Important Amendments made by Punjab Government in the Punjab Vat Act, 2005 By virtue of notification dated 15.11.2013
VAT is a system of collection of tax under which the tax is charged at each stage of sale on value added to the goods. Our country is governed by “rule of law”. there are immumerable statutes, their rules & bye laws, VAT is one of them which deals with the sale & purchase of goods in the state. It is system of collection of tax under which tax is charged at each stage of sale on the value addition. In other words we can say the selling dealer collects the tax on the full price at which he sells the goods to a consumer or to a dealer and at end of period fixed by VAT act he discharge his output liability by reducing the tax paid by him while making the purchases but now the amendment dated 15.11.2013 has bought drastic changes in the concept of collection, levy of VAT & penalty. The Punjab Value Added Tax Act, (Second amendment) Act 2013 (Punjab Act No. 38 of 2013) has brought various changes which are important as well as creates major attention of all, In this regard, I recall the observation of a Division Bench of our Hon’ble High Court of Punjab & Haryana comprising Mr. Justice Jawahar Lal Gupta and Mr. Justice N.C. Khichi in the case of Mr. V.K.Khanna , Ex . Chief Secretary, Punjab;
“ Dark deeds need the cover of darkness, otherwise sunlight is the best antiseptic. Transparency is the best guard against all allegations.”
the changes are briefly discussed below:
Details of Amendments :->
VAT on MRP:
A new Section 8-C has been introduced which has authorized the State Government to levy VAT in respect of any goods covered under the Standards of Weight and Measures (Packaged Commodities) Rules, 1977 on the maximum retail price of such goods as printed on such goods. However this facility is optional is applicable on the manufacturer or the first importer of goods at their option. Such option once chosen can also be cancelled by making an application to the designated officer. Section 8-C(2) clarifies that a person who opts to pay tax on MRP has to issue invoice showing value of goods and tax separately , as MRP printed would be inclusive of the tax payable.
It has also been provided in the provisions that for computing the tax liability in such case, taxable person shall not be entitled to claim any deduction on account of any trader discount or incentive in terms of quantity or cash discount that he may have given to the purchaser.
Constitutional validity of tax on MRP: The power of State Government to levy VAT and sales tax is governed by the Entry 54 of the State List of the Seventh Schedule to the Constitution of India, which authorizes State Government to levy tax on the sale and purchase of goods with the State.
Section 8-C(4) further provides that all subsequent taxable persons buying such goods on which tax on MRP has been paid, shall be exempted from payment of tax on the sale of such goods.
CREDIT OF ADVANCE VAT, WITHOUT REVERSAL:
Section 6(7) provides that the advance VAT will be counted towards final liability of the taxable person. Section 13(1-A) which provided that Advance VAT is to be treated as input tax credit has been omitted w.e.f 04.10.2013. Which means credit of advance VAT will be available without any reversals u/s 13 because it is to be counted towards final tax liability and since it is not to be treated as input tax credit therefore reversals applicable on input tax credit will not be applicable on Advance VAT. Although in the explanation it is stated that the taxable person who imports the goods into the State, shall pay advance VAT on it on a rebuttable presumption that such goods are meant for sale or for use in manufacture or processing of goods meant for sale and such goods will not be sold below the price at which such goods have been purchased and imported in the State.
It has not been clarified in section 6(7) what will be the consequences if the above presumptions are rebutted that is to say if the goods on which advance VAT is paid are disposed off otherwise than as sale or are being sold at lesser price than on which they have been purchased and imported.
Second proviso to section 6(7) also provides that a taxable person may apply for the exemption from the payment of advance VAT to the Commissioner or the Designated officer, who can allow such application subject to such terms and conditions as may be deemed fit.
ADVANCE VAT IS NOT TO BE TREATED AS ITC:
Section 13(1-A) has been omitted w.e.f 04.10.2013. Section 13(1-A) provided for treatment of Advance VAT as input tax credit. Since Advance VAT has to be counted towards final tax liability as per section 6(7) and final liability is calculated after adjustment of output tax with input tax credit, therefore omission of section 13(1-A) was necessary in view of section 6(7).
SECTION 8-D POWER TO GRANT TAX INCENTIVES:
Section 8-D has been introduced under Punjab VAT Act so as to give power to the State Government under a non- abstante clause, to grant tax incentives to the industries which come into production for the first time as and when notified in the industrial policy framed by the Department of Industries. It seems that Government is soon going to frame a new Industrial Policy after the industrial policy of 1996 so as to grant the tax incentives to the new industries, for which purpose the above amendment has been made.
SECTION 8-E RETENTION OF TAX COLLECTED:
It gives power to the State Government to allow retention of tax collected to such class of industries subject to such conditions as may be prescribed.
