

40 Lakhs have an option to pay turnover tax in lieu of VAT.

The same provision continues with an enhancement of the limit from 40 Lakhs to 50 Lakhs, that   is,  any   retailer  whose  annual  gross  turnover  does  not  exceed  50  lakhs   have an option to pay turnover tax in lieu of VAT.

Section 3 (Amendment of Section 10)

This  section  deals with the taxable limit where the  dealer shall  be liable to pay VAT  if  it exceeds the specified limit which has been enlisted below:

Also, a sub-section namely 10(4-a) has been inserted which states as follows:

“Where  a  dealer,  who  transfers  property  in  goods  (whether  as  goods  or  in  some other  form)  involved  in  the  execution  of  works  contract  (hereinafter  referred  to  as the contractor) enters into further contract for assigning such works contract, either wholly or in part thereof to other dealer (hereinafter referred to as sub-contractor), directly or otherwise, and the sub-contractor executes such works contract then each or either of them shall be jointly and severally liable to pay tax, and notwithstanding anything contained in  this Act, the contractor  and the sub-contractor  shall  pay tax proportionately in the prescribed manner in respect of transfer of property in goods (whether as goods or in some other form) involved in the execution of such works contract.

If   the   contractor   proves,   in   the   prescribed   manner,  to   the   satisfaction   of   the Commissioner that the tax has been paid by the sub-contractor on the turnover of the goods involved in the course of execution of the works contract, the contractor shall not be liable to pay tax on such turnover.

If the sub-contractor proves, in the prescribed manner, to the satisfaction of the Commissioner that the contractor has opted for composition under sub-section (3) of section11 in respect of the works contract being executed by the subcontractor, then

the sub-contractor shall not be liable to pay tax on such turnover.”

Meaning if a dealer involved in the execution of works contract (contractor) outsources such work  to  another  dealer  i.e.  sub-contracts  it  (sub  contractor)  either  wholly  or  partially, directly or otherwise and if the said sub contractor executes the assigned work, then both the contractor and the sub contractor shall be jointly and severally liable to pay VAT proportionately and in the manner prescribed.

Also if the contractor proves to the satisfaction of the commissioner that the sub-contractor has  paid  the  taxes  on  the  turnover  of  the  goods  involved  in  the  execution  of  the  works contract, then the contractor shall not be liable to pay tax on the said turnover.

Also if the sub contractor proves to the satisfaction of the commissioner that the contractor has opted for composition scheme in respect of the works contract being executed, then the sub-contractor shall not be liable to pay tax.

Section 4 (Amendment of Section 11)

Sub-section 3 of Section 11 of Odisha Value Added Tax Act is an over-riding section and provides for an option to pay taxes under composition scheme for works contractor.

The said sub-section also widens its scope by including dealers undertaking the construction of  flats,  dwellings  or  buildings  or  premises  and  transferring  them  in  pursuance  of  an agreement along with the land or interest underlying the land.

The following table depicts the comparison of the new section with the older one:

Section 5 (Amendment of Section 16)

This  section  lays  down  the  criteria  fulfilling  which  a  dealer  can  opt  for  the  scheme  of turnover tax in lieu of VAT. One such criteria being the gross turnover shall not exceed forty Lakhs.

The government here has brought an amendment by increasing the said limit to Fifty Lakhs

Section 6 (Amendment of Section 20)

The Department has inserted a new sub-section namely (3-a) to put a cap on the input tax credit claimed. It has restricted the amount of credit to the amount of tax actually paid.

The clause so inserted read as under: -

“Notwithstanding  anything  contained  in  this  Act,  no  amount  of  input  tax  credit  shall  be allowed to a registered dealer on any purchase of goods in excess of the amount of such tax actually paid under this Act."

The amendment may warrant to such cases where the input tax credit can only be availed if the amount claimed is actually being paid in the invoice which is a base document for taking input tax credit.

Meaning there by, the dealer needs to assure from the party from whom the goods have been purchased as to the VAT mentioned in the invoice is actually being paid. Alternatively as a preventive measure the dealer need to check the online credit reflection in  his login before claiming any Input tax credit to safe guard his position under law.

Section 7 (Amendment of Section 25)

Section 25 sub-section (2) has been substituted by another sub-section which states:

If the registering authority, on verification of application for registration, is satisfied that the requirements of the provisions of this Act and the rules have been complied with, he shall register  the  applicant  and  grant  him  a certificate of  registration  in  the  prescribed  form, which shall specify the class or classes of goods dealt in or manufactured by him and such registration certificate shall be assigned a number in the manner as may be prescribed.

The Act earlier required as a part of the registration process to conduct an inquiry before issuing the registration certificate. However with the electronic registration in place with an online application and document verification, such enquiry is no longer required.

