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MVAT - Maharashtra Value Added Tax.

Direct and Indirect Tax. (SEM 4). S.Y.B.M.S (Semester 4) Div: A

(Maharashtra Value Added Tax)

Bhavans college.

MVAT - Maharashtra Value Added Tax.

Group members.
Roll no



Ronak Agrawal Business: U/S: 2(4). Shoab Ansari Dealer: U/S: 2(8). Vaishali Barick Goods: U/S: 2(12). Sagar Bhagat Importer: U/S: 2(13).

MVAT - Maharashtra Value Added Tax.

Bhavish Bharadwa 5 Manufacture: U/S 2(15). Deepti Calangutkar 6 Purchase price: U/S: 2(20).

We owe profound Gratitude to Prof. Gagandeep Khanna stimulating our Creative abilities by assigning this report to us. Writing this report appeared to be a great experience to us. It added a lot to our knowledge while we were working on this report. We are immensely obliged to all our fellow students who guided us in making this report, without whose considerate attention &, it would be difficult for us to complete this report on time. Whatever we

MVAT - Maharashtra Value Added Tax.

have learnt from them & this project report has out indelible impression on our mind. It is our conviction that this learning experience will always be a source of help in our practical life and professional career.

The MVAT Act, 2002. Business: Section 2(4). Dealer: Section 2(8).

Goods: Section 2(12).

Importer: Section 2(13). Manufacture: Section 2(15)

MVAT - Maharashtra Value Added Tax.

Purchase price: Section: 2(20)

The MVAT Act, 2002.

Scope Of MVAT.

The MVAT Act, 2002 deals with the law relating to the levy of tax on the sale or purchase of certain goods in the State of Maharashtra. The word State wherever used in the MVAT Act means the State of Maharashtra.

Introduction of MVAT Act, 2002:

The Maharashtra Value Added Tax 2002 (Herein after called as MVAT Act) has replaced the Bombay Sales Tax Act, 1959 on & w. e. f. 1st April 2005 and now the sales tax is collected by the Maharashtra government under MVAT Act, 2002. When the sales tax was collected under The B. S. T. Act, 1959, What was the reason to introduce the new MVAT Act, 2002?

MVAT - Maharashtra Value Added Tax.

What is the difference between the two Acts? Why the government felt the need to replace the B. S. T. Act?

The basic difference is the charging of sales tax. Under the B.S.T. Act, 1959 it was a single point levy of tax i.e. tax collection was at first stage and other stages are allowed as resales and no tax payable on subsequent stages. However to increase the revenue, the Govt. of Maharashtra in the BST regime. Introduced resale tax which was maximum at 0.5 percent on sales. Under the MVAT Act, 2002 the concept of collection of sales tax has changed and now the sales tax is collected at every stage of value addition till the goods reaches to the end user or consumer.

Business: Section 2(4).

Business includes: (a) Any service; (b) Any trade, commerce or manufacture; (c) Any adventure or concern in the nature of service, trade, commerce or manufacture; whether or not the engagement in such service, trade, commerce, manufacture, adventure or concern is with a motive to make gain or profit and whether or not any gain or profit accrues from such service, trade, commerce, manufacture, adventure or concern. Explanation for the purpose of this clause: (i) The activity of rising of man-made forest or rearing of seedlings or plants shall be deemed to be business.

MVAT - Maharashtra Value Added Tax.

(ii) Any transaction of sale or purchase of capital assets pertaining to such service, trade, commerce, manufacture, adventure or concern shall be deemed to be a transaction comprised in business. (iii) Sale or purchase of any goods, the price of which would be credited or, as the case may be, debited to the profit and loss account of the business under the double entry system of accounting shall be deemed to be transactions comprised in business. (iv) Any transaction in connection with the commencement or closure of business shall be deemed to be a transaction comprised in business.

Dealer: Section 2(8).


