CA Narinder Kumar Gupta
Governments may charge certain fee such as user fee, toll tax or other types of assessments in exchange of particular goods, services, or use of property. These are generally not considered taxes, as long as they are levied as payment for a direct benefit to the individual paying.
Punjab Excise & Taxation Department by uploading an notification on it’s web site has revised the amount of processing fee Chargeable under rule 40-A of the Punjab VAT Rules, 2005. Which is illegal, discriminating and void in my opinion?
First of all this notification is without any date and notification number. The notification was issued in September, attested on 1-10-2013 and yet to be published in the official Gazette of Punjab Government.
Further what is the nature of this annual processing fee? it has not been defined under the Punjab VAT Act or the rules framed there under. If it is a fee then what direct benefit an individual or an assessee is getting there from? If it is being charged for a providing services by the Excise & taxation Department, then what these services are?
The returns are uploaded either by the assessee or by his authorised agent (May be professional like CAs and Advocates). Self Assessment is the basic concept of VAT regime of taxation. VAT is administrated by requiring the assessee to complete his VAT return, giving details of VAT paid by him on his purchases (referred to as input tax )and vat collected by him on his sales (referred to as output tax). The difference between output tax and input tax is payable to the Tax Authority. If input tax is greater than output tax the assessee is entitled to claim refund of excess tax paid by him.
While uploading the return the assessee is doing it’s own assessment even. For Final Assessment the assessee is again being called to the offices of the VAT department. So in what manner the services are being provided to the assessee for which processing fee is being imposed. If processing fees is levied for providing services to the assessee for processing his returns, even then it is beyond the legislative power of the state since service tax can be imposed only by Central Government.
Now let us assume that processing fee is not a service provided by the Excise & Taxation Department rather is a Tax imposed by the State Government, even then this is illegal and discriminative in nature. Indian constitution provides that “No tax shall be levied or collected except by authority of law.” It means that before any tax can be levied and collected there must be a valid law enacted by an appropriate legislature imposing such tax and providing for its collection. Under the Constitution of India a tax can be imposed through a proper legislation only. It cannot be imposed by amending rules of a main legislation.
The revision of processing fee has the following different criteria.
1) For those taxable persons, who have been registered in Financial year 2013-14 and have not filed their return in F Y 2012-2013 the processing fees have been fixed at Rs. 1500/- whereas those taxable persons who have been granted registration before financial year 2012-13 are required to pay a processing fee of Rs. 800 only.
2) The next criteria are that of turnover.
A) Those taxable persons whose Gross turnover was Nil in F.Y 2012-13 will have to pay a processing fee of Rs 1500/-
B) Those taxable persons , whose Gross turnover was not NIL, but have not paid any tax , will have to shell out a progressive processing fee, which vary from Rs. 1500/- to Rs. 5000/-.
The first criteria discriminate between taxable persons with respect of date of their registration whereas the second criteria discriminate on the basis of tax liability of the taxable person. A taxable person who is dealing exclusively in tax free goods, his tax liability obliviously will be NIL by virtue of class goods he deals in. By imposing a progressive processing fee there is discrimination on the basis of turnover dealing in same class of goods. Higher the turnover, higher will be the processing fee.
Take yet another case of Katcha Arhtiya ( Commission Agents) who are neither required to file quarterly returns nor any tax liability is there on this class of taxable persons. By imposing a progressive processing fee there is discrimination on the basis of turnover dealing in same class of goods. Higher the turnover, higher will be the processing fee.
In my opinion, A state may raise funds by taxation in aid of its own welfare, provided the tax does not constitute unjust discrimination among those who are to share the tax burden Equality is a fundamental principle of taxation. The taxing power of the legislature must always be exercised in such a way that the burdens imposed by taxation are laid as equally as possible on all classes.
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CA Narinder Kumar Gupta, BA LLB , FCA
47- Near New judicial Court complex
Rajpura 140401
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