Section 8 (Amendment of Section 27)

Section 27 has been substituted as follows:

“The registering authority may, for proper realization of tax payable under this Act and for enforcement of lawful conduct of any dealer from time to time, demand from a registered dealer, a reasonable security, or additional security, as the case may be, to be paid in the prescribed manner and if the security so demanded is not paid within such time as may be specified in the order demanding such security, he may, notwithstanding anything contained in this Act, cancel the certificate of registration granted to him.

Provided  that,  no such cancellation shall be made unless the dealer has been given a reasonable opportunity of being heard”.

Hence,  the   registering   authority  shall  have  the  powers  to  demand   for  reasonable   or additional security from the dealer for proper utilization of tax payable. In case, the said amount is not deposited by the dealer within the said time and manner then the registering authority shall have the power to cancel the registration after providing a reasonable opportunity of being heard.

Section 9 (Amendment of Section 30)

The section dealing with the suspension of the registration certificate has been omitted.

Section 10 (Amendment of Section 31)

With the abolition of section 30, a few changes were required to be made which are summarized as follows:

Clause (d) of sub-section 1 of section 31 is substituted as-in the event of death of the  proprietor, the registration shall stand cancelled automatically irrespective of the availability of the successor at the time of death.

Clause  (h)  under  sub-section  1  of  section  31  has  been  inserted  stating  that  the issuing  authority  can  cancel  the  registration  certificate  on  the  basis  of  "good  or sufficient reasons".

Sub-section 2 of section 31 expresses the point of time which renders the certificate of  registration  inoperative.  This  amendment  is  made  by  insertion  of  clause  (c)  to section  31(2)  applicable  to  section  31(1)  (g).  Further  clause  (d)  to  section  31(2) applicable to section 31(1) (h).

Sub-section (3) shall be substituted as follows:

a registered dealer whose certificate is liable to be cancelled under clauses (a), (b), (c), (e), (f) and (g) shall apply for its cancellation in such manner and within such prescribed time.

Also  Section  (3-a)  has  been  inserted  where  in  the  issuing  authority  is  required  to  inquire into the matter before cancelling the registration certificate. He is also required to provide a reasonable opportunity of being heard before such cancellation.

Section 11 (Amendment of Section 32)

The sub-section (1) shall be substituted as follows: (a) Where the registered dealer:

Sells or disposes of his business or any part thereof

- Or discontinues his business,
- Or changes the name, style, or nature of business,
- Or makes any addition or deletion in the class of goods dealt in or manufactured,
- Or changes  his  place  of  business  (other  than  principal  place  of  business)  or warehouse,
- Or opens a new place of business; or

(b) Effects any other change in the constitution or principal place of business, (c ) Changes the ownership of the business or its basic status,

Then he shall duly inform the registering authority within the prescribed time.

Sub-section (2) has been substituted as follows:

i. In  case  of  clause  (a)  the  amendment shall  be  done  electronically on  the  basis  of application.

ii. In   respect  of  clause  (b)  the  registering  authority  may  amend  the  registration certificate or reject the application for such amendment.

iii. In  respect  of  clause  (c)  the  registering  authority  may  issue  a  fresh  registration certificate or reject the application for such amendment.

However before any application is rejected the registration authority is required to give a reasonable opportunity of being heard.

Sub-section (7) of the said section is the penalty section.

If  the  dealer  fails  to  make  an  application  of  the  amendment  within  the  prescribed time,  he  shall  have  to  pay  a  penalty  of  Rs  100  each  day  of  default  subject  to  a maximum of Rs 10,000.

Section 12 (Amendment of Section 33)

Sub-section (5) of section 33 of the principal Act, gives the dealer an option to voluntarily revise his return in case of any taxes being due after the filing of returns. However, no  such  option is  available in  case notice for audit has been  issued and received by the dealer.

The words "or as a result of such audit", has been omitted.

Another clarifying section, section 9 has been inserted where it is specifies that, in case of return filled electronically, signature by the dealer or authorized person is not required.

Section 13 (Amendment of Section 39)

Sub-section (5) of section 33 of the principal Act has been substituted to:

If  a  registered  dealer  furnishes  the  return  in  respect  of  any  tax  period,  it  shall  be deemed to be self-assessed.

Section 14 (Amendment of Section 41)

The Act  earlier  required that once  the tax  audit of the dealer, the authorized officer shall submit an 'Audit Visit Report' within seven days of its completion to the assessing authority along with all its statements, documents and evidences of evasion of tax.

After this amendment,

On  the  completion of  the  tax  audit, the  authorized officer  shall  determine the  tax liability and shall also serve a notice along with the 'Audit Visit report'.

