CA Anilkumar Shah

CA Anilkumar ShahTURNOVER IN VIEW OF CLARIFICATION dt.15-9-2015 AND TAX PAID UNDER AMNESTY SCHEME-2015

Two queries are coming every day in and day out under LBT

A. Whether the turnover of sale made from the city to outside the city is covered or not, specifically in view of clarification dt. 15-9-2015?

B. Whether the tax paid under amnesty is subject to interest and penalty again when the turnover on assessment is found more than declared under the amnesty scheme?

My views on the same are as follows-

A. Whether the turnover of sale made from the city to outside the city is covered or not specifically in view of clarification dt. 15-9-2015?

1. Let us go to the basic things first-

The original clarification No. Sankirna-2015/Pra.Kra.42/Navi-32, Urban Development Dept., dt. 15-9-2015, is in Marathi. It states that and I translate –

Govt. has taken a policy decision to relieve the traders from levy of LBT whose turnover is below Rs.50 crores w.e.f.1-8-2015.

i) In relation to that many trade organisations and Commissioner Municipal Corporations have sought clarification about how to calculate the turnover Rs.50 crores, means- whether the turnover within the Corporation area to be included or the turnover of all other business places within the state to be included is not clear and hence it needs to be clarified. In this regard Govt. has sought opinion of Law and Judiciary Dept. and it is as follows…….

I am putting the para (i) again with break up for the sake of convenience as follows-

In relation to that many trade organisations and Commissioner Municipal Corporations have sought clarification about how to calculate the turnover Rs.50 crores, means-

whether the turnover within the Corporation area to be included

or

the turnover of all other business places within the state to be included

is not clear and hence it needs to be clarified. In this regard Govt. has sought opinion of Law and Judiciary Dept. and it is as follows……..

This means the clarification was sought with a specific question that, whether to include the turnover within one Corporation area or all business places at other places in the state.

Hence, we have to look to the clarification in the light of the question only. The question does not say whether sale made outside the city is to be included or not. The question is whether the turnover of sale at other places in the state is to be included.

2. In this background the clarification issued is as follows-

“The words “sale therein” in the words consumption use or sale therein, in the definition of Local Body Tax means the sale of taxable goods to a person for the purpose of consumption or use by such person in the Local Body Tax area. It means registration of Local Body Tax turnover regarding the business of the dealer within the corporation area is required to be considered and not the turnover in relation to business of the dealer within the entire State of Maharashtra.”

From the underlined portion of the clarification, it is clear that the turnover of  the business of the dealer from the business within the corporation area is to be considered and not the turnover in relation to business of the dealer within entire state.

This means entire turnover from the business within the particular Corporation is to be included, irrespective of the fact whether it is sold within the city or exported outside the city. The sale from the business within the Corporation area to outside the Corporation area remains the sale in the Corporation area only and has to be included in the turnover of that business in that LBT area.

3. The export benefit u/r 32 requires that the same goods must be exported out of the city and those are required to be included in the turnover in the return of LBT.

If the proposition not to include export out of city is accepted, then it means the benefit of export out of the Corporation area is automatically cancelled by the clarification dt.15-9-2015.

Hence the proposition not to include export is totally contradictory and wrong.

4. Further I wish to invite attention to para (iii) of the same clarification which states that to prepare the list of dealers whose turnover exceeds Rs.50 crore and for that the Corporation should collect information from Sales tax offices within the area of the Corporation. It further states, in Marathi and I put the translation of the original version as follows-

…….if the trader in the list received from the Sales Tax Department is not paying LBT to the Municipal Corporation, then the trader should be personally called and his Municipal Corporation wise turnover should be calculated. If his turnover within the Corporation limits exceeds Rs. 50 crores then he must be forced to register…….

This clarifies the position that the turnover has to be calculated in each Corporation area separately and it includes the turnover within the Corporation area. Not only this, but, a duty is cast upon the Commissioner, to confirm the figure from Sales tax records.

If the proposition that the export out of city is not to be included then how the Sales tax records are going to match with the LBT turnover as proposed excluding the export turnover?

This cannot be the interpretation as it cannot be interpreted devoid of the context in which it is issued.

Considering the issue in its entirety, it is clear that the clarification issued cannot be stretched to mean exclusion of the export out of city turnover for the purpose of calculating turnover of Rs.50 cores.

5. The original clarification issued by Govt. of Maharashtra dt. 15-9-2015 may be referred.

B. Whether the tax paid under amnesty is subject to interest and penalty again when the turnover on assessment is found more than declared under the amnesty scheme?

6. Notification dt. 3-6-2015 is the Amnesty Scheme as popularly known. Clause 2 and 3 of the notification read as under-

2. Applicability of the Local Body Tax Amnesty Scheme, 2015

This scheme shall be applicable to the registered as well as non-registered, (if trader or person registers himself during the prescribed time period of Amnesty Scheme) trader or person and for temporary registered person or trader for specific year. The scheme shall be applicable for the total period starting from date of implementation of Local Body Tax in the Corporation to 31st March, 2015.

The Scheme shall be applicable for assessed period as well as for un-assessed period. Under the scheme, if trader or person pays total amount of principal tax payable by him to respective corporation during the amnesty period of 3rd June, 2015 to 31st {~ly, 2015 out of pending dues then the total amount of interest or penalty shall be waived.

If respective trader or person pays part of outstanding principal amount of tax then in respect of only tax paid amount interest and penalty shall be, waived and the balance tax which is not paid shall be recovered with interest and penalty.

