CA Umesh Sharma

CA Umesh SharmaArjuna (Fictional Character): Krishna, Good News!!! Mumbai High Court on 3rd March, 2015 has ordered to assess and grant MVAT refund on the basis of Returns, what is it?

Krishna (Fictional Character): Arjuna, MVAT Act comes under the purview of the Maharashtra State Government. The dealers have been irritated due to the complicated and time consuming provisions of MVAT Laws for refund. There are two provisions for granting MVAT refund 1) By Filing Form 501 i.e, application to grant early refund and 2) Obtaining refund on the basis of returns filed after Assessment. However, many times the dealers were not getting refund on the basis of the Return filed as he has not filed Form 501. That’s why the Mumbai High court has given decision in the favor of dealers to give refund on the basis of returns. Thus crores of rupees of refund were blocked as dealers filed returns but these were not assessed by the Sales Tax department. There was no mistake of dealer in such cases, but justice was also not there from sales tax department to such dealers.

Arjuna: Krishna, What is Refund in MVAT?

Krishna: Arjuna, In Maharashtra the Taxpayer has to pay Tax on the difference between Sales and Purchases value. In this if there is less VAT payable on sales and more VAT setoff on Purchases then the refund arises. E.g. if taxpayer has purchased Goods for production @ 12.5% and levied VAT @ 5% on finished goods while making sale then there is a refund. Otherwise for e.g. if taxpayer has Rs. 10 lakhs of VAT payable and VAT Setoff of is Rs. 16 lakhs then refund of Rs. 6 lakhs will arise.

Arjuna: Krishna, What ate the two methods of claiming VAT refund?

Krishna: Arjuna, Every dealer has to file his VAT return according to his periodicity. There are two methods of claiming VAT refund, they are as follows:

  • Filling of Form 501: Within 18 Months from the end of financial year dealer has to file VAT refund Application in Form 501. In this he has to provide details of Invoice wise purchases made, details of “C” and “H” form received and not received, etc. For match and mis match of setoff was done. Thereafter lot of follow needs to be done with department for grant of refund. Further the same was reduced due to no errors of dealer and Interest was also not granted to dealer in such cases.
  • On the basis of Returns filed: Dealer has to get VAT refund by getting Assessment done from sales tax department. But many times his assessment was not done and never got refund on the basis of VAT returns. Many times the Dealer’s Refund money is kept by the department itself without assessment. That means taxpayer has to beg to the Department for his own money.

Arjuna: Krishna, Can a Dealer carry forward VAT refund in next year instead of claiming it?

Krishna: Arjuna, the dealer can carry forward his VAT refund up to Rs. 5 lakhs to next year but if it is exceeds Rs. 5 lakhs then he has to claim it in the same year to Sales Tax department.  It’s mandatory to claim such refund above Rs. 5 lakhs.

Arjuna: Krishna, oh My God!! Then it’s good that Mumbai High court has given relief to such dealers?

Krishna: Arjuna, for getting VAT refund on the basis of Returns, Mumbai High Court has ordered against Writ petition no.297/15 on 3rd of March. In this it came to the notice that, Sales Tax department is causing delay in verifying the returns filed by the Taxpayer. That’s why High court has order that returns should be verified as early as possible and Refund should be given within 8 weeks of this High Court decision.

Arjuna: Krishna, what should one learn from this Sales tax department and VAT refund?

Krishna: Arjuna, many taxpayers will get relief by this decision of High Court as dealers who have not filed Form 501 will get refund now. Sales Tax department should follow the decision given by the High Court and should process the Refund on an earlier basis. If this happens then we can surely say “Der Aaye Durust Aaye.” Further no money of taxpayers should be kept by tax departments and taxpayers should also not keep tax payable. The dealers who abide the tax laws should not be punished refund should be granted with interest when correct and complete returns are filed by them.

Dear Kaneeti lovers and tax guru lovers, happy holi and your colorful comments are welcomed.

Author Bio

Qualification: CA in Practice
Company: R.B. Sharma and Co
Location: Aurangabad, Maharashtra, India
Member Since: 27 Jan 2018 | Total Posts: 339
1. Vice-Chairmen of WIRC of ICAI for the year 2015-2021. 2. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 3. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNITI” published in Lokmat on every Monday. Till date 335+ weekly articles ha View Full Profile

My Published Posts

More Under Goods and Services Tax


  1. PRASHANT says:

    For the year 2011-12 dealer has refund. All the returns are filed within prescribed time limit. However Form 501 not submitted. Further department has not taken up the case for assessment. Now the year 2011-12 is also time barred. Kindly guide. Dealer is ready to pay necessary professional fees also.

  2. Balraj says:

    By mistake I have paid Rs 10000 excess VAT in the FY 2011-12. I have come to know now. My t/o during that year was Rs 37 Lacs. I had not filed J1 and J2 filed was wrong. How do I correct my J2 and claim excess VAT wrongly paid by me.

  3. T V S SARMA says:

    I wish to know, if there is a provision in MVAT by which the dealer can claim VAT refund on fast track basis.. say typically in the 1st quarter of the following financial year for refund of the previous financial year.

    Also what for doing so on special case, does the dealer have to produce any Bank Guarantee and if so what % of the refund and for what tenure?

  4. K r dhole says:

    i have to get lot many refunds, but the dept is going very slow & moreover they r refusing to give interest on it even though we have got the same from appellate. Under such circumstances what action is required to be taken by me against this tendency of the assessing officer?

  5. kalpesh says:

    Dear Sharmaji,

    Thanks a lot for providing such a valuable info. on MVAT Refund. I request you to also provide link or pdf copy of the High court judgement 297/15 dtd. 3/3 15 as it is extremely difficult to search & get the same on Bom. High Court website.

    If possible pls. also provide your email id. so that we can contact you in case any clarification or query on your articles.

    Once more Thanks in anticipation of your Reply.

  6. VUM Rao says:

    This is proving again that genuine tax payers always put to suffering. Government should show keenness to undertake studies in all taxing Departments and pay back what ever has to be refunded in the fastest manner. These delays breed corruption. If Govt. is sincere it should undertake such studies quickily
    to prove their good governance.

  7. Gourishankar Narone says:

    Dear Sir,

    Please reply in case of refund is pending due to J-1 & J-2 for there confirmation what remedies are available or How we can check confirmation of J-1 & J-2 on line please suggest.

    Thanking You,

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

September 2021