If the dealer agrees to all the findings in the 'Audit Visit Report' and pays in full the net  tax  liability  as calculated  by  the  officer  along  with  an  additional  25%  of  the amount as penalty within 30 days of the date of service of the notice, there shall be no assessment on account of such audit.

If the dealer does not comply and fails to make the payment the authorized officer shall  submit  the  'Audit Visit  Report'  to  the  assessing  authority  along  with  the statements  recorded  and  documents  obtained  evidencing  suppression  of  purchases or  sales,  or  both,  erroneous  claims  of  deductions  including  input tax credit and evasion of tax, if any, relevant for the purpose of investigation, assessment or such other purposes.

Section 15 (Amendment of Section 42)

Section 42 (1) is being amended with the inclusion of section 43 along with section 39  and  section  40  and  hence  now  it  is possible  to  conduct  an  audit  assessment where   turnover   escaping   assessment  is   already done  unlike earlier   where assessment was possible only in case of self assessment or provisional assessment.

Section 42 (5)  has  been  amended  where  penalty  prescribed  as  twice  has  been brought down to an amount equal to that of the tax payable.

Section 42 (6) talks about time period for completion of audit assessment which was prescribed as six months and commissioner may extend it to further period of   six months. However after the 2015 amendment the same period can be extended to further six months. Hence after amendment the maximum period for the assessment to be completed is 18 months which was earlier only 12 months.

Further sub-section 7 has been omitted which required the assessment to be completed within a period of one year from the date of receipt of the audit report.

Section 16

By way of section 16, a new section is inserted namely Assessment in Certain cases in lieu of Audit

This section shall over-ride sections 41 and 42, where in the commissioner may by notification select large tax payers or dealers with large turnover or the dealers who have been granted provisional refund under section 58, for assessment in lieu of tax audit and audit assessment.

After notifying, the assessing authority may serve on such dealer a notice, requiring him  to  appear  on  a  date  and  place  specified  therein  and  produce  or  cause  to  be produced   such   books   of   account,  documents relying  on which  the assessing authority, may proceed to assess the said dealer.

The dealer shall  have a  maximum of  thirty days to  produce the  relevant books of  accounts and documents.

If  the  dealer  fails  to  produce  the  books  of  accounts  and  documents,  the  assessing authority shall proceed to complete the assessment to the best of his judgment on the  basis  of  the  material  available  and  after conducting  such  enquiry  as  may  be necessary.

If the dealer produces the books of accounts and documents, the assessing authority shall after examining the material so produced and after conducting an enquiry as required assess the tax due.

Penalty of twenty five percent on the tax amount to be imposed irrespective of any other penalty imposed in respect of any other assessment completed earlier.

An assessment under this section shall be completed within a period of six months from the date of service of the notice on the dealer. However the Commissioner may, on  the  merit  of  a  case  allow  such  further  time  not  exceeding  six  months  for completion of the assessment proceeding.

Section 17 (Amendment of section 43)

The assessing authority, after the amendment of this section can proceed to assess the turnover of the dealer based on the information available even if the dealer has not been earlier assessed under section 39,40,42 and 44.

Also, section 43 (2) has been amended to bring down the penalty to a maximum of an amount equal to the amount of tax.

A new sub-section (4) has been inserted which requires the   completion of turnover escaping assessment within six months from the date of service of notice and commissioner may extendit to   further   six  months.  Further,   under   special circumstances and with good and sufficient reasons, the commissioner may allow a further period of six months. Hence the maximum period for the assessment to be completed is 18 months.

Section 18 (Amendment of Section 50)

Section 50 stands for payment and recovery of tax, sub-section (4) enumerates the details of cases where the amount so demanded, under various provisions are to be collected under section 50. As the new section 42A for assessment has been inserted in the amendment act 2015,  suitable  amendments  were  made  to  incorporate  the  section  42A  paripasu  to  the existing provisions for the uniformity of law.

Section 19 (Amendment of Section 54)

Section  54  of  the  OVAT  Act,  stands  for  deduction  of  tax  at  source  from  the  payment  of works contract.

A  much  awaited  issue  stands  cleared  under  the  amendment  that  the  principal contractor need not deduct any tax from the payment to the subcontractor. The provision enumerates the following points which are of immense importance and in the line of modernisation and e-mechanism:

Where a dealer executing works contract, enters into further contract with sub-contractor  to  execute  such  work,  he  shall  not  deduct  any  further amount towards tax in respect of the said work.

Tax deducted at source by the deducting authority shall be transferred proportionately to the subcontractor by the principal contractor in such manner as may be prescribed. This limb talks about credit transfer mechanism which can really help the unnecessary rerun mechanism and can save resources of the Department and also poor assesses.

