Southern India Regional Council of
The Institute of Chartered Accountants Of India
(Setup by an Act of Parliament)

 

Professional Updates- Kerala Vat

 

Professional Updates- November 2018

SESHADRI NADAN, B.com, FCA DISA (ICAI) CITY LIGHTS SHOPPING COMPLEX Chartered Accountant

VADAKKENCHERRY – 678 683
PALAKKAD (DIST), KERALA
PHONE: 04922-255528
MOBILE: 92497 17557
seshadri.itax@rediffmail.com
seshadrinadan@icai.org


UPDATE ON KERALA VAT

Commercial Tax Officer Versus Najeem & others (W.A.Nos.230/2017): Hon. High Court of Kerala considered the amendments to section 25 (1) of the Act and held that:- the extention granted to the time u/s. 25 (1) is for initiation of assessment proceedings as the extension granted was for completion of assessment and does not extend the period for initiation of proceedings. It was also held that there is no irrefutable rule that an amendment by substitution is invariably retrospective and that the amendment by substitution in the present case, extending the period of limitation from 5 years to 6 years, is not applicable to those assessments which stood completed and where the 5 year period for re-opening of assessment under Section 25(1) stood expired. Though the legislature had the competence to extend the period of limitation with retrospective effect, the same was not done and even if such an exercise was carried out, necessarily there should have been a validation clause so as to get over the judgment of the writ Court - The validation clause by which the action taken under the defective provision could have validated under the retrospective amendment was totally absent in the amendment made to section 25 (1) for substituting the period of limitation from five to six years.

Circular No. 21 dated 17/09/2018 is issued for extending the time limit for filing of annual return and financial statements.

Circular 23 dated 25/09/2018 is issued for release of security deposits furnished for obtaining registration under KVAT Act, 2003.


Professional Updates- February 2017

SESHADRI NADAN, B.com, FCA DISA (ICAI) CITY LIGHTS SHOPPING COMPLEX Chartered Accountant

VADAKKENCHERRY – 678 683
PALAKKAD (DIST), KERALA
PHONE: 04922-255528
MOBILE: 92497 17557
seshadri.itax@rediffmail.com
seshadrinadan@icai.org


ORDER No.C3/17692/16/CT DATED 08/11/2017 specifies that a dealer in cooked food and beverages cannot opt to pay compounded tax in respect of certain branches only and to pay tax under sec. 6(1) in respect of other branches. This decision was arrived at by relying on 1st proviso to sec. 11(4). It is held by the Authority for Clarification that this proviso applies only in the case of medicine dealers, contractors and dealers in jewelleries of gold, silver, diamond and platinum and that Sec. 8 which deals with payment of compounded tax, metes out a special treatment for branch business place only in respect of a dealer in bullion or ornaments or wares or articles of gold, silver or platinum group of metals, including diamond.

ORDER No.CT/12777/2017-C3 DATED 28/10/2017 considered the issue whether the nature of work involved was inter-state in character and the liability for TDS. After considering the facts, the Authority for Clarification held that to be an inter-state works contract, there must be a works contract agreement and movement of goods, by way of inter-state trade, must be in pursuance of the conditions and / or that as an incident of the contract between the parties and that the goods must be of specific quality and description for being used in the works contract, and there should not be any possibility of such goods being diverted by the contractor for any other purpose. It was also held that in the case of an inter-state works contracts, local tax under KVAT Act are not leviable.


