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CA Umesh Sharma


In The Mahabharata on the Battlefield of Kurukshetra, the conversation between Lord Shri Krishna and Arjuna gave birth to the Holy book “Bhagwat Gita”

Wherein Arjuna asked many questions to Lord Krishna and Lord Krishna answered the questions with full justification.

Today a common man is facing many difficulties and he always strives to overcome these difficulties and problem. These problems may be financial or social and we always try to find answers for these problems.

Lord Krishna very easily and joyfully answered to the questions of Arjuna due to which Arjuna was happy and motivated to take further actions.

Keeping this conversation between Lord Krishna and Arjunaas the foundation we will learn certain basic financial and tax matter. Let us try to get answers to our questions in a bit different and joyful manner. The character of Arjuna will be played by the common man or tax payer and the character of Lord Shri Krishna the Expert for giving solutions to all problems.

This is a small attempt to get answers to our queries related to tax matters in simple manner.

There is no intention of hurting anyone’s religious feeling and this is a small attempt of knowledge sharing in a simple way. 


State Budget: Relief in MVAT up to Rs. 10 Lakh but No relief for refund & LBT

Arjuna (Fictional Character): Krishna, on 5th June 2014, Deputy Chief Minister and Finance Minister of Maharashtra State presented the finance budget for the year 2014-15. Taxpayers had many expectations from the budget due to all round changes and upcoming elections.

Krishna (Fictional Character): Yes Arjuna, due to Loksabha elections Finance Minister has presented interim budget on 24th February. Therefore from State budget of 2014-15 post elections, taxpayers had many expectations. Through this budget many new things and changes came in but, finance minister kept mum on certain things like LBT and Toll Charges on usage of road.

Arjuna: Krishna, What are the changes in this budget?

Krishna: Arjuna, The VAT department has not yet issued notification regarding the changes but some important changes given in budget are as under:

1. VAT REFUND,NO RELIEF: Finance Minister while giving speech on taxes, first of all said that if selling dealer has not paid VAT then it is recovered from purchasing dealer along with interest and penalty by disallowing the set off, however when VAT is recovered from the selling dealer then it should be refunded to the purchasing dealer by allowing set off. It is mentioned that this refund should be given expeditiously. However dealer doesn’t receive such refund.

Further in our opinion department should give authentic information to the dealer regarding VAT recovered from the defaulting dealer, so that dealer can claim the refund. In the case of Mahalaxmi cotton, VAT department has filed affidavit with Mumbai high court that it will grant refund to such dealers. However department has not yet executed on this. It seems that FM knows the issue, but can’t solve it. How pathetic situation is this.

2. To grant relief to small taxpayers from the rules and compliances of VAT, limit of compulsory registration has been increased from Rs. 5 Lakh to Rs. 10 Lakh. Further if the turnover of the taxpayers is less that Rs. 10 Lakh in the year 2013-14 and they are registered under VAT then they can make application for cancellation of registration before 30th September 2014 and cancel their registration.

3. Late fee of Rs. 5,000/- was levied for delay in filing VAT return. Now if return is filed within one month from the due date then late fees of Rs. 2,000/- will be levied. Further if taxpayer files pending returns up to 1st April 2014 by paying tax and interest then they can be filed with late fee of Rs. 1,000/- only. Late fees already paid will not be refunded.

4. Composition scheme is available to taxpayers whose annual turnover is less than Rs. 50 Lakhs. In this budget this scheme is made more attractive. If retailers are registered under this scheme then VAT will be levied @ 1% of turnover or 1.5% of the taxable turnover.

5. From the year 2013-14 turnover limit for carrying out VAT audit has been increased from Rs. 60 Lakh to Rs. 1 Crore. It means now limit for tax audit and VAT audit will be same.

6. The limit of levying luxury tax has been increased from Rs. 750 to Rs. 1,000/-. Further 4% Luxury tax will be levied up to Rs. 1,500 and Rs. 10% will be levied for more than Rs. 1,500/-.

7. The basic limit for levying profession tax to employees has been increased from Rs. 5,000/- to Rs. 7,500/-.

8. VAT on cotton was levied @ 5%, now it is reduced to 2%.

9. If the dealer has sold specified goods, VAT on which is charged @ 12.5% to government then they can be sold @ 5% only.

10. In the assessment or audit from the department and addition tax is required to be paid by the dealer then additional interest @ 25% was levied other than normal interest. Now if certain conditions are specified this additional interest will not be levied.

Arjuna: Krishna, What taxpayer should learn from this Budget?

Krishna:Arjuna, every year finance minister of the state declares budget and accordingly changes in the laws were made. Some of the changes are beneficial for the taxpayer and some are to the government. Taxpayer should accept these changes and should follow tax laws and government also should not levy harsh provision on the taxpayer. If there are harsh provision then taxpayers finds other ways for escaping. Government should levy tax keeping this mind. It is said that “King says and others follow.” In this connection we can say that, Finance Minister informed to give refunds expeditiously but VAT department should follow this. At the end government collects taxes through various means but its benefits are for all.

