Category Archives: GS – January 2014 Series

Recent Changes in TN VAT Act – Article – January, 2014

Recent Changes in TN VAT Law

-        T R Srinivasan, ACA         

AMENDMENTS IN TN VAT ACT, 2006

The Government of Tamil Nadu has passed “Tamil Nadu Value Added Tax (Fifth Amendment) Act, 2013 – (Act No.28 of 2013), which has made significant changes in the law. Such changes have direct impact on the tax liability of the dealers within the State.

This write up attempts to cover all those significant changes in law and the related procedures.

(1)   Reversal of Input Tax Credit upto 3% in relation to Inter–State Sales (w.e.f. 11.11.2013)

(a)    Relevant Section: Proviso to Section 19(2)

(b)   Change in Law

  • Input Tax Credit shall be allowed for the purchases made within the State and if such purchases are used for Inter–State Sales (supported by C Form Declaration)
  • However, it is amended that such Input Tax Credit shall be reversed to the extent of 3% and any credit above 3% shall alone be eligible.

(c)    Examples: Consider the following examples:

(i)     Example 1:

Description

Base Value

Tax Amount (Rs.)

Purchases of goods within Tamil Nadu

10,000

VAT @ 5% = 500

Sales of these goods to another State against C–Form Declaration

20,000

CST @ 2% = 400

 

Conclusion:

  • As per the earlier provisions, the entire VAT Credit of Rs.500 is eligible for Input Tax Credit.
  • However, as per the above amendment, “A” can claim VAT Credit only in excess of 3%. Hence, he can claim only the balance 2% i.e. Rs.200 [500 ÷ 5%] x 2 %. (Note: Balance of Rs.300 becomes a cost).

 

(ii)   Example 2:

Description

Base Value

Tax (Rs.)

Purchases of goods within Tamil Nadu

10,000

VAT @ 14.5% = 1,450

Sales of these goods to a buyer in another State against C–Form

20,000

CST @ 2% = 400

 

Conclusion: As per the above amendment, “A” can claim 11.5% i.e. Rs.1,150 [1,450 ÷ 14.5%] x 11.5 %. The balance of Rs.300 becomes a cost.

 

(iii) Example 3:

Description

Base Value

Tax (Rs.)

Purchases of goods within Tamil Nadu

10,000

VAT @ 5% = 500

Sales of part of these goods to a buyer in another State against C–Form

20,000

CST @ 2% = 400

Sales of another part of these goods to a buyer in Tamil Nadu

30,000

VAT @ 5% = 1,500

 

Conclusion: A’s Eligible VAT Credit = Total VAT Credit – Reversal of VAT Credit

 

Reversal of VAT Credit

(Total VAT Credit on purchases during the period)

×

Value of Inter–State Sales

×

3%

Value of Sales within the State

+

Value of Inter–State Sales

5%

 

Reversal of VAT Credit in the above Example shall be:

500

×

20,000

×

3%

=

Rs.80

30,000

+

20,000

5%

Eligible VAT Credit = Rs.500 – Rs.80 = Rs.420

 

(d)   Notable Issues

  • In the calculation of Eligible VAT Credit in Example 3, where common purchases are sold both locally and also outside the state, the proportion is based on the value of sales. However, as the TN VAT Act is silent on the method of calculation, some other bases like “quantity, cost of goods sold” may also be considered for calculation.
  • The above reversal mechanism is applicable only for Inter–State Sales against C–Form Declaration. In case of Inter–State Sales without C–Form, then entire Input Tax Credit is not eligible.
  • Though it is obvious that the above reversal provisions are applicable for trader, it is not as clear whether it is applicable for manufacturer.
  • In case of existence of multiple reversals like exempted sales, branch transfers, then the above formula may be suitably modified to accommodate them.

(2)   Reversal of Input Tax Credit upto 5% for Inter–State Branch Transfers (w.e.f. 11.11.2013)

(a)    Relevant Provision: Section 19(4)

(b)   Change in Law: Input Tax Credit in relation to Transfers to branches outside Tamil Nadu shall be reversed to the extent of 5% instead of the existing 3%.

 (3)   Requirement of Transit Pass for specified goods (w.e.f. 08.11.2013)

If the following goods are transported from one state to another state, but goes through Tamil Nadu, then the owner of the vehicle must obtain a transit pass at the first Check post after the vehicle’s entry into Tamil Nadu

(a)    Vegetable oils including refined vegetable oils

(b)   Iron and steel as specified in Sec.14(iv) of the CST Act, 1956

Note: Detailed procedure is mentioned in Section 70 of the TN VAT Act, 2006

(4)   Increase in Tax Rates for Alcoholic Liquors (w.e.f. 01.04.2013): Tax Rates on Alcoholic Liquors for human consumption is increased.