3. Salient features of the Amnesty Scheme

(i) If trader pays total principal tax amount out of pending dues payable as per any statutory order passed before 31st May, 2015 for any period ending on 31st March, 2015 under, Maharashtra Municipal Corporations Act then interest and penalty shall be waived.

(ii) If trader is in appeal and if amount of principal tax out of   outstanding dues is paid as per assessment order then interest and penalty shall be waived under the scheme, subject to unconditional withdrawal of appeal.

(iii) If return is not filed by trader and if he files returns and pays total amount of tax during the amnesty period then interest and penalty shall not be levied. If trader has already furnished returns and by furnishing revised return he accepts additional tax liability and pays the total amount of tax then interest and penalty shall not be levied.

(iv) If trader or person has already paid total amount of tax as per returns before the coming in to force of the Amnesty Scheme then interest or penalty shall not be levied on such late payment of tax.

(v) No refund shall be granted as result of this amnesty scheme.

(vi) If there is any doubt regarding interpretation of Amnesty Scheme then interpretation of the Government shall be final.

(vii) There will be 10% random assessment of traders under amnesty scheme.

(viii) Selection of 10% traders for assessment will be done randomly by the commissioner and this power can’t be delegated to subordinate officers.

(ix) All the assessment under amnesty will be completed by the end of 31st December 2015 and then there after there will be no tax, interest or penalty liability on the traders.

(x) If there is 10% variation in tax liability at the time of the assessment compare to the return file by the trader then on such amount no interest or penalty will be levied.

(xi) After the declaration of the scheme the Municipal Commissioner will arrange workshop for trade and industry for making them aware about the benefit of the scheme.

7. I wish to draw attention to the underlined portions.

First is the last para of clause 2 of the scheme. It says –

If respective trader or person pays part of outstanding principal amount of tax then interest and penalty shall be waived, in respect of only tax paid amount.

The balance tax which is not paid shall be recovered with interest and penalty.

Hence, it is distinctly mentioned that only balance portion shall be subjected to interest and penalty. The tax paid under the amnesty is completely free from interest and penalty.

8. Next is clause 3(iii)- There two situations narrated and covered-

One – when the trader has not filed a return and he files return and pays tax during amnesty then interest and penalty shall not be levied.

Two- If trader has already furnished returns and by furnishing revised return he accepts additional tax liability and pays it, then interest and penalty shall not be levied.

The two situations are clear and need no further explanation.

The intention seems to mean all those covered under the LBT and not only traders.  But the scheme is likely to create confusions.

I may point out that the entire amnesty scheme is loosely drafted.

9. Clause (iv)-The first part covers a situation where the person has already paid total amount of tax as per return before coming into force of the amnesty scheme.

But, the second portion is little confusing- the clause further states, “then interest or penalty shall not be levied on such late payment of tax.”

What is the meaning to be taken for the words “such late payment”? Does it mean a case where return is filed before the scheme but tax is later paid under amnesty scheme? But this also may not be correct as the first portion distinctly mentions that a person has already paid total amount of tax as per returns. Then what late payment is covered?

In my opinion the word “late” is not required. But, certainly a clarification is required.

10. Clause (ix) needs to be discussed. This clause puts a restriction of time for all assessments under amnesty to be completed by the end of 31-12-2015.

What happens if –

  • the assessments are not initiated at all before the time specified?
  • the assessments initiated but not completed before the specified time?

Does such situation mean that, the assessments are deemed to have been completed and the returns and applications under amnesty are also deemed to have been accepted and closed for all the purposes?

Lot of chaos is likely to happen. Further clarification here is also necessary.

11. Clause (x) – specifies a situation where there is variation of 10% in the tax liability in assessment as compared to the return by the dealer, then in such situation no interest and penalty will be levied.

The clause specifically mentions 10%. It does not state more or less than 10% variation.

Questions arise that, what if – the tax due is more or less than 10%?

Does this mean in both the situations interest and penalty shall be levied?

Further question arises in the second portion of the clause where it states that, “on such amount no interest or penalty will be levied.”

Does it mean only exact 10% variation is permissible?

The intention seems to waive interest and penalty for the tax due in assessment which is more than the tax already paid and the variation is less than 10%.  Only on the portion which exceeds 10% of the tax already paid, interest and penalty can be levied. An arithmetical example will quickly convey the exact meaning-

Say-

Tax already paid is                                       Rs.100,000/-

Tax payable as per assessment                  Rs.130,000/-

Excess of tax assessed                                  Rs.  30,000/-

10% of Tax paid                                             Rs.10,000/-No interest/penalty.

Tax in assessment liable

for interest and penalty                              Rs.  20,000/-+Interest +penalty.

As already stated, the entire amnesty scheme is loosely drafted and is leading to confusions.

12. It is clear that once the person pays the tax and files the return, he gets the benefits of the scheme to the extent of tax paid.

For the balance of tax –

  • to the extent it does not exceed 10% of original tax paid (Rs. 10000 in the example above), he will have to pay only tax and no interest or penalty can be levied.
  • and if the assessed tax is exceeding the 10% of tax already paid (Rs. 20000 in the example), interest and penalty shall be levied.

13. Conclusion for the issue under Amnesty scheme is- the intention of the Govt. is loud and clear. It does not want to levy interest and penalty not only on the tax already paid but also on the excess of assessed tax if it is not more than 10% of the tax already paid. But, due to the language used it is necessary to clarify certain issues and remove ambiguity.

(Article was first Published in STPAM’s Sales Tax Review, March 2016 )

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