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Author Bio

1. Central Council Member of ICAI. 2. Vice-Chairman of WIRC of ICAI for the period 2015-2021. 3. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 4. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNEETI” published in Lokmat on every View Full Profile

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  1. Rajesh,Mumbai says:

    Arjuna : There is no relief to Existing purchasers who have become victim of Non genuine sellers who issued bogus Invoices but did not pay Taxes.

    Krishna : Yes Arjuna, In Mumbai and Maharashtra, Sales Tax Department has found that around 2000 suspicious suppliers have sold goods and issued sales Invoice without paying taxes. Purchasers, on the basis of said sales Invoices, claimed set off of taxes as legitimately permitted by law.

    Arjuna : But department did not allow set off citing reasons that sellers did not pay/deposit taxes to the government. They are resorting to highhandedness to recover taxes from Existing purchasers.

    Krishna : Yes Arjuna, since seller had not paid taxes, Sales tax department, instead of being harsh and coercive with sellers who was guilty and had made mockery of system fooling department, invoked section 48(5) of Mvat act and started to recover said evaded taxes from purchaser of goods. This has become burning issue and trading community is being harassed in such a way.

    Arjuna : Purchasers fulfilled required conditions for claiming set off. 1) They purchased material with Invoice. 2) Invoice showed Tax amount separately. 3) Seller had valid TIN Number at the time of transactions 4) Seller issued Certificate of Tin in force further stating Tax will be paid and return will be filed. 5) Transactions were recorded in books 6) Purchasers made payment including Taxes through Bank.

    Krishna: Yes Arjuna, More than This, A dealer cannot be expected to do. He cannot act as a policeman and ensure whether seller has paid Taxes or not. There is no mechanism to ensure whether seller has paid taxes to the government or not. All these suppliers/sellers held valid registration numbers at the time of transactions. But department cancelled their 4-5 years old number with retrospective effects and started to recover taxes from purchasers from retrospective effects.

    Arjuna : Why department acted so Late ?

    Krishna: Yes Arjuna, Department had a long sleep of so many years and woken up after computers (Electronic system) found an abnormal mismatch in tax payments v/s set off claimed.

    Arjuna : Is it Fair?.

    Krishna: Not at all. But they are the government. They make laws. They do not see practicability of Laws. They issue TIN numbers after due verification of applicant and premises. After allotment of TIN, It is established position that registered dealer becomes agent of department and whatever taxes he collects can be deemed to be collected by department. But such position can be violated any time by government by making retrospective laws.

    Arjuna : Is n’t it unconstitutional to cancel TIN retrospectively. For example, Tin has been cancelled in 2011 and 2012 but effect has been given from 2006.

    Krishna: Of course Arjuna. You are right. This is unconstitutional. This is against law of nature. But as I said, they have powers to do anything hence they do it.

    Arjuna : Department contacted those sellers and took (forced them) their statement in writing that they had issued fake invoices without delivery of goods. Such statement saved those defaulting suppliers from paying huge tax liability and helped department to catch genuine purchasers in view of section 48(5). See smartness of Department that after taking (desired) statement, those sellers are free and genuine existing purchasers are being harassed with coercive recovery action with penalty and interest.

    Krishna: Yes Arjuna. To justify department’s action, they are using their power in such a forceful way unilaterally taking false statements from sellers. Department can contact such sellers any time but department informs purchasers that they (Sellers) are nonexistent hence recovery of taxes from purchasers.

    Arjuna: But Krishna, My Lord. What is the solution afterall ?

    Krishna: It may be true that such Non genuine dealers were doing genuine and also non genuine business. Non genuine business means such sellers might have bought material from grey market and sold under their Invoices to purchasers. Such sellers collected taxes from purchasers but did not pay to the government. Purchasers claimed set off based on seller’s invoice but department disallowed it in view of section 48(5). Department acting unconstitutionally cancelled TIN of such sellers retrospectively. Department observes that though registered for 4-5 years Such sellers were not filing their returns regularly and most of them were non filers but department did not take any action against them. The problem may be spread over 3 to 4 years and department though in fault is using its muscles to recover taxes from purchasers by hook or crook. The episode has made business atmosphere unfavourable and unfriendly in Mumbai. The most amicable solution at this stage is: government must come out with an amnesty scheme giving an opportunity to purchasers to pay 50% of lost taxes in the transactions which had taken place during validity of seller’s TIN and 100%+Interest which had taken after cancellation of TIN, declaring them publically on department’s Website as Non genuine dealers. Government must play a proactive role considering tough time and competitive environment of doing business. Afterall Maharashtra is getting Sales tax of more than 110000 crore (highest in India) which is paid by businessmen only. Harassment of the Dealers is not the solution.

    Arjuna : This seems reasonable and welcome step it taken by government. But can’t you help to convey this solution to the government?

    Krishna : I will request Tax Guru to do the needful in this matter so business community can be saved from such unwanted harassment and Maharashtra state can continue to progress.

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April 2024