Vide Notification No. No.23/H.A.6/2003/S.60/2015 dated 24th September, 2015 the State of Haryana has amended Rule 49A of Haryana Value Added Tax Rules, 2004 in what appears as a fresh effort to rope more developers to opt for the 1% composition / Lump sum scheme by introducing few changes and allowing fresh 60 Days to join this Notification from 24th September, 2015 itself.
Importantly some additional and further conditions have also been imposed. Further, vide this notification the government has also prescribed the Returns to be filed by Such Dealers and application to file for option of Composition Scheme by Developers.
Below is a clause by Clause Summarization of Revised Rule 49A. The changes vis-à-vis has been explained by dedicated author’s note under every change to make things simpler.
49A (1). A developer liable to pay tax under the Act, and duly registered, may pay, as an option, in lieu of tax payable by him under the Act, by way of composition of lump sum tax calculated at the compounded lump sum rate of one percent of entire aggregate amount specified in the agreement or value specified for the purpose of stamp duty, whichever is higher, in respect of the said agreement. The developer opting for this scheme here-in-after shall be referred to as the composition developer.
Author’s Note 1:- No Change
49A (2). The composition developer opting for composition under this scheme shall, -
i. Purchase goods for use in the execution of the works contract from a registered dealer of the State but shall not be entitled to claim any input tax credit thereon. If the input tax in respect of any goods purchased in the State has been availed of by a developer and such goods are held in stock at the time of option of composition scheme, the input tax in respect of such goods shall be reversed. In case any goods used in the execution of works contract are procured or purchased from dealers other than the registered dealers from within the State or from outside the State on which no tax has been paid to the State, the composition developer shall be liable to pay an amount equal to the amount of tax that would have been payable, had the goods been purchased within the State from a registered dealer.
Author’s Note 2: - Additional Restriction Imposed to buy the goods locally only from Registered Dealer only. In case the goods are purchased from unregistered dealer, the tax is to be paid on such purchases by Developers at the rate applicable on such goods.
ii. Be entitled to purchase or receive goods, from any place outside the State including imports from out of India, against prescribed declaration forms, to be used in the execution of the contract at any time during the period for which the composition remains in force under this Scheme, but he shall pay tax at the rate of 4% on purchase price thereof and on goods purchased and or received from any place outside the State and held in stock at the time of option of the composition scheme, and such tax shall not be adjustable towards his composition tax liability;
Author’s Note 3: - This can be a welcome step since in the previous scheme outside state purchases /receipt was not allowed explicitly but proviso required payment of additional tax in the state of Haryana in case if developer purchased or received from outside state thereby resulting in eligibility of Prescribed forms land in grey mess. Now, it is clarified that prescribed forms shall be allowed and tax shall be payable at 4% on purchase price.
iii. Not be entitled to use declaration Form VAT D-1 for purchasing goods at concessional rate of tax from within the State; (Author’s Note 4: - Newly Inserted and Clarified)
iv. Be treated as non-VAT dealer and shall not be eligible to claim input tax credit under section 8 of the Act;
v. Not collect any amount by way of tax under the Act;
vi. Not issue “Tax Invoices”;
vii. Retain the originals of all tax invoices and all the retail invoices for all his purchases
viii. Not be entitled to any refund
49A (3). The tax period for the composition developer shall be monthly and the payment of lump sum in lieu of tax shall be paid by the composition developer within fifteen days of the close of the month:
Provided that if a composition developer fails to make the payment of tax including tax on purchases in time under this scheme, then he shall be liable to pay interest as per the provisions of subsection (6) of Section 14 of the Act.
49A (4). Where the composition developer awards any portion of his contract to another contractor or sub-contractor, such composition developer shall not be eligible for any deduction on account of any tax paid by the contractor or the sub contractor under the Act.
49A (5). A developer may opt for payment of tax in lump sum with effect from the 1st April 2014 in accordance with the provisions of this Scheme, by submitting an application in Form VAT-CD1 to the appropriate assessing authority, within sixty days of the issue of the notification. However, a developer getting registration certificate after the issue of the notification may opt for the scheme within thirty days of the issue of registration certificate under the Act. A registered developer can also exercise such option from the beginning of a financial year by submitting the application to the appropriate assessing authority within thirty days of the commencement of the financial year concerned.
Author’s Note 4: - (i) Fresh Time of 60 Days from Date of Notification allowed to Developers to Opt In. (ii) New Application prescribed VAT CD-1 for opting the scheme (Copy annexed with this write-up) (iii) Importantly, it is clarified that this scheme can be opted on beginning of Financial Year. (Iv)
49A (6). A composition developer who has opted for lump sum payment of tax under the lump sum scheme notified on the 12th August, 2014, shall be deemed to have opted for lump sum payment of tax under this scheme. In case the tax deposited under the scheme notified on the 12th August 2014 is more than the tax liability calculated under this Scheme, the excess tax shall be adjusted against the future tax liability but no adjustment on account of such excess tax shall be allowed if the composition developer opts out of the Scheme. (Author’s Note 5: - To Clarify on Existing Developer shall be deemed to have opted this scheme and no need to filed Fresh VAT CD1)
49A (7). A composition developer shall furnish a quarterly return in Form VAT R-13 to the appropriate assessing authority and also submit proof of payment of tax along-with the return. (Author’s Note 6: - Newly Prescribed Return – Annexed with this write-up)
49A (8). The Excise and Taxation Commissioner shall be competent to issue guidelines, specifying the procedure and the forms etc. for the purpose of availing, compliance and monitoring of this Scheme.
49A (9). For the removal of doubts, it is hereby made clear that nothing contained here-in-above shall be construed as conferring any benefit, concession or immunity on the composition developer other than the benefit, concession or immunity granted under the scheme.
Clarification on Outside State Purchases or receipt of goods on the strength of prescribed forms is always a welcome step. This shall result in a significant reduction on purchase cost vis-a-vis scheme previously notified. Nonetheless, with no exit option still and inability to collect VAT from customers only time can tell how much success can this scheme!
About the Author: -
CA Ankit Gulgulia (Jain)
Author is Practicing Chartered Accountant in New Delhi (NCR). He Specialises in Matters Related to Indirect Taxation, Corporate Laws and Transfer Pricing. He can be reached at firstname.lastname@example.org
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