SECTION 13 AMENDMENTS RELATE TO ITC:
Section 13 which is a very important section under Punjab VAT Act, 2005 relating to the input tax credit has also been amended. First proviso to section 13 has been substituted as follows:
“Provided that the input tax shall not be available as input tax Credit unless such goods are sold within the State or in the course of inter-State trade or commerce or in the course of export or are used in the manufacture, processing or packing of taxable goods for sale within the State or in the course of inter-State trade or commerce or in the course of export.”
The amended proviso has been differently worded from the earlier proviso. In the amended proviso the words used are “unless such goods are sold” where as in the proviso before amendment the words used were “such goods are for sale”. The above amendment in section 13(1) shall come into force w.e.f 01.04.2014.
ITC REVERSAL AT TIME OF CLOSURE:
Section 13 (9) also been amended so as to provide that a person shall reverse input tax credit availed by him on goods which remained in stock at the time of closure of business.
Before amendment section 13(9) also provided a condition that input tax credit shall be reversed on the goods if they are not used for the purposes as mentioned in section 13(1). Now the said condition has been removed in view of the amendment in first proviso to section 13(1). Input tax credit not to exceed tax paid in the Government Treasury-
SECTION 29 AMENDMENT-ASSESSMENT PROVISIONS:
Extension of time limit for the assessment:
Section 29(4) of Punjab VAT Act, 2005 has been amended so as to provide for that an assessment u/s 29(2) or 29(3) may be made within a period of 6 years after the date when annual statement was filed or due to be filed whichever is later. Thus time limit for the assessment has been increased from 3 years to 6 years. Earlier the time limit for the assessment was 3 years from the due or actual date of filing the annual statement and beyond 3 years the assessment could be framed only after the extension of time period for assessment is made by the Commissioner.
But now the default time limit for assessment has been made 6 years itself, that means assessment can be framed without any order for extension of Commissioner.
The proviso to section 29(4) providing for the extension of time limit of the assessment period has also been deleted.
In the proviso added to section 29(4) the time limit for framing the assessment of the cases of year 2006-07 in which annual statement has already been filed, has been extended till 20th November 2014.
Explanation to section 29(4). also clarifies that the limitation period of six years for an assessment under sub-section 2 or sub-section 3, shall also apply to those cases in which the aforesaid period of six years has not yet expired.
Explanation 2 and section 29(10-A) undermines the judgement of P&H High Court:
Explanation 2 added to section 29(4) very interestingly makes it clear that prior to the commencement of the Punjab Value Added Tax (Second Amendment) Act, 2013, the Commissioner was not required to issue any notice to the concerned person before extending the limitation period of assessment.
In newly added sub-section 29(10-A) under a non-abstante clause it has also been stated that irrespective of any judgement, decree or order of any court, Tribunal or other authority, an order passed by the Commissioner under sub-section (4) prior to the commencement of the Punjab VAT(Second Amendment) Act, 2013, shall not be invalid on the ground of prior service of notice or communication of such order to the concerned person.
Insertion of section 46-A-Power to purchase under-priced goods:
Section 46-A has also been introduced which gives power to designated officer to purchase the under-priced notified goods. This section seems to have been introduced for curbing the tax evasion due to under pricing of the goods sold. This section gives power to the designated officer with the prior approval of the Commissioner or any other officer as the Commissioner may in writing authorize for this purpose, if he has reason to believe that any goods notified by the State Government whether in stock or in transit are under priced as shown in the document or books of account, may make an offer to purchase such goods at the price shown in the document or books of account, increased by 10 percent plus freight and other expenses. If the owner accepts such offer the goods will be delivered by him on such date, time and place as directed by the officer, however if rejects such offer or fails to deliver such goods, then it shall be construed as conclusive proof that the owner has under priced the goods and the price of goods determined by the Designated officer to the best of his judgment shall be considered as the actual price of the goods. This section is a step in the direction of curbing the tax evasion in case of under-priced goods.
That Punjab & Haryana High Court instructs the Punjab Government to appoint all the members of Tribunal, as till that time Chairman alone was carrying on the operations of the Tribunal. Which means that appointment of all the Chairman as well as members in the Tribunal will not be compulsory & even a member or two without the Chairman can also run the Tribunal; here the word “shall” has been replaced with the word “may”.
Amendment in Section 56 related to Penalty Clause
Person who has availed refund under fast track refund scheme & enjoying the status of star rating if found to have willfully of fraudulently claim refund which was not due to him then he shall be liable for penalty which is maximum of five times of the refund amount so claimed & interest there on.
In nutshell it can be safely inferred that by virtue of this amendment legislature has tried to nullify the settled law laid down on number of issues even this amendment has bypassed the principles of natural justice which is the basic requirement as in the absence of the same one will not get justice. That notification reflects unbridled powers and wayward liberty. It reminds the words uttered in front of the Statue of Liberty –during the French Revolution: “ O liberty! What crimes are not committed in thy name.”
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Authored by
J S BEDI Advocate
Email ID: bediadvocate@yahoo.co.in
Contact Number: 98140-66336
