CA Lalit Munoyat
While the intentions of the State Government are clear as to non levy of VAT on Fabric, but due to some misdrafting of the rules and notifications, the general public is put under severe confusion as to whether a specific levy is applicable to it or not. In the case of Fabric, the same is the situation. After all amendments, the position of law that remains on the statute book. This situation has first arrived when Entry-45 of Schedule A which contains Fabric was amended in such a way that declared goods were removed from Schedule A and shifted to Schedule “C” by bifurcating the existing entry 101 into two parts:
| Entry-101(a)-Fabrics and sugar as defined from time to time, in section 14 of the Central Sales Act, 1956. (01-04-2010 to Date)Rate of Tax 4% | |
| Entry-101(b)- Varieties of Textile and Textile Articles as may be notified from time to time, by the State Government, in the Official Gazette. (01-04-2010 to Date)Rate of Tax 5% |
If one goes through the interpretation of the above bifurcated entries, he is compelled to believe that all the declared goods are now covered by Entry 101(a) with no conditions attached to their taxability or exemption.
In so far as Entry 101(b) is concerned, the meaning and interpretation is abundantly clear in the sense that only those Varieties of Textile and Textile Articles shall be taxable which are notified from time to time, by the State Government, in the Official Gazette.
There is no condition of issue of notification in respect of Entry 101(a), which means all the declared goods, including Fabric, has become chargeable to VAT @ 5% suo moto w.e.f. 01-05-2011 when the post budget notifications (Maharashtra Govt.). From what has been stated above any person with a little knowledge of the VAT laws would safely conclude that the taxability of Fabric to VAT is automatic and nothing more is required to be done by the government to levy tax on Fabric as the Entry 101(a) is silent about issue of any notification.
The matter has been made more complicated by Notification No. VAT 1510/CR 47A/Taxation-1 dated 17-03-2010. The said Notification states that w.e.f. 1st April 2010 the following goods more particularly described in SCHEDULE appended hereto , TO BE FABRICS, for the purposes of Sub Entry (a) of Entry 101 of Schedule C: By this notification the government intended to exempt Fabric from VAT tax , but until this entry 101(a) is amended on the lines of entry 101(b), under which issue of notification is a pre requirement for VAT tax, Fabric is taxable to VAT @ 5%. This is also surprising to note that the aforesaid notification has been brought under entry 101(a) whereas this entry entails no requirements of a notification.
No. VAT. 1510/CR. 47A/Taxation- l.—In exercise of the powers conferred by sub-entry (a) of-entry 101 of Schedule C appended to the Maharashtra Value Added Tax Act, 2002 (Mah. IX of 2005), the Government of Maharashtra hereby, with effect from the 1st April 2010, specifies the following goods, more particularly described in the SCHEDULE appended hereto, to be fabrics, for the purposes of the said sub-entry, namely:—
SCHEDULE
Types of fabrics covered, from time to time, under the headings, subheadings or tariff items, as the case may be, of the Central Excise Tariff Act, 1985 (5 of 1986)—
| Sr. No. | Heading | Sub No. heading No. | Tarrif Item No. | Name of the Commodity |
| (1) | (2) | (3) | (4) | (5) |
| 1 | — | — | 5802 20 00 | Terry toweling and similar woven terry fabrics of any textile material other than cotton. |
| 2 | — | 5804 10 | Tulles and other net fabrics. | |
| 3 | — | — | 5804 10 10 | Tulles and other net fabrics of cotton. |
| 4 | — | — | 5804 10 90 | Tulles and other net fabrics of other material. |
| 5 | — | — | 5804 30 00 | Hand-made lace. |
| 6 | 5806 40 00 | Narrow fabrics consisting of wrap without weft assembled by means of an adhesive (bolducs). | ||
| 7 | 5905 | Textile wall coverings. | ||
| 8 | 5906 | Rubberised textile fabrics, other than those of heading No. 5902 of chapter 59 of Central Excise Tariff Act, 1985. |
It was therefore purported to be communicated that except the above stated items , being Fabric for entry 101(a) no other fabric was taxable. But unfortunately the entry 101(a) as it stands today gives a clear indication that all the items of fabrics, including those listed in the above Schedule are taxable @ 5% as declared goods.
Nothing new has been done by the enactment of notification w.e.f. 01-05-2011 except that the rate of tax on declared goods has been increased from 4% to 5%.
A gullible textile trader can take solace only from the Trade Circular Date: 17.03.2010 No. VAT/AMD-1010/ 1C/1Adm-6 Trade Cir. No.11T of 2010 issued by the Commissioner of Sales Tax Maharashtra State, Mumbai which clarifies that the fabrics & sugars which were tax free prior to issue of this notification continue to remain as tax free.
The textile trading community is therefore advised to seek clarification on the Scope of Entry 101(a) Schedule “C” and the Notification issued as stated above lest a time may come when hiding behind the technicalities of the above Schedule Entries, the VAT Department starts knocking on the doors of the textiles trading community and raising demand for VAT on FABRIC.
Earlier Post on same Subject
Maharashtra Vat On Fabric – Fresh Confusion from 1st May 2011
Compiled By:
CA Lalit Munoyat
B.Com.(Hons.), CS., FCA, DISA
munoyat@gmail.com 98201 93508
The Trade Circulars, Notifications, The Maharashtra ACT NO. XV OF 2011 dated 21st April 2011 are available with the author ON DEMAND or can be searched on the website.
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Author Bio
Non Woven Fabrics covered under Excise Chapter Heading 5603. What is the VAT rate in Maharashtra? In adjoining state of Madhya Pradesh it is exempt from VAT under notification No. 72 dt. 27/9/11.
Narrow woven fabrics (excise head 5806) manufactured in India are exempted from VAT in Maharashtra ( as well as various other states).
I want to know details and notification for same)