Professional Updates- December 2017

SESHADRI NADAN, B.com, FCA DISA (ICAI) CITY LIGHTS SHOPPING COMPLEX Chartered Accountant

VADAKKENCHERRY – 678 683
PALAKKAD (DIST), KERALA
PHONE: 04922-255528
MOBILE: 92497 17557
seshadri.itax@rediffmail.com
seshadrinadan@icai.org


  • Vettathil Agencies v. Commercial Tax Officer, Cherthala W.P. (C) NO. 40152 OF 2016: - Assessing authority had issued notice u/s. 25(1) of VAT Act observing that sales turnover of goods is below the cost of purchase. In this case, the Honourable High Court held thus: -
  • “The amendment by the Finance Act, 2008 only clarifies the fact that the amount covered under credit notes issued by a supplier that do not affect the input tax credit already availed shall not be reckoned for the purpose of assessment under the Act. This provision according to me cannot be extended to the assessment of turnover for the purpose of payment of tax. Of course, it could be said that there is some ambiguity to the provision. But in so far as the liability to pay tax is on the turnover and discount given is part of the turnover, which is clearly indicated in Cement House and Syed Muhammed [O.T. Rev. (VAT) No. 164 of 2015] , I do not think that a different view is possible to be taken in the matter”.
  • V.K. Shajan v. Commercial Tax Officer - W.P. (C) NO. 13318 OF 2017(L): - Dealer had filed application for payment of tax at compounded rates, which was not acted upon by the Officer and dealer paid tax u/s. 6(1) of the Act and informed that he was cancelling his application. But, the Officer issued a notice demanding differential compounded tax. It was held by the Honourable Court that in the absence of acceptance of application of assessee, he was obliged to discharge his liability only on basis of regular method of assessment as indicated in section 6 and as tax liability has been discharged for the period in question u/s. 6(1), demand notice could not be sustained.
  • Gulf Oil Lubricants India Ltd. v. Commissioner of Commercial Taxes- W.P. C. NO. 28594 OF 2016: - It was held that statute does not say that trade discount shall form part of turnover of dealer and as assessee had only effected sale of goods by providing quantity discounts, Assessing Officer could not have included quantity discount given to dealers as part of turnover as turnover is only with respect to consideration received by assessee for quantity which is actually sold - [Para 7]
  • Smt. Lalitha Muraleedharan v. Commissioner of Commercial Taxes- WA NO. 2665 OF 2015 / W P (C) NO. 21530 OF 2015 JUNE 14, 2017 :- It was held that “ Where terms of auction notification stipulated that sale of cleaned sandalwood stocked and stored at Government Sandalwood Depot / Godown in Kerala was nothing but a local sale, further conduct of appellant SEZ unit, whether it wanted to sell it within State of Kerala or intended to take it to other place or wanted to effect some export of product manufactured by making use of sandalwood purchased from department, was of no consequence and hence, exigible to tax”.


Professional Updates- November 2017

SESHADRI NADAN, B.com, FCA DISA (ICAI) CITY LIGHTS SHOPPING COMPLEX Chartered Accountant

VADAKKENCHERRY – 678 683
PALAKKAD (DIST), KERALA
PHONE: 04922-255528
MOBILE: 92497 17557
seshadri.itax@rediffmail.com
seshadrinadan@icai.org


ORDER No.C3/5228/14/CT DATED 12/07/2017: Authority for Clarification considered whether reverse tax was applicable when a registered dealer returns goods to the seller after expiry of 90 days from the date of purchase. After adverting to definition of reverse tax, it was held reverse tax is applicable in circumstances which are specifically mentioned in sec. 2(xlii) of the KVAT Act, 2003.

ORDER No.CT/6689/17-C3 DATED 17/08/2017: In this order, it was clarified that ‘maize poha / maize flakes’, classified under the HSN code 1904.10.10, would be taxable at the rate of 5% by virtue of Entry 49 of the Third Schedule to the Kerala Value Added Tax Act, 2003.

ORDER No.C3/22114/16/CT DATED 08/08/2017: It is clarified by this order that plastic tray, plastic containers, plastic box and plastic bowl would come under Entry 174 of List A to the Third schedule, bearing HSN code 3923, and hence would be taxable @ 5%. Plastic lid would also be taxable @ 5% by virtue of Entry 174 of List A to the Third Schedule, bearing HSN code 3923.50.

