Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fees Ordinance 2019

The Maharashtra Goods and Services Tax Act, 2017 has been made applicable in the State with effect from the 1st July 2017. Prior to the implementation of GST in the State various tax laws were in force, some of the tax laws have been repealed and subsumed in the Goods and Services Tax.

Substantial amount of tax is locked due to large number of cases and litigations which are pending under the repealed laws (hereinafter referred as relevant act) administered by the state GST department which includes Central Sales Tax Act 1956, Bombay Sales Tax Act 1959, Purchase Tax on Sugarcane Act 1962, Profession Tax Act 1975, Right to use goods Act 1985, Entry of Motor Vehicle Act 1987, Luxury Tax Act 1987, Works Contract Act 1989, Value Added Tax Act 2002. The State Government hence considered it expedient to provide for a scheme for settlement of arrears of tax, interest, penalty or late fee under the relevant Act which were levied or imposed, for the periods ending on or before the 30th June 2017.

Arrears of tax, interest, penalty or late fee: It has been defined in the ordinance to mean the amount of tax, interest, penalty or late fee, as the case may be,—

(i) Payable by an assessee as per any statutory order under the relevant Act; or

(ii) admitted in the return or, as the case may be, the revised return filed under the relevant Act and which has not been paid either wholly or partly; or

(iii) determined and recommended to be payable by the auditor, in the audit report submitted as per section 61 of the Value Added Tax Act, and accepted by the assessee either wholly or partly, whether the notice under section 32 or 32A of the Value Added Tax Act has been issued or not; or

(iv) in respect of which a notice has been issued, in relation to any proceeding under the relevant Act; or

(v) determined to be payable by the assesse where no notice in relation to any proceeding under the relevant Act is issued, and such arrears of tax, interest, penalty or late fee, pertains to specified period;

and such arrears of tax, interest, penalty or late fee, pertaining to any period ending on or before 31st June, 2017

Duration of Phase under Ordinance: The Settlement scheme has given an option to the assesse by giving two different phases for filing application and payment of requisite tax amount. The benefit of waiver of tax, interest, penalty & late fees is different in both the phases. It is advisable to take benefit in the first phase itself as the quantum of waiver is more in first phase as compared to that in the second phase.

First Phase: The first phase for making application under the settlement scheme along with the payment of requisite tax amount (other than waived) shall begin on 1st April 2019 and end on 30th June 2019.

Second Phase: The second phase for making application under the settlement scheme along with the payment of requisite tax amount shall begin on 1st July and end on 31st July 2019

Conditions for availing benefit under settlement of arrears scheme:

(1) The applicant shall make a separate application for each class of arrears under the relevant Act, on or before the last date provided for the different period of Phases.

(2) The application shall be made to the designated authority in such form and in such manner, as may be specified by order by the Commissioner. The Order specifying the requisite forms have been issued on 7th March, 2019.

(3) A Separate application needs to be made to settle the arrears of original / revised return dues under the relevant Act, in respect of the specified period which is till 30th June, 2017. Where an applicant desires to settle the return dues in respect of more than one original or revised return pertaining to a financial year, then he may make a single application. No application for settlement of arrears in case of revised return shall be entertained if the returns are revised after 31st March, 2019.

(4) Every such application shall be accompanied by the proof of payment of the requisite amount and the documents stated in the application form.

(5) Where any appellate authority including Tribunal or the Court has remanded case back to any authority under the relevant Act, for giving  effect to the directions given therein, such order need to be passed on or before the 15th July, 2019 for availing the benefits under the settlement scheme.

(6) Under any circumstances, the applicant shall not be entitled to any waiver in respect of un-disputed tax.

(7) No arrears of tax, interest, penalty or late fee, if any, shall be settled under the Ordinance, in case the statutory orders are made or returns or the revised returns are filed after the 15th July 2019

(8) The applicant shall be entitled to the waiver of disputed tax, interest, penalty or the late fee, to the extent as mentioned below:

a) For the Period up to 31st March, 2010:

Particulars Amount to be Paid Waiver in First Phase Amount to be Paid Waiver in Second Phase
Undisputed Tax 100% Nil 100% Nil
Disputed Tax Amount 50% 50% 60% 40%
Interest as per Statutory orders or returns 10% 90% 20% 80%
Penalty Outstanding 5% 95% 10% 90%
Post Assessment interest or penalty leviable but not levied 100% 100% 100% 100%

b) For the Period from 1st April 2010 to 30th June 2017:

Particulars Amount to be Paid Waiver in First Phase Amount to be Paid Waiver in Second Phase
Undisputed Tax 100% Nil 100% Nil
Disputed Tax Amount 70% 30% 80% 20%
Interest as per Statutory orders or returns 20% 80% 30% 70%
Penalty Outstanding 10% 90% 20% 80%
Post Assessment interest or penalty leviable but not levied 0% 100% 0% 100%
Late fees for returns filed from 1st April 2019 to 31st July 2019 0% 100% 0% 100%

(9) No application under this Ordinance shall be entertained in respect of the applicant, who has taken the credit of set-off under the relevant Act, in the Electronic Credit Ledger, provided under the Goods and Services Tax Act, unless the credit equivalent to the amount for which the settlement application is filed is reversed by debiting the Electronic Credit Ledger or the Electronic Cash Ledger, on or before the date of submission of application for settlement.

(10) In case the appeal is pending before the appellate authority, Tribunal or Court, the same needs to be unconditionally withdrawn by the assessee before filing an application under this scheme.

