Confution about security deposit

This query is : Resolved

pintu das (Querist)
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05 October 2012 sir, i am confused about security deposit for vat registration. i want to know that security deposit for new vat registration is mandatory or not.

Amol S Joglekar

Amol S Joglekar (Expert)
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05 October 2012 For voluntary registration (without crossing the turnover limit) it is a must.

deepali agarwal

deepali agarwal (Expert)
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06 October 2012 1. MVAT Sec 16(2) provides that whenever dealer deposits 25000/- , it will be treated as advance towards tax payable.. The section read as under "Provided that, in the case of an application made by a person who voluntarily desires to get registered, the certificate of registration shall not be granted unless the applicant has deposited an amount of Rs.25,000/- in the Government Treasury as advance towards the tax, interest or penalty, if any, that may become due. The amount so deposited may be adjusted against the tax payable according to the return required to be filed in the year in which the registration is granted or in the succeeding year. The amount of deposit in excess of the amount due from him, by way of tax, interest or penalty, if any, shall be refunded as provided in section 50 or, as the case may be, section 51.

Prakash Kochar

Prakash Kochar (Expert)
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07 October 2012 Deepali Agrawal's reply is not as per substituted provisions. kindly note - W.e.f. 01-05-2011 provision regarding adjustment of security deposit is substituted.
From 01-05-2011, "Amount so deposited shall not be adjusted against the tax payable as per any return or towards any other liability under this Act"
The security deposit deposited shall be refundable on such conditions, restrictions and within such time as may be prescribed. The security deposit shall be forfeited, if there is no compliance of such conditions, restrictions and time limit."
Trade Circular No.7T of 2011 dated 04/05/2011 on amendment is as under -
Amendment of section 16(2):-
Sub-section (2) provides for voluntary registration.
(b) Earlier, by virtue of provison to sub-section (2), the dealer who desired to get voluntary registration was required to deposit Rs.25,000/- as advance towards tax. The dealer was allowed to adjust the said amount towards tax, interest or penalty that may become due.
(c) The said provision is now amended. The amendment provides that with effect from 1st May 2011, the application under voluntary registration shall not be entertained unless applicant deposits into Government Treasury Rs. 25,000/- as security deposit. This Security Deposit is not adjustable towards Tax, interest, penalty or any other liability under the Act.
(d) The security deposit is refundable in the manner and time and on fulfillment of such conditions as is prescribed in the rules. The rule 60A provides that same will be refunded on applications within six months of cancellation of registration, where registration is cancelled within 3 years. In other cases the dealer may apply for refund within 4 years from the date of registration but after completing 3 years from date of registration. The refund shall be granted within 90 days of application subject to condition of filing of all returns and payment of taxes. In any other case the deposit shall stand forfeited.

Amol S Joglekar

Amol S Joglekar (Expert)
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08 October 2012 Thanks Prakash, for such a detailed reply. Apprciate the efforts taken by you.

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