ORDER No.CT/815/17-C3 DATED 22/08/2017: Relying on the notification SRO.753/2011 and the circular No.17/2013 dtd.05-10-2013, it was held that interstate sale of rubber procured from agriculturists should have suffered tax under the VAT Act and CST rate applicable is 0% with liability to file Form “C‟. It was also clarified that claim of input tax credit / special rebate will not be available and that refund of tax paid on purchase from registered dealers as well as from unregistered dealers will not be available.


Professional Updates- August 2017

SESHADRI NADAN, B.com, FCA DISA (ICAI) CITY LIGHTS SHOPPING COMPLEX Chartered Accountant

VADAKKENCHERRY – 678 683
PALAKKAD (DIST), KERALA
PHONE: 04922-255528
MOBILE: 92497 17557
seshadri.itax@rediffmail.com
seshadrinadan@icai.org


CLARIFICATIONS ON RATE OF TAX LEVIABLE UNDER KVAT ACT, 2003: -

  • ORDER No.C3/5133/13/CT DATED 03/07/2017: The commodities hydrogen, nitrogen, oxygen and naphtha would be taxable @5% under entries 78(1), 78(4), 78(5)(b) and 92A of the List A to the Third schedule and carbon monoxide, mixture of carbon monoxide and hydrogen (synthesis gas), steam and natural gas would be taxable at the rate of 14.5% under entry 103 of SRO No. 82/2006.
  • ORDER No.CT/4337/2016-C3 DATED 04/07/2017: ‘Medicated toilet soap’ is covered under Entry 27(1)(a) of the SRO No. 82/2006, bearing HSN Code 3401.11.10 and hence taxable at 14.5% (entry 27(1)(a) of the SRO No. 82/2006).
  • ORDER No.C3/11481/13/CT DATED 03/07/2017: Entry 38 of the 3rd schedule includes only the edible grade of vegetable oils. Non-edible grade of vegetable oils would come under entry 138 of the 3rd schedule. Hence, ‘lamp oil’ (produced by adding 0.01% by weight of sugandha draviyas to edible palm oil) would come under entry 138(4) of Schedule III of KVAT Act with HSN 1511.90.90, and, hence, taxable at 5%.
  • ORDER No.CT/3177/16-C3 DATED 12/04/2017: Issue raised was whether sale of pre-recorded compact discs (after recording the blank audio cassettes) would be covered under the category of “dealer effecting first taxable sales of goods within the state” and recording of audio cassettes on duplicating music system amounts to manufacture. The order clarifies that sale of pre-recorded compact discs are covered under the category of “dealer effecting first taxable sale of goods within the State” for the purpose of sec. 6(5) and that recording of audio cassettes on duplicating music system amounts to “manufacture”.


Professional Updates- July 2017

Kerala VAT

C.SESHADRI NADAN, B.com, FCA DISA (ICAI)
Chartered Accountant
CITY LIGHTS SHOPPING COMPLEX
VADAKKENCHERRY – 678 683
PALAKKAD (DIST), KERALA
PHONE: 04922-255528
MOBILE: 92497 17557

seshadri.itax@rediffmail.com
seshadrinadan@icai.org

  • ORDER No.C3/40710/10/CT DATED 22/02/2017 of Authority for Clarification deals with rate of tax for the commodity “Bakery Shortening (Inter Esterified Vegetable Oil)”. It was held that HSN Code 1517.90 does not appear in any of the schedules to the Act and the commodity is classified under the HSN 1517.90 by the Director General of Foreign Trade, and also by the Hon’ble Customs, Excise & Service Tax Appellate Tribunal, New Delhi in the case of M/s. Shree Gopal Vanaspati Ltd. v/s. C.C.(ICD), New Delhi. Hence, it was clarified that by virtue of Entry 103 of SRO No. 82/2006, applicable rate of tax would be 12.5%/13.5%/14.5%.
  • ORDER No.C3/11060/13/CT DATED 29/03/2017 of the Authority for Clarification holds that ‘Blended Edible Vegetable Oil’ would come under entry 38(19) (c) of the third schedule to the KVAT Act, and, hence, would be taxable at 5%.
  • ORDER No. CT/1117/2017-C3 DATED 25/03/2017: The applicant, a dealer situated in the State of West Bengal, was awarded a works contract by the Southern Railway, Thiruvananthapuram for the renewal of Corroded Steel Channel Sleepers. The work involved manufacturing, supplying and fixing of BG galvanized steel channel sleepers along with all fittings and fixtures. The materials were moved from the factory at Hawrah after issue of a certificate, after inspection, by Rites Ltd. The issue considered by the Authority for Clarification was whether the above work is an interstate works contract and whether the provisions of TDS under the KVAT Act is applicable in this case. It was clarified by the Authority that the transaction involved was an interstate works contract for which the applicant is not liable to pay any tax under the KVAT Act.