(11) Under no circumstances, the applicant shall be entitled to get the refund of the amount paid under this Ordinance

Adjustment of Payment:

a) Any payment made in respect of any statutory order either in appeal or otherwise before 31stMarch, 2019 shall first be adjusted against amount and tax and thereafter against interest, penalty & late fees sequentially (Overriding the adjustment mechanism in the relevant act)

b) After the above adjustment, the amount remaining outstanding as on 1stApril, 2019 shall be considered for the settlement under the scheme for calculating the amount to be paid and the amount that shall be waived.

Salient Features:

1. In respect of the demand of the arrears of tax, interest, penalty or late fees, any amount is paid on or before the 31st March 2019, then the said amount shall not be considered as the requisite amount for the settlement of the arrears as per the provisions of the Ordinance.

2. The complete waiver of late fee shall be available in respect of the returns filed for the period ending on or before 30h June 2017 and which are filed during the 1st April 2019 to 31st July 2019.

3. The Ordinance provides for the settlement of arrears of tax, interest, penalty or, late fee in TWO PHASES. First Phase will last for THREE MONTHS and the Second Phase for ONE MONTH. The First Phase provides slightly higher waiver in respect of disputed tax, interest and penalty as compared to the waiver available in Second Phase.

4. It may be noted that to get the benefit under First Phase it shall be mandatory for the applicant to submit application and also need to make payment on or before 30th June 2019. In case the payment is made during the First Phase i.e. before the 30th June 2019 but the application is submitted after 30th June 2019, then such applicant shall be entitled to get benefit available for the Second Phase.

5. It is clarified that the tax for the purposes of this Ordinance, includes the surcharge, turn-over tax, additional tax, tax deducted at source, tax collection at source and by whatever name the tax is called.

6. The Ordinance makes it clear that the applicant shall not be entitled for any waiver in respect of the undisputed tax. The undisputed tax shall mean:

(i) the taxes that are collected separately; or

(ii) the deduction allowed by the authorities in statutory order for the taxes collected separately; or

(iii) taxes shown payable in the return or the revised return filed under the Relevant Act; or

(iv) an amount claimed by the dealer as deduction or allowed by the designated authority as per rule 57 of the Maharashtra Value Added Tax Rules, 2005 or similar rules under the other Relevant Act; or

(v) an amount forfeited under the statutory order or excess tax collection shown in the return, revised return or, Audit report, as the case may be, submitted under the Relevant Act; or

(vi) any amount of tax, interest or late fee determined and recommended to be payable by the auditor, in the audit report submitted as per section 61 of the Value Added Tax Act, and accepted by the assessee either wholly or partly; or

(vii) the tax deducted at source (TDS) by the employer under the Relevant Act; or

(viii) the tax collection made under section 31A of the Value Added Tax Act.

Who can take the Benefits under the Ordinance?

The following categories of the assessee may prefer to avail the opportunity for settlement of tax, interest, penalty or late fee levied, payable, imposed, respectively, under the Relevant Act:-

(1) the tax payer whose registration is continued after 1st July 2017;

(2) the tax payer whose registration certificate under the Relevant Act was valid at any time on or before the 30th June 2017;

(3) the tax payer whose registration certificate is cancelled at any time on or before the date of commencement of this Ordinance;

(4) the tax payers who were never registered under any of the Relevant Act, but desire to avail the benefits under this Ordinance, shall also be eligible to make an application and subject to the conditions may settle the arrears of tax, interest, penalty or late fee payable for the periods ending on or before the 30th June 2017.

Forms to be used for the Settlement:  

Sr. No. Form No. Purpose of Form
1. Form-I Application for settlement of arrears of tax, interest, penalty or late fee payable as per the Statutory order.
2. Form-IA Application for settlement of arrears other than the Statutory orders like return/revised return dues, dues as per recommendations in audit report or self-assessed dues etc.
3. From-II Application for withdrawal of appeal.
4. Form-III Notice of Defect in respect of application for settlement of arrears.
5. Form-IV Order of Settlement or Order of rejection.
6. Form-V Notice for Rectification of Mistakes to be issued by the Nodal Officer.
7. Form-VI Application for Rectification of Mistakes to be submitted by the applicant.
8. Form-VII Notice for review

Concluding: It’s a welcome move by the state government to introduce such a settlement scheme to get rid of pending litigations and also to unlock the revenue involved in all the erstwhile laws which has now got subsumed in GST and focus on GST administration and collection. Infact this scheme is quite liberal as compared to the previous scheme (Maharashtra Settlement of Arrears in Dispute Act 2016) as there is a waiver in disputed tax amount as well which not the case was in earlier scheme. The dealers registered under earlier laws are advised to take benefit of this settlement scheme and come out clean as far as disputed liabilities are concerned.

(Written by CA. Ritesh R. Mehta, Nagpur)

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3 Comments

  1. Tamal says:

    As per the example given under the Trade Circular dtd 08.03.2019, ( page 14 ) Demand due to non production of Form C shall be treated as Tax arrears and amounting to Disputed Tax and therefore available for settlement under the scheme. Does this mean that Tax payable due to non production of Form C for which Rectification was applied are available for settlement?

    1. cariteshrmehta says:

      The settlement scheme is applicable to interest under all the provisons of the law. It doent distinguish between Sec. 30(2) and 30(3) and hence you are elligble for the waiver even for Sec. 30(2) of MVAT act under the settlement scheme.

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