KPMG FLASH NEWS. Value Added Tax (VAT) Budget Amendments. Background. Maharashtra. Decrease in tax rates KPMG IN INDIA.

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1 KPMG FLASH NEWS KPMG IN INDIA Value Added Tax (VAT) Budget Amendments 15 April 2013 Background In March 2013, the various State Budgets were announced proposing amendments interalia in the VAT Act, VAT Rules, VAT tax rate, Entry tax on goods. Most of the said proposals have been made effective by way of various notifications issued by the State Governments. Hence, the key and relevant amendments have been summarized below, statewise. Maharashtra The following changes are effective from 1 April General Dealers of second hand tractors are eligible for composition scheme. Concessional tax rate at 5 percent on tea to continue till 31 March Inter-state sale of furnishing cloth has now been exempted from tax. VAT rate change Decrease in tax rates Sr No Name of goods Rate decrease 1 Braille watches From 12.5 % to 1 % 2 Automated Implantable Cardiac Defibrillators (AICD) 3 Excavators (other than not liable for registration as motor vehicle) From 12.5 %

2 Increase in tax rates Sr No Name of goods Rate Increase 1 Paver blocks and beady 2 Medicines which are capable of being used as cosmetics and shampoos 3 Powders, tablets, cubes, crystals and other solids or liquids from which non-alcoholic beverages and soups are prepared 4 Industrial goods and tools of gold, silver and other precious metal 5 Precious stones viz Gold, Silver, Platinum, Osmium, Palladium, Rhodium, Ruthenium and alloys of any of them, any jewellery made out of these stones From 5 % to 12.5 % From 1 % From 1% to 1.1 % 6 Cigar and cigarettes From 20 % to 25% Goa The date for completion of all VAT assessments for the financial year extended till 30 September West Bengal The following VAT rate changes are effective from 1 April Sr No Particulars Increase in rate 1 Lower VAT rate From 4 % 2 Standard VAT rate From 13.5 % to 14.5% 3 Chewing tobacco, all types of pan masala when sold in any packaged form, cigar, cheroot, cigarettes 4 Composition scheme for work contractors From 20 % to 25% From 2 % to 3% With effect from 28 March 2013, the turnover limit of registered dealer (except public and private companies) for the purposes of furnishing Profit and Loss Account, Balance Sheet and Audit report, has been increased from INR 30 million to INR 50 million in a year. Himachal Pradesh The following changes are effective from 1 April E-returns Dealers having annual turnover of INR 4 million and above are required to compulsorily file e- return. Rate change Sr No Name of goods Change in rate 1 Aviation Turbine Fuel decreased from 5 % to 1 % 2 Tobacco, tobacco products (except beedis) increased from 18 % to 36% Concessional Central Sales Tax (CST) rate Existing industrial units manufacturing goods, other than that manufactured by breweries/ distilleries/ non-fruits/ vegetables based wineries and bottling plants, shall pay concessional CST rate at 1.5 percent of the taxable turnover of goods, subject to fulfillment of specified conditions, with effect from 1 April 2013 for period of 5 years or till implementation of Goods and Services Tax (GST), whichever is earlier. The following units shall pay concessional CST rate at 1 percent of the taxable turnover of goods, subject to fulfillment of the prescribed conditions: New industrial units coming into operation on / after 1 April 2013, shall pay the said tax, with effect from date of commencing commercial production for period of 5 years or till implementation of GST, whichever is earlier;

3 Existing industrial units carrying out substantial expansion on / after 1 April 2013 shall pay the concessional tax, with effect from commencing commercial production of the expanded capacity for period of 5 years or till implementation of GST, whichever is earlier. Jammu & Kashmir With effect from 1 April 2013, VAT rate on cigarettes, cigars, cigarillos, cigarette and cigar holders, cigarette and cigar cases, smoking pipes and pouched tobacco, gutka and beedis has been increased from 30 percent to 40 percent. Chhattisgarh All VAT assessment proceedings related to Financial Year and pending before the Deputy Commissioner of Commercial Tax, Assistant Commissioner of Commercial Tax, Commercial Tax Officers and Assistant Commercial Tax Officers, which were not completed by 31 March 2013, should be completed latest by 30 June Decrease in VAT rate with effect from 1 April 2013: The time limit of a registered dealer having turnover upto INR 20 million for filing quarterly e- returns in Form 10 along with the proof of tax payments, has been extended from 30 days to 50 days from the expiry of the quarter to which the return relates. Earlier, a registered dealer having turnover of INR 6 million was required to submit revised return for any quarter / quarters of a year till 31 July of the subsequent year. Now, the said turnover limit has been increased to INR 10 million. With effect from 1 April 2013, a registered dealer claiming refund of input tax rebate in the VAT returns can now apply for grant of Provisional refund of input tax rebate, of the unadjusted input tax rebate, in Form 40-A. Forms VAT Returns for the period 1 April 1, 2013 onwards should be filed electronically, without digital signature, in the following forms: Sr No Particulars Decrease in rate 1 Specified machineries and equipments used in execution of civil works contracts and road construction From 14 % Threshold limit Dealer with annual turnover above INR 10 million Dealer with annual turnover up to INR 10 million Form Form 10 Form 5 or Form 10 (for the period 1 April 2013 to 31 March 2014) 2 Light Diesel Oil From 25 % to 14% Madhya Pradesh The following amendments are effective from 1 April 2013: The threshold limit for availing composition scheme has been raised from INR 6 million to INR 10 million. Input tax credit will not be allowed if details of dealerwise purchases and sales exceeding INR 40,000 in a quarter have not been filed electronically along with the e-return. Subsequently, the return should be verified in Form 5-B or Form 10-A. CST All registered dealers are required to file e-return in Form V, without digital signature. Subsequently, they should submit verification of the said return in Form V-B. Entry tax Entry tax at concessional rate allowed on goods used as raw materials has been extended to goods used as incidental goods also. A registered dealer cannot claim set-off/ refund of excess entry tax paid on coal.

4 Form I (declaration by purchasing registered dealer regarding concessional rate purchases) listing at least two sale transactions if the total sale price covered in said declaration was less than INR 10,000 will now, illustrate all sale transactions which takes place in a quarter of a year between the same dealers. Form II (declaration by selling registered dealer relating concessional rate sales) covering minimum two purchase transactions where the total purchase price is less than INR 10,000 will henceforth, include all purchase transactions which takes place in a quarter of a year between the same dealers. All registered dealers are required to file e-return in Form VII, without digital signature. Subsequently, they should submit verification of the said return in Form VII-E. Punjab With effect from 5 April 2013 Electronic Governance has been introduced and implemented for the purposes of paying tax/ interest/ penalty/ other amount payment, return filing, applying declaration forms, filing applications, creation/ retention/ preservation of records, issue of orders/ certificates. Delhi All the amendments listed below are effective from 1 April Information in Form T-2 With regard to Form T-2 (declaration electronically filed by dealer for all goods purchased/received as stock transfer from outside Delhi, before the goods physically enter the boundary of Delhi) it has been notified that if the vehicle number is not available in advance, Form T- 2 should be filed without the vehicle number. The vehicle number needs to be updated within 24 hours of receipt of the goods by the dealer. However, in cases where the complete information in Form T-2 has not been filed online before the goods enter Delhi, the dealer shall not dispose of / sell / dispatch such goods till the vehicle number in Form T-2 is updated online. Threshold limit of registered dealer The threshold limit for obtaining registration has been increased from INR 1 million to INR 2 million. Audit of accounts The gross turