SKP Tax Alert
23 March 2016 | Volume 8 Issue 30
Key highlights of the Maharashtra Budget 2016-17

The Maharashtra Budget for the financial year 2016-17 was presented by the Finance Minister of Maharashtra, Sudhir Mungantiwar, on 18 March 2016. The budget considers improving the ease of doing business and incorporates the necessary changes in tax laws and in its administration and also tries to overcome constraints to the growth of business.

Our alert covers changes regarding Maharashtra Value Added Tax, profession tax and entry tax. The main amendments proposed in the Maharashtra Value Added Tax, 2002 (MVAT Act) and Maharashtra Value Added Tax Rules, 2005 (MVAT Rules) are listed below.
  • This Bill proposes an increase in the rate of tax from 5% to 5.5% for goods falling under Schedule C of the MVAT Act, (except declared goods mentioned in section 14 of the Central Sales Tax Act, 1956).
  • It proposes to levy an entry tax on marble and granite slabs.
  • The changes in tax rates for key products are mentioned below:
Sr. No. Commodity Current Rate Proposed Rate Impact
1 Coconut oil (in packing up to 500 ml)* 5% 12.5%
2 Terry- towels (for commercial use in hotels) 0% 5.5%
3 Tea 5% 5.5%
4 Barbed wires, wire mesh and chain links 12.5% 5.5%
5 Cotton seed 5% 2%
6 Buses operating on battery and hybrid fuel (if purchased by a public transport undertaking and used for public transport) 5% 0%
7 Pyrolysis oil (processed from plastic bags and organic waste) 12.5% 5.5%
8 LED Tubes 12.5% 5.5%
9 Pencil box, staple pins, dusters, gum and gum sticks used by students 12.5% 5.5%
10 Retrofit kits (used for vehicles of the differently abled) 12.5% 0%
11 Sterile water for injections 12.5% 5.5%
  • Other changes relating to commodities are:
    • *Coconut oil be excluded from the entry of drugs.
    • VAT on mammography machines used for detection of breast cancer exempted.
  • Implementation of SAP based computer systems in the Sales Tax Department, providing online access to the Input Tax Ledger and interactions with the department from the next financial year.
  • The concept of Fair Market Price (FMP) has been introduced to empower the assessing officer to assess a dealer on the basis of the market price if goods are sold below the market price with an intention to evade tax.
  • Multiple filing of revised returns permissible till the due date of filing an audit report (earlier it  was restricted to only one revised return per return period).
  • Provision of ‘Return Acceptance order’ to be issued to dealers who have filed returns within the stipulated period and have not been selected for assessment.
  • Closure of assessment proceedings if the dealer accepts to pay tax and interest liability as assessed by the assessing officer and file a revised return for that period.
  • Employers who are liable to deduct VAT TDS in case of Works contract transactions would be required to obtain registration under the MVAT Act, and file returns with details of the TDS deducted.
  • The procedure for the determination of a disputed question would be deleted and replaced with ‘Advance Ruling Authority’.
  • E-commerce companies to provide details of goods purchased-sold from their portals periodically with the sales tax department. A format for this purpose is awaited.        
  • The changes proposed in the various composition schemes are as follows:
    • The yearly turnover limit for the composition scheme for retailers has been increased from INR 5 million to INR 10 million.
    • In the scheme for bakeries, the turnover of tax-free goods would not be considered for computing the turnover for composition.
    • The composition rate applicable to restaurants would be increased to 8%, in case the turnover from the sale of food and non-alcoholic beverages exceed INR 30 million.
  • Proposed changes in set off rules (credit) are as follows:
    • Input tax credit on mobile handsets procured locally and sold in the course of interstate trade would be restricted to the extent of liability under the CST Act, 1956.
    • Restriction on the input tax credit of taxes paid on the purchase of petrol and diesel has been extended to entry taxes also.
    • Input tax credit on leased passenger motor vehicles would be allowed to the extent of the output tax on the lease of such vehicles.
  • The amnesty scheme introduced under MVAT Act and Profession Tax Act are as follows:  
    • Amnesty scheme under the MVAT Act:
    • Applicible to a dealer who has filed an appeal and the recovery of disputed dues is stayed by the appellate authority
    • Amnesty would be available if the dealer withdraws the appeal
    • Amnesty shall not be available for tax dues
The scheme is applicable for the period specified below:
Sr. No. Period of dispute/appeal Amount to be paid by dealer Amount waived
1 Before 1 April 2005 100% of disputed tax Interest and penalty
2 1 April 2005 to 31 March 2012 100% of disputed tax plus 25% of disputed interest Balance interest and penalty
  • Scheme shall be available from 1 April 2016 to 30 September 2016.
 The Amnesty scheme under Profession Tax:
  • An amnesty scheme is being proposed for encouraging persons not enrolled with the profession tax department.
  • Under this scheme, a person enrolling between 1 April 2016 to 30 September 2016, would be required to pay profession tax and penalty only for three preceding financial years.

(Note: The aforesaid changes would be effective once the assent of Governor of Maharashtra is received and after it is published in the Official Gazette)
SKP's comments

The proposed changes (viz. multiple filing of revised return, reduction in the rate of tax for specific products, implementation of a SAP based system, changes made in the composition scheme for small dealers, etc.) is a welcome step for dealers of all classes. Additionally, in light of the forthcoming Goods and Services Tax, authorities have announced amnesty schemes for pending dues for all dealers, whose matters are in litigation and this is expected to reduce litigation by a great extent.

It is pertinent to note that trade circulars, notifications and the legislative assembly bill to give effect to the proposed changes are expected to be issued by the authorities in due course.

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