Professional Updates- April 2017

    • HIGHLIGHTS OF FINANCE BILL 2017:
  1. A. If arrears of tax under KAIT ACT, KVAT Act and CST Act for 2005-06 to 2010-11 is remitted, interest and 70% of the penalty and interest on penalty, will be waived.

  2. B. Presumptive Tax Dealers: Total turnover will be calculated by adding a gross profit of 5% of unaccounted purchases along with the sales turnover declared as per return. If total turnover so calculated is below the limit u/s. 6 (5), tax of 0.5% percent is to be paid. If turnover is above the limit but below 1 Crores, rate of tax is 1% and tax of 2% applies to turnover above 1 crore. Option is to be filed before the assessing authority on or before 30th June, 2017. This scheme is also applicable for those dealers who have opted amnesty scheme for 2016-17 but had defaulted payments. There will be no other changes in the conditions prescribed under the amnesty scheme for 2016-17.

  3. C. Works Contract: - Disputes in works like installation of kitchen cabinet, aluminium fabrication, air-conditioning plant is to be settled if compounded tax was paid by the contractors, provided that purchases were from within the State and contractors pay 2% tax for total contract amount over and above compounded tax already paid. This scheme applies for assessments up to the financial year 2014-15.

  4. D. Rate of tax for solar energy devices and spare parts is levied at 14.5% for installation of such devices, considering it as works contract.

  5. E. Packing materials used in exporting goods will be exempted from tax, subject to conditions, for the period from 2005-06 up to 31/03/2016. Form H to be filed. Tax already paid during this period will not be refunded.

  6. F. Simplification of Procedures: - Revisions u/s 57 pending with Deputy Commissioners and second revisions u/s 59 pending with the Commissioner shall stand transferred to the first Appellate Authority and to the Tribunal respectively w.e.f. 01.04.2017.

  7. G. The time limit for assessments, including completion of assessments under Sec.24, 25 of the KVAT Act shall be extended by a year.


Professional Updates- March 2017

Kerala VAT

  • CIRCULAR No. 02 / 2017: By S.R.O. No. 796/2014 dtd.20-12-2014, natural rubber and its variants were exempted from the tax payable under the Kerala Value Added Tax Act, 2003 for the period from 20th day of December, 2014 to 31st March, 2015. The Government has now clarified that as the notification was not introduced in the Assembly, it has become infructuous. Hence, the above Circular is issued by the Commissioner directing all assessing authorities to assess the turnover of said commodities for the period from 20-12-2014 to 31-03-2015.
  • CIRCULAR NO.03 I 2017: The time limit for filing Form No.13 and Form No.13A by the companies for the assessment year 2015-16 was 31st January, 2017 and for other dealers 31st December, 2016. By the above circular, time limit for filing Form 13 and Form 13A is extended upto 31st March 2017 for all category of dealers. This extension is based on the representation of All Kerala Chartered Accountants' Association.
  • CIRCULAR No.04 I 2017: Commissioner has directed that steps be taken to ensure that all pending annual statement of accounts and closing stock inventory are filed by dealers by 1st March 2017. All Dy. Commissioners are instructed to ensure that all statutory documents are filed by the dealers for the financial year 2011-12 as these will become time bar. In case any dealer fails to file the above documents within the said time limit, the Dy. Commissioner may take appropriate actions to ensure that dealers file all the statutory documents.