As per the provisions of MVAT, only a dealer is liable to pay tax on the turnover of sales within the State of Maharashtra. The term dealer has been defined u/s 2(8) of the Act as an Individual or firm that buys goods from a producer or distributor for wholesale and/or retail reselling. Unlike a distributor, a dealer is a principal and not an agent. What does dealer means? And what does it includes! ''Dealer'' means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash, or for deferred

MVAT - Maharashtra Value Added Tax.

payment, or for commission, remuneration or other valuable consideration, and includes

A local authority, a body corporate, a company, any cooperative society or other society, firm, Hindu undivided family or other association of persons which carries on such business; AND

A factor, broker, commission agent, or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal whether disclosed or not; AND

An auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal.

Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies or distributes, goods in the State or acts on behalf of such dealer as -

(i) a mercantile agent as defined in the Sale of Goods Act, 1930,(3 of 1930) or (ii) an agent for handling of goods or documents of title relating to goods, or

MVAT - Maharashtra Value Added Tax.

(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such a collection or payment,

Exception: However an agriculturist, educational institution and transporters shall not be deemed to be a dealer (subject to fulfillment of conditions).

Goods: Section 2(12).

of Goods under the

Definition Constitution.

Article 366 (12) of Constitution of India states that the term goods includes all materials, commodities and articles. Act 2002 is not as wide as it is defined under the Constitution. This definition is very wide. However, the term goods used in MVAT

MVAT - Maharashtra Value Added Tax.

Definition of Goods under the Central Sales Tax Act, 1956.

Section 2(d) of the Central Sales Tax Act 1956 defines the term goods which is the same as the definition under Maharashtra Value Added Tax Act 2002. The term Goods includes all movable property. In several cases, it has been held that sale of steam, electrical energy, etc. is sale of goods. However, the tax is only on movable property. There is no tax on immovable property. Section 3(14) of the General Clauses Act defines the term immovable property as land, benefits arising out of land and things attached to the earth or permanently fastened to anything that is attached to the earth. However, as per Section 2(7) of the Sale of Goods Act, goods include standing crops, grass and things attached to and forming part of the land, which is agreed to be severed before sale or under contract of sale. Thus, the term goods include uprooted trees, second hand goods, rejected goods as well as worn out goods, etc.

However, States have, in the definition clause, included some clarifications, like: a. Whether in the same or the other form;

MVAT - Maharashtra Value Added Tax.

b. If materials etc. are attached to or form part of immovable property and agreed to be severed under the sale contract, such material shall be deemed to be the goods; c. Some States exclude electricity; d. Some States deem the goods used in the execution of works contract as goods, etc. It can be said that there is no uniformity among the States in defining the term. Accordingly, it would be advisable to refer to the definition of each State.

Classification of Goods.

Broadly speaking, the goods can be classified as follows: Class of goods Declared goods Treatment for tax purposes Goods of special importance as declared under section 14 of CST Act. Rate of tax cannot exceed 4 percent as per CST Act.

Goods agreed upon for Rate of tax should not be lower than the uniform floor rate floor rate Tax free goods or Exempt Goods Raw materials or Industrial inputs Goods exempt from tax in a given State. Concessional rate of tax or set off allowed in respect of tax paid on purchase thereof.

Goods purchased for Concessional rate of tax or set off allowed resale or manufacture in respect of tax paid on purchases as specified thereof. Packing materials Usually liable to tax at the same rate as

MVAT - Maharashtra Value Added Tax.

containing goods

the goods sold.

Classification of Goods having regard to rate.

Exempt goods (not liable to tax) Declared goods (liable to tax @ not exceeding 4%, as per CST Act) Industrial inputs/ raw materials (liable to tax at a concessional rate) Goods specifically listed (liable to tax at specified but different rates) Unclassified goods (liable to tax at a specified rate)

Based on Rate of tax, the goods may be classified into:

MVAT - Maharashtra Value Added Tax.

Importer: Section 2(13).

Importer" means a dealer who brings any goods into the State or to whom any goods are dispatched from any place outside the State.

The term "import" is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Import goods or services are provided to domestic consumers by foreign producers. An import in the receiving country is an export to the sending country. Imports, along with exports, form the basis of international trade. Import of goods normally requires involvement of the customs authorities in both the country of import and the country of export and is often subject to import quotas, tariffs and trade agreements. When the "imports" are the set of goods and services imported, "Imports" also means the economic value of all goods and services that are imported. The macroeconomic variable I usually stand for the value of these imports over a given period of time, usually one year.