Vide sub-section (1-a), where the Commissioner is satisfied on his own information that the deducting
authority requires enrolment, he may enroll the deducting authority in such form as may be prescribed and assign him with an identity code.

E-payment of TDS has been introduced with which the manual payment method has been rendered void.

A new proviso has been inserted in clause (a) of sub-section (5) wherein if a dealer executing works contract, enters into further contract with sub-contractor to execute such  work,  the  sub-contractor  shall  not  require  a  certificate  of  no  deduction  in respect of the said works contract.

Section 20 (Amendment of Section 57)

A  new  sub-section  (2-a)  under  in  section  57 is  inserted,  where  in  it is  provided  that,  the Commissioner shall, in such manner and within such time, as may be prescribed, refund to a dealer, any amount of tax, deducted at source in respect of such dealer, in excess of the amount due from him under this Act.

Section 21 (Amendment of Section 58)

Sub-section (1) of section 58 has been substituted as follows:

i. If  a  registered  dealer  has  filed  a  return  or  a  revised  return  for  grant  of  refund  on account of sales referred to in clauses (b), ( c)or (d) of section 18 and if he has not adjusted the amount due in accordance to section 33 in any of his returns, then he shall make an application to the assessing authority for refund in such manner and form as may be prescribed.

ii. The registered dealer may apply for grant of  refund relating to a  quarter after six months of filing the return or revised return for such quarter.

iii. To establish the correctness of the claim, the assessing authority may call for such additional information as he may think necessary.

iv. The assessing authority shall grand a provisional refund of 90% of the claim on the basis  of  verification  within  a  period  of  ninety  days  from  the  date  of  application  of such refund.

However, if there is any delay in completing the verification due to non co-operation of the dealer or due to any other reason attributable to the dealer then such period shall not be taken into consideration while calculating the period of ninety days. Further he shall not be entitled to any interest (if admissible under section 59) on such period.

Also, if the dealer causes delay without any valid reason, the authority can reject the refund application after giving the dealer an opportunity of being heard.

All cases of refund, for which provisional refunds have already been granted under clause (d), shall be assessed under sub-section (1) of Section 42-A within a period of twelve months from the end of the year containing tax periods relating to the returns for which refund has been granted.

On assessment if it is found that the dealer has been granted excess refund as provisional  refund,  then  the  claim  for  excess  refund  shall  be  disallowed  and  the dealer shall be liable to pay an interest at the rate of 2% per month on such excess amount  from  the  date  of  grant  of  provisional  refund  till  the  date  of  issue  of assessment order.

Refund can be claimed only if the application for such refund has been made within twelve months from  the  end of the  year  containing the period to which  the return relates.

Section 22 (Amendment of Section 59)

In pursuance of insertion of section 42A, in the principal Act, in section 59, in clause (a) of subsection (1), after the figure "42", the figure "42-A" shall be inserted.

Section 23 (Amendment of Section 65)

The closing stock statement that was required to be furnished by the dealer who are liable to pay tax under section 11 but are not required to file audit report has been dispensed with and hence such compliance is no longer required.

Sub-section (2), talks about the penalty provisions if the application for amendment is  not filed within the due time prescribed, the dealer may have to pay a penalty of Rs100  per  day  of  default.  However  with  the  amendment  in  the  said  section  the penalty  shall  be  limited  to  a  maximum  amount  of  Rs  10,000.  The  substituted provision will be applicable from 1st  of October 2015

Section 24 (Amendment of Section 77)

a. In pursuance of insertion of section 42A, in the principal Act, in sub-section (1) of section 77, the figure "42-A" shall be inserted after the figure "42".

b. Substituted sub-section (7)  requires the Appellate  authority to pass the appellate order within a period of 3 years. No such time limit had been prescribed earlier.

c. The other provisions of the said section are:

In  disposing  of  an  appeal,  the  appellate  authority  may,  within  a  period  of three years from the date of admission of such appeal or as the case may be, in   pending   cases   within   a   period   of   three   years   from  the  date   of commencement of the Odisha Value Added Tax (Amendment) Act, 2015, after giving   the   appellant   a   reasonable   opportunity   of   being   heard   and   after causing such enquiry as he may deem necessary-

(a) Confirm, reduce or annul the assessment of tax, or the imposition of interest or levy of penalty, if any; or

(b) Enhance the assessment including any part thereof whether or not such part is the subject matter in the appeal; or

(c) Set-aside the assessment  and  direct  the  assessing  authority to make a  fresh  assessment after such further enquiry as may be directed.

(d) A new sub-section (7-a) has been introduced to put a cap on the time limit on the cases that have been set aside for conducting a fresh assessment. Such assessments shall be completed within 2 years from the date of order causing such assessment.