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CALCULATION OF VAT UNDER COMPOSITION

Harsh shah (Final CA Student) (50 Points)

25 August 2009

ONE OF MY CLIENT HAVING T/O OF RS 30 LACS IN THE YR 07-08 WAS UNDER COMPOSITION.

DURING THE YR 08-09 HIS T/O WAS RS 60 LACS.

HOW TO CALCULATE HIS TAX LIABILITY FOR THE YR 08-09.

PLEASE JUSTIFY YOUR ANS THROUGH RELEVANT SEC/RULE/CIRCULAR/NOTIFICATION

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5 Replies

CP Ram (Articled Assistant) (640 Points)
Replied 25 August 2009

Dear Harsh,

Pls. provide which composition your client has opted..

1. Reseller,

2. Bakery,

3. Restaurant,

4. Caterer,

5. Second hand car dealer....

Regards,

Chandraprakash Ramjalwar...

Harsh shah (Final CA Student) (50 Points)
Replied 25 August 2009

dealer is a reseller

CP Ram (Articled Assistant) (640 Points)
Replied 26 August 2009

As per NOTIFICATION - No.VAT-1505/CR-105/Taxation-1

Classes of Sales or Purchases:

Total turnover of sales made by a registered dealer, who is a retailer as provided in section 41, of any goods excluding the turnover of resales� if any, effected by him, of the following goods:-

1) Foreign liquor, as defined in rule 3(6)(1) of the Bombay Foreign Liquor Rules, 1953.

2) Country liquor, as defined in Maharashtra Country Liquor Rules, 1973.

3) Liquor imported from any place outside the territory of India as defined, from time to time, in rule 3(4) of the Maharashtra Foreign Liquor (Import and Export) Rules, 1963.

4) Drugs covered by the entry 29 of the Schedule C appended to the Act.

5) Motor Spirits notified by the State Government under sub-section (4) of section 41 of the Act.

Composition Amount:

The composition amount shall be as specified below, calculated on the,-

Excess, if any, of the total turnover of sales, including turnover of sales of tax -free goods but excluding�liquor,�Drugs, and Motor Spirits�referred to in column (3) of this entry , in respect of any six monthly period over the turnover of purchases including turnover of purchases of tax free goods,� but excluding�liquor,�Drugs, Motor Spirits�referred to in column (3) of this entry , in respect of the said six month period.� The turnover of purchases shall be increased by the amount of tax collected by the vendor of the retailer separately from the retailer.

1) at the rate of 5 per cent for the retailers whose aggregate of the turnover of sales of goods, covered by schedule A and goods taxable at the rate of 4 per cent., if any,� is more than 50 per cent. of the total turnover of sales; excluding the turnovers of liquor, drugs and motor spirits referred to columns 3 of this entry

2) at the rate of 8 per cent. in any other case.

Conditions:

(i) The selling dealer does not collect tax separately in respect of the sales specified in column 3.

(ii) The claimant dealer shall not be entitled to claim any set off under the Maharashtra Value Added Tax Rules, 2005, in respect of the purchases corresponding to any goods which are sold or resold or used in packing of goods referred to in column (3) of this entry.

(iii) The turnover of sales of goods specified to in column (3) of this entry has not exceeded rupees fifty lakh in the year previous to which the composition is availed of and if the dealer was not liable for registration under the Bombay Sales Tax Act, 1959 or, as the case may be under the Maharashtra Value Added Tax Act, 2002, in the immediately preceding year, then he shall be entitled to claim the benefit of the scheme in respect of the first fifty lakh rupees of the total turnover of sales in the current year.

(iv) The turnover of purchases referred to in column (3) shall be reduced by the amount of every credit of any type received by the selling dealer from any of his vendors whether or not such credit is in respect of any goods purchased by the selling dealer from the said vendor.

(v) In respect of the six monthly period starting on the 1^st April 2005, for calculating the excess referred to in column (4), 5/6^th of the turnover of sales of the six monthly period is to be considered instead of the entire turnover of sales for that period.

(vi) The claimant dealer shall apply in the �Form-4� appended to this notification for exercising the option to pay tax under the composition scheme. The application should be made to the assessing authority who was in charge of the case on the 31^st March 2005 before the 15^thJune 2005 or as the case may be, to the registering authority at the time of application for Registration Certificate under the Act.

(vii) Subject to condition (iii), if the option to join the composition scheme is exercised, in any year then it can be changed only at the beginning of the next year.

(viii) The claimant dealer shall not be eligible to recover composition amount from any customer separately.

(ix)� The claimant dealer is not a manufacturer or importer.

(x) The taxable goods resold are purchased from registered dealers.

(xi) Purchases of tax free goods may be from registered dealers as well as from unregistered dealers.

xii) Any other purchases from unregistered dealers are meant only for packing of goods resold.