MVAT - Maharashtra Value Added Tax.

Advantages of an importer of doing import business

Enhance your domestic competitiveness. Increase sales and profits. Gain your global market share. Reduce dependence on existing markets. Exploit international trade technology. Extend sales potential of existing products. Stabilize seasonal market fluctuations. Enhance potential for expansion of your business. Sell excess production capacity. Maintain cost competitiveness in your domestic market.

MVAT - Maharashtra Value Added Tax.

Manufacture: Section 2(15)

Manufacture, with all its grammatical variations and cognate expressions includes producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods; and includes any process of goods which brings into existence a commercially different and distinct commodity but does not include any activity as may be notified by the Government. Manufacturing is a part of Business. Its a place where dealer or manufacturer processes, produce or manufacture goods. Central Excise duty is an indirect tax levied on those goods which are manufactured in India and are meant for home consumption. The taxable event is 'manufacture' and the liability of central excise duty arises as soon as the goods are manufactured. It is a tax on manufacturing, which is paid by a manufacturer, who passes its incidence on to the customers. The term "manufacture" includes any process, 1. Incidental or ancillary to the completion of a manufactured product and 2. Which is specified in relation to any goods in the Section or Chapter Notes of the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture or 3. Which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers

MVAT - Maharashtra Value Added Tax.

including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer? Judicial meaning- Various courts have defined manufacturing as bringing into existence a new substance. Manufacturer implies a change, but every change is not manufacture. Manufacture leads to such a decisive change in the original (raw) material that a new and different (finished) marketable article emerges having a distinctive name, character or use. Test- Whether there is manufacture or not depends upon the facts of each case. There is no standard test to determine, conclusively, whether a particular activity or process amounts to manufacture or not. However a following test can apply, as laid down by various Courts: a) There should be some process on the goods b) Such process may be carried out by the dealer or any third person hired by the dealer. c) Such process may bring about changes in the substance of the original goods. d) The changes must result in the emergence of a commercially new and different article.

Excise duty is the indirect tax levied by the state on the manufacture or production of goods in India. The rate of excise duty was 16.5% before 1April08.From 1st April, and before 7th December the rate was 14.42%. (14% approx) The rate of the, Excise Duty(ED) is 8% on the transaction/goods value, Education Cess. @ 2% on ED and Secondary & Higher Education Cess. @ 1% on ED Total Tax = 8.24%, with effective from 25.02.2009. (Feb 2009)

MVAT - Maharashtra Value Added Tax.

Excise duty is duty on manufactured levied it following 3 conditions must be satisfied:

1. Duty on goods 2. Goods must be manufactured in India 3. Goods must be excisable.

Purchase price: Section: 2(20)

Meaning:Purchase Price-The price at which something is actually purchased. Turnover Purchase means the total purchase price for goods purchase. Traditionally, to purchase a home, one would have to make a down payment, usually 20% of the purchase price and would finance the other 80% with a local or Mortgage Company.

This definition is similar to that of sales price. If A sells goods to B, what is the sales price for A is the purchase price for B. Related Ads to Purchase Price:

Used car price.

MVAT - Maharashtra Value Added Tax.

Gold market price. LCD Television price.

Crude oil price.

Equity price.

Purchase Price: Section 2 (20):

Provision of u/s : 2(20) Consideration for purchase.

Explanation to u/s: 2(20) Includes Excise/Custom/Prohibiti on Duties. Excludes Including charges for MVAT(Maharashtra anything done by Value Added Tax) due goods. At or before to seller. delivery. But Excluding Insurance Includes Deposit for transit installation. Incidental to purchase.

MVAT - Maharashtra Value Added Tax.


Book Referred;

Websites Referred;
www.finance.indiamart.com www.caclubindia.com www.servicetax.gov.in www.management paradise.com www.tax4india.com www.wisegeek.com

MVAT - Maharashtra Value Added Tax.