CA Mukund Abhyankar
Applicability of audit under MVAT Act, 2002
To whom audit is applicable?
As per Section 61(1) of the MVAT Act, 2002, audit is applicable to
- A dealer who is liable to pay tax and his turnover, either of sales or purchases, exceeds Rs. 60 Lakhs during the Financial Year
- A dealer who holds a Liquor license in Form PLL, BRL, E, FL or CL.
Who is a Dealer?
Sub section 8 of Section 2 defines a dealer as a person who buys or sells goods in the State of Maharashtra for commission, remuneration or otherwise in relation to his business.
When a Dealer is liable to pay tax?
Any dealer becomes liable to get registered and to pay tax if his turnover of taxable goods sold or purchased during FY exceeds Rs. 10000 and turnover of all sales exceeds
- Rs. One Lakh, if he is an importer
- Rs. Five Lakhs if he is not an importer
Besides any person who has voluntarily registered under this Act is also a dealer liable to pay tax.
Any dealer who becomes liable to pay tax, continues to be so liable till his registration is duly cancelled.
Who can conduct Audit?
Practising CA/ICWA alone can be appointed as Auditor for audit under MVAT
Form and Time Limit for submission of Audit Report
Audit report has to be submitted by the Dealer in Form No. 704 within nine months and fifteen days from the end of the year to which the report relates – Rule 65 and 66.
Due Date for FY 2012-13 is 15.1.2014
Penalty for Non-filing of Audit Report
The responsibility of submitting the audit report to the Sales Tax Department is of the dealer and not of the Chartered Accountant.
For non compliance (including submitting an Incomplete Audit Report), Dealer can be charged penalty equal to 0.1% of Turnover of Sales or Purchases and can be prosecuted for imprisonment for 6 months
However , in view of proviso to section 61(2), no penalty under this sub-section shall be imposed, if the dealer files the audit report within one month after the aforesaid prescribed due date and proves to the Commissioner of Sales Tax that the delay was on account of factors beyond his control.
Audit Appointment and Engagement
- No procedure is laid down for appointment of VAT Auditor under the MVAT Act.
- A CA/ICWA working as Tax Consultant for the Dealer or Statutory Auditor of the dealer can also conduct MVAT Audit u/s 61. But an internal auditor of the dealer cannot conduct VAT Audit as VAT Audit is an audit under Statute.
- There is no ceiling on number of MVAT Audits
- The VAT Auditor should obtain from the dealer a letter of appointment for conducting the VAT audit. The letter of appointment should also specify the remuneration of the VAT auditor.
- If there is change of Auditor, new Auditor should first communicate with the previous auditor, before accepting the appointment.
- A dealer can appoint two or more chartered accountants as joint auditors for carrying out the VAT Audit.
Approach to VAT Audit
Entire system of VAT is based on self-assessment by a Dealer.
Tax liability is calculated and paid by the tax payers through their periodical returns.
As an essential cross check however, statutory provision has been made for verification of returns by an independent auditor in minute details by going through the books of accounts and also by analysing and interpreting the provisions of the State VAT Laws.
A certification at the end of audit, as to whether there was any under-assessment made by the dealer requiring additional payment or whether there was any excess payment of tax warranting refund to the tax payer, is therefore an important element of VAT administration.