Punjab Government has revised the amount of processing fee leviable under rule 40-A of the Punjab VAT Rules, 2005. Rule 40-A earlier envisages payment of  annual processing fee of Rs. 800/- by every taxable person under the Punjab VAT Act, 2005.

Now the different amount of processing fee have been defined for different persons based upon the criteria of payment of taxes by them and their turnover.
Revised amounts of processing fee under the amended rule 40-A are as follows:

“40-A. Annual processing fee.- Every taxable person, shall pay annual processing fee, as specified in the Table given below, in the month of October every year, and shall attach a receipt challan , as the case may be, as a proof of payment of such fee along with the quarterly return, namely:-
Serial No.
Category of Dealer
Amount of Processing fee
(in rupees)
Dealers, who have not filed returns during the financial year 2012-13
Dealers, whose gross turnover was nil during previous financial year.
Dealers, who have paid no tax and whose gross
turnover is up-to-rupees,-
(i) .one crore;
(ii) one crore to five crore;
(iii) five crore to ten crore; and
(iv) ten crore and above
All other Dealers
What is “Tax Paid”: As is clear form the above table it is clear that the tax paid by a person as compare to his turnover has been made the criteria for determining the amount of processing fee payable by a taxable person.
 However the term tax paid has not been defined in the abovesaid rule. It seems that Government considers tax paid as tax paid in the treasury.
As per my understanding, entry tax deemed as advance VAT paid by a person u/s 6(7), 6(8) and WCT i.e VAT TDS deducted from the payments made to a contractor u/s 27 of Punjab VAT Act, 2005 should be considered as tax paid for the purpose of Rule 40-A.
Government should understand that under the Value Added Tax system, when a purchaser pays tax to his seller i.e an agent of the Government(as per P&H HC’s verdict Gheru Lal Bal Chand vs State of Haryana case) while making purchases, the tax paid by him to his seller is also a tax paid to the government treasury, as the seller will also deposit the same with the exchequer.
 Persons paying tax in the Government treasury directly cannot be considered as the only tax payers in the State, but persons paying taxes to their sellers while making purchases are also paying the taxes indirectly to the Government.
The reason behind it is that incidence of taxation even after the introduction of system of VAT, is still on the sale or purchase of goods within the State and not on the value addition of the goods(refer entry 54 of the State List of the Seventh Schedule to the Constitution).
Once a person pays tax on his purchases within the State indirectly to the seller, he has paid tax to the exchequer.
Another thing to be noted is that in the table notified for processing fee as stated above under Rule 40-A , the word mentioned is “Dealer” , whereas Dealer word has nowhere find mention under the Punjab VAT Act or Rules, 2005, nor it has been defined anywhere under the Act, rather the words “Taxable Persons” and “Registered Persons” find mention everywhere in the Act as well as in the Rules.
In my view this processing fee is not a fee as a fee is always for providing service to the payer or it may be regulatory in nature, but this fee seem to have been levied for the efiling and processing of returns, which is not a service at all to the tax payers, rather it is a duty of the Government to provide better tax administration.
See my earlier article on the constitutionality of processing fee herebelow:

Validity of processing fee under rule 40-A of Punjab VAT Rules, 2005


Read Other Articles from Advocate Amit Bajaj

(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amit@amitbajajadvocate.com, M +919815243335)

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0 responses to “Processing fee amount revised under Punjab VAT Rules, 2005”

  1. ca.dev kumar kothari says:

    Services in relation to determination and collection of taxes are incidental to levy of tax. Thus filing of returns, keeping tax return records, assessment, appeals, revision, and all proceedings before tax authorities and tax courts are incidental to levy and collection of tax. These services are, services provided to tax department in relation to levy and collection of tax and it cannot be said that services are provided to tax payer.
    These services are not independent to levy of tax but are intimately connected to tax – levy, determination and collection.
    Tax payer has to file return because there is a levy. Tax payer has to represent and contest proceedings to save himself from illegal and unjust demands which the tax authorities can otherwise made. Therefore, in course of assessment or appeals any service is not rendered to tax payer, by tax authorities or courts. Government want computerized tax collection systems and record keeping. This is for betterment of working of tax department. This is incidental to levy of tax. Therefore, there is no justification for levy of any fees like return processing fees, record keeping fees, appeal fees etc. All these must be removed.
    Even the extra charges levied in case payment is made through internet banking or credit card are not justified. In such cases bank charges for internet banking should be payable by tax department as a receiver of payment.
    We can find cases in which cost conscious party paying deducts charges for demand draft or NEFT from gross amount payable. When in case of business payments such charges can be collected from the recipient of money, in case of tax payment also such charges must be paid by tax department as receiver of money.
    In conclusion, there should not be any extra burden on tax payer in name of such charges or fees.

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