Recently CCT Rajasthan has issued a Circular No. F.26(197)ACCT/MEA/2013 dt. 09.06.14 to resolve problems of ITC mismatch under Rajasthan VAT Act 2003. First of all I appreciate the CCT that he has realized the problem and issued a circular in this regard.
For the help of dealers a facility has been given on the departmental portal to see the mismatch in sales with corresponding purchase ledgers of the buyers and to see the mismatch in purchases with the corresponding sales ledger of the sellers or vice versa . Now it has become easy for the sellers to find out omissions and mistakes in their vat-08A just by seeing the mismatch statement at once for each quarter. For this purpose the sellers are not required to wait for the request or communications from buyers regarding mismatch. Now the dealers have to just login into rajtax.gov.in and open the page e-service>e-return>sales mismatch ledger. Now it is duty of the seller to check the mismatch in sales with corresponding purchase ledger of buyers and upload the corrections to be made in their VAT-08A for the assessment year 2011-12. Uploading of information on this portal does not mean automatic correction in vat-8A of the seller. It is only a request and the correction will be made or accepted by the department only after the AO is satisfied and passes a rectification order in this regard and only then the purchaser would get the ITC. It has also provided a time limit for uploading the information till 31st August 2014. Failure to upload the information by this date will made the sellers liable for penalty u/s 64 of the RVAT Act.
Special features of this facility:
1. Now Sellers can very easily know about the omissions which took place in their vat-08A without any communication from their buyers in this regard.
2. It is an unilateral duty of the sellers to find out the omissions in VAT-08A filed by them and upload the correction request accordingly.
3. The entire duty is of the seller i.e. to look the mismatch and upload the information, the purchaser is nothing to do with it.
4. The facility is only for the AY 2011-12.
5. Uploading of information for correction is only a request for correction, it does not mean automatic correction.
6. If the seller fails to upload the information till 31st August 2014 he may invite penalty u/s 64 of the RVAT Act.
On the surface of the Circular the utility is showing a ray of hope for resolving the problems of ITC mismatch but at the same time there are many questions which requires answers to pose confidence among the dealers.
Questions which requires answers:
1. This facility is only for the AY 11-12, what will happen for other year, particularly for years prior to AY 11-12 when returns were not online?
2. If the seller fails to upload the information and pays the penalty for non uploading the information then what will happen to the buyer? Whether ITC will not be allowed to the buyer?
3. When the AO’s are not satisfying themselves even when all the relevant records are physically produced before them regarding ITC claim, then now how they will satisfy themselves only with information uploaded on the departmental portal?
4. Whether the seller’s AO will call all the selling dealers one by one along with books of accounts and will verify the things and whether the department or the AO’s are ready for this?
5. If this lengthy exercise of verification is to be followed then how this Circular will help when the dealers were already willing to furnish all the details to the AO for verification but the AO’s are not willing to go into detail, then how this circular will change the situation or make the situation better?
6. What will be standards for the satisfaction of the AO to judge the genuineness of the corrections?
7. The circular further says that after satisfaction about the genuineness of the corrections the AO will rectify the order, what purpose the rectification order will serve when the assessment of the seller is not going to be affected by the corrections in their vat-8A?
8. What is the time frame in which department will do all these things?
When I was just finishing the above write up with above questions in mind I came to know that CCT has issued one more Circular in this regard and the circular No. is F.26(197)/ACCT/MEA/2013/235 dt. 19.06.14. I read out the said circular and I was very much exclaimed to know that CCT has understood the complexity of the manner in which solution was provided in earlier circular and now he has come out with most refined and easy solution for this problem. I welcome this circular and thanks to CCT for his positive response.
The welcome points of this circular are:
- That now the ITC shall be allowed just on the basis of corrections uploaded in vat-8A without going into much detail as now the department has understood the exact problem and feels satisfied with the changes uploaded in vat-8A as it is not going to permit enter more sales than that was already disclosed in vat-10. [clause (b) of Circular]
- That ITC shall not be denied if mismatch is below Rs.10/-.
- The circular also provides that a system shall be evolved for verification of cases which remains unmatched even after 31st August 2014.
I once again thanks to CCT for giving solution for the year 2011-12 but at the same time I would also draw his attention to the cases which pertains to the year prior to the year 2011-12 when the returns were not online and heavy demand were raised due to mismatch and are still pending for disposal in the absence of verification.
In this regard an another circular should be issued on similar lines to revise vat-8A or VAT-09 in paper format for the period prior to the year 2011-12 to set rest the problems of earlier period also.
I have few suggestions in this regard which are as under:
a. Although vat-08A is a part of return it should be allowed to be revised without permission to make corrections in figures declared in vat-10 and there should be no time limit for such revision. Such permission is not going to help the dealers to manipulate the claim of ITC as the purchaser would not have the opportunity to make corrections in their vat-7A. Purchasers are and would be entitled to claim ITC only in respect of those purchase invoices which they would have already declared in his vat-7A furnished along with his return.
b. Or Vat-8A should be allowed to be rectified u/s 33 as any omission in vat-8A is a mistake apparent on the records as the sales is already entered in books, entered in VAT-10 but due to oversight it was omitted to enter just in vat-8A only. It is a mistake apparent on record and it should be allowed to be rectified.
c. The above circular does not provide solution for cases where the seller does not upload the changes in vat-8A. In this regard I suggest that the AO of purchasing dealers should examine the ITC claim with the original physical documents and may obtain an affidavit from the purchasers about the correctness of the ITC claim, may obtain confirmatory letters from the sellers in this regard, and at the most may obtain indemnity bond from the purchasers to the effect that if he is found to be guilty of any fraud he shall indemnify the government for the financial loss and the department should randomly check such cases and if any dealers is found to have taken wrong credit harsh action should be taken against such defaulting dealers.
d. Copy of orders must be provided in 100% cases, so that if there is any adjustment by the department in the returned figure, the dealer may file rectification application or appeal in time otherwise he may miss the opportunity.
I also invite suggestions, ideas and comments from the readers which will help the department in coming time to come out with more and more refined solution tool.
With best regards
CA Pawan Kedia