(5)   Other Procedural Amendments

(a)  Additional Requirement in VAT Monthly Returns (GO No.136 dt. 31.10.2013) (w.e.f. 01.11.2013)

In Monthly Returns – Form I, Quantitative and Value of Stock must be mentioned in the New Annexure V if the dealer wishes to carry forward the Input Tax Credit from one month to the next month.

(b)  Extension of due date for filing VAT Audit Report (GO No.136 dt. 31.10.2013)

The time limit for filing of VAT Audit Report (Form WW) has been altered as 9 months from the end of the relevant Financial Year. Hence, revised due date for filing Form WW is on or before the 31st of December.

Updates in Corporate and Allied Law – January 2014 Series

Shree Guru Kripa’s Institute of Management

“Gyaan Smriti” – CORPORATE LAW UPDATES – January 2014 Series

Updates in Corporate and Allied Law

1.    GENERAL CIRCULAR NO.20/2013 [NO.1/12/2013-CL-V], DATED 27-12-2013

SECTION 2(87) OF THE COMPANIES ACT, 2013, READ WITH SECTION 4(3) OF THE COMPANIES ACT, 1956

It is hereby clarified that the shares held by a company or power exercisable by it in another company in a ‘fiduciary capacity’ shall not be counted for the purpose of determining the holding-subsidiary relationship in terms of the provision of section 2(87) of the Companies Act, 2013.

2.    CIRCULAR NO.19/2013 [NO.17/27/2013-CL-V], DATED 10-12-2013

SECTION 182 OF THE COMPANIES ACT, 2013 ­– CLARIFICATIONS AS TO REQUIREMENTS OF DISCLOSURE ON PART OF AN ELECTORAL TRUST COMPANY OF ANY AMOUNT OR AMOUNTS CONTRIBUTED BY IT TO ANY POLITICAL PARTIES UNDER SECTION 182(3)

It is hereby clarified as under;

(i) Companies contributing to an ‘Electoral Trust Company’ for contributing to a political party or parties are not required to make disclosures required under above section.
(ii) Companies contributing any amount or amounts directly to a political party or parties will be required to make the disclosures laid down in above section.
(iii) Electoral Trust Companies will be required to disclose all amounts received by them from other companies/sources in their Books of Accounts and also disclose the amount or amounts contributed by them to a political party or parties as required by above section.

3.            A.P. (DIR SERIES 2013-14) CIRCULAR NO. 78, DATED 3-12-2013

EXTERNAL COMMERCIAL BORROWINGS (ECB) BY HOLDING COMPANIES/CORE INVESTMENT COMPANIES FOR THE PROJECT USE IN SPECIAL PURPOSE VEHICLES

In order to strengthen the flow of resources to infrastructure sector, it has been decided to permit Holding Companies/Core Investment Companies (CICs) coming under the regulatory framework of the Reserve Bank to raise ECB under the automatic route/approval route, as the case may be, for project use in Special Purpose Vehicles (SPVs) with respect terms and conditions as specified.

4.            A.P. (DIR SERIES 2013-14) CIRCULAR NO. 79, DATED 6-12-2013

EXIM BANK’S LINE OF CREDIT OF USD 30.94 MILLION TO THE GOVERNMENT OF LAO PEOPLE’S DEMOCRATIC REPUBLIC

Out of the total credit by Exim Bank under this Agreement, the goods and services including consultancy services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 percent goods and services may be procured by the seller for the purpose of Eligible Contract from outside India.

Under the LOC, the last date for opening of Letters of Credit and Disbursement will be 48 months from the scheduled completion date(s) of contract(s) in the case of project exports and 72 months (September 08, 2019) from the execution date of the Credit Agreement in the case of supply contracts.

No agency commission is payable under the above LOC.

5.            A.P. (DIR SERIES 2013-14) CIRCULAR NO. 81, DATED 24-12-2013

BORROWING AND LENDING IN RUPEES – INVESTMENTS BY PERSONS RESIDENT OUTSIDE INDIA IN THE TAX FREE, SECURED, REDEEMABLE, NON-CONVERTIBLE BONDS

It has been decided to permit resident entities/companies in India, authorised by the Government of India, to issue tax-free, secured, redeemable, non-convertible bonds in Rupees to persons resident outside India to use borrowed funds for the following purposes:

(a) for on lending/re-lending to the infrastructure sector; and
(b) for keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses.

6.            A.P. (DIR SERIES 2013-14) CIRCULAR NO. 80, DATED 16-12-2013

DEFERRED PAYMENT PROTOCOLS DATED 30-4-1981 AND 23-12-1985 BETWEEN GOVERNMENT OF INDIA AND ERSTWHILE USSR

Circular No.76 dated November 19, 2013, wherein the Rupee value of the Special Currency Basket was indicated as Rs.86.513657 effective from November 18,2013.

Further revision has taken place on December 09, 2013 and accordingly, the Rupee value of the Special Currency Basket has been fixed at Rs.83.564155 with effect from December 12, 2013.

7.            A.P. (DIR SERIES 2013-14) CIRCULAR NO.82, DATED 31-12-2013

IMPORT OF GOLD BY NOMINATED BANKS /AGENCIES/ENTITIES

It has been decided to issue the following clarifications w.r.t to import of gold Dore which shall come into force with immediate effect :

(a) Refineries are allowed to import dore up to 15% of their gross average viable quantity based on their license entitlement in the first two months for making this available to the exporters on First in First out (FIFO) basis. Subsequent to this, the quantum of gold dore to be imported should be determined lot-wise on the basis of export performance.
(b) Before the next import, not more than 80% shall be allowed to be sold domestically.
(c) The dore so imported shall be refined and shall be released based on FIFO basis following 20:80 principle.
(d) The imports, thereafter, shall be allowed only up to 5 times the quantum for which proof of export has been submitted. This shall be on accrual basis.

8.            A.P. (DIR SERIES 2013-14) CIRCULAR NO.83, DATED 3-1-2014

OVERSEAS DIRECT INVESTMENTS – ROLLOVER OF GUARANTEES

It has been decided not to treat/reckon the renewal/rollover of an existing/original guarantee, which is part of the total financial commitment of the Indian party in terms of Regulation 6 of the Notification ibid, as a fresh financial commitment, if the said conditions are satisfied.

In case, however, the above conditions are not met, the Indian party shall obtain prior approval of the Reserve Bank for rollover/renewal of the existing guarantee through the designated AD bank.

Learning From Nov 2013 Exams – CA Final – By S Sundar Raman, FCA

The result of Nov 2013 Exams – CA Final and CA CPT declared on 15th Jan, 2014 by ICAI. The results were very dis-appointing at first place for CA FINAL, whereas in case of CA CPT it was normal.

CA FINAL Result position is as follows:-

[Exhibit – 1]

Group I

5.67%

Group II

7.35%

Both Group

3.11%

 

The result was the lowest in the past 5 years.

Exam

Group 1 (%)

Group 2 (%)

Both Groups (%)

Nov-13

5.67

7.35

3.11

May-13

13.79

18.65

10.03

Nov-12

12.97

27.3

21.85

May-12

25.32

29.62

16.38

Nov-11

25.54

27.81

15.78

May-11

36.34

26.67

20.51

Nov-10

20.37

11.31

9.33

May-10

13.19

7.88

6.56

Nov-09

11.05

8.93

8.7

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Statutory Compliance Chart January – 2014

DATE COMPLIANCE REQUIRED FORM NO. / CHALLAN NO.
JANUARY 2014
6 EXCISE: PAYMENT OF EXCISE DUTY FOR DEC 2013 AND PAYMENT OF EXCISE DUTY FOR QUARTER ENDING DEC 2013 BY SSIs GAR 7
EXCISE: E-PAYMENT OF EXCISE DUTY FOR DEC 2013 AND E-PAYMENT OF EXCISE DUTY FOR QUARTER ENDING DEC 2013 BY SSIs 
NOTE: E-PAYMENT IS MANDATORY IF ED PAID>=10 LAKHS IN FY 2012-13
SERVICE TAX: PAYMENT OF SERVICE TAX FOR DEC 2013 BY CORPORATES AND PAYMENT OF SERVICE TAX FOR THE QUARTER ENDING DEC 2013 BY NON-CORPORATES
SERVICE TAX:  E-PAYMENT OF SERVICE TAX FOR DEC 2013 BY CORPORATES AND E-PAYMENT OF SERVICE TAX FOR THE QUARTER ENDING DEC 2013 BY NON-CORPORATES 
NOTE: E-PAYMENT IS MANDATORY IF ST PAID>=1 LAKH IN FY 2012-13
7 INCOME TAX: DEPOSIT OF TDS/TCS COLLECTED DURING DEC 2013 281
10 EXCISE: MONTHLY RETURNS FOR PRODUCTION AND REMOVAL OF GOODS AND CENVAT CREDIT FOR DEC 2013 ER 1
EXCISE: MONTHLY RETURNS OF EXCISABLE GOODS MANUFACTURED & RECEIPT OF INPUTS & CAPITAL GOODS BY UNITS IN EOU, STP, HTP FOR DEC 2013 ER 2
EXCISE: MONTHLY RETURNS OF INFORMATIONS RELATING TO PRINCIPAL INPUTS FOR DEC 2013 BY MANUFACTURER OF SPECIFIED GOODS WHO PAID DUTY>=RS. 1 CRORE DURING FY 2012-13 BY PLA/CENVAT/BOTH ER 6
EXCISE: QUARTERLY RETURNS OF PRODUCTION AND REMOVAL OF GOODS BY SSIs FOR THE QUARTER ENDING DEC 2013 ER 3
13 CST/TN VAT: MONTHLY RETURNS AND PAYMENT OF CST AND VAT COLLECTED DURING DEC 2013 FOR ASSESSEES WHOSE YEARLY SALES TURNOVER > RS. 200 CRORES IN THE FY 2012-13 IF THE MODE OF PAYMENT OF VAT AND CST IS BY CASH/CHEQUE/DD FORM 1 / FORM I
14 CST/TN VAT: MONTHLY RETURNS AND PAYMENT OF CST AND VAT COLLECTED DURING DEC 2013 FOR ASSESSEES WHOSE YEARLY SALES TURNOVER > RS. 200 CRORES IN THE FY 2012-13 IF THE MODE OF PAYMENT OF VAT AND CST IS BY ELECTRONIC MODE FORM 1 / FORM I
15 EXCISE: QUARTERLY RETURNS OF ASSESSEES PAYING 1% OR 2% EXCISE AND NOT MANUFACTURING ANY OTHER GOODS FOR QUARTER ENDING DEC 2013 ER 8
INCOME TAX: QUARTERLY STATEMENT OF TDS FROM INTEREST, DIVIDEND OR ANY OTHER SUM PAYABLE TO NON-RESIDENT FOR QUARTER ENDING DEC 2013 27Q
INCOME TAX: QUARTERLY STATEMENT OF TDS IF DEDUCTOR IS A PERSON OTHER THAN OFFICE OF THE GOVERNMENT FOR QUARTER ENDING DEC 2013 24Q/26Q
INCOME TAX: QUARTERLY STATEMENT OF TCS FOR QUARTER ENDING DEC 2013 27EQ
EXCISE: QUARTERLY RETURN OF CENVAT BY FIRST STAGE AND SECOND STAGE DEALERS FOR QUARTER ENDING DEC 2013 ER 3
EPF: PAYMENT OF EPF CONTRIBUTION FOR DEC 2013
EPF: CONSOLIDATED STATEMENTS OF DUES AND REMITTANCES UNDER EPF AND EDLI FOR DEC 2013 12A
EPF: MONTHLY RETURNS OF EMPLOYEES WHO JOINED/LEFT THE ORGANISATION IN DEC 2013 5/10
20 EXCISE: QUARTERLY RETURN OF PRODUCTION, REMOVAL AND CENVAT BY SPECIFIED MANUFACTURERS OF YARNS AND READY MADE GARMENTS FOR QUARTER ENDING DEC 2013 ER 3
CST/TN VAT: MONTHLY RETURNS AND PAYMENT OF CST AND VAT COLLECTED DURING DEC 2013 FOR ASSESSEES WHOSE YEARLY SALES TURNOVER < RS. 200 CRORES IN THE FY 2012-13 IF THE MODE OF PAYMENT OF VAT AND CST IS BY CASH/CHEQUE/DD FORM 1 / FORM I
21 ESI: DEPOSIT OF ESI CONTRIBUTIONS AND COLLECTIONS FOR DEC 2013
22 CST/TN VAT: MONTHLY RETURNS AND PAYMENT OF CST AND VAT COLLECTED DURING DEC 2013 FOR ASSESSEES WHOSE YEARLY SALES TURNOVER < RS. 200 CRORES IN THE FY 2012-13 IF THE MODE OF PAYMENT OF VAT AND CST IS BY ELECTRONIC MODE FORM 1 / FORM I
30 INCOME TAX: ISSUE OF TDS CERTIFICATE FOR TDS MADE FOR QUARTER ENDING DEC 2013 EXCEPT ON SALARIES 16A
31 INCOME TAX: QUARTERLY RETURN OF NON-DEDUCTION OF TAX AT SOURCE U/S 206A BY BANKING COMPANY FOR QUARTER ENDING DEC 2013 26QAA
INCOME TAX: QUARTERLY STATEMENT OF TDS IF THE DEDUCTOR IS AN OFFICE OF GOVERNMENT FOR QUARTER ENDING DEC 2013 24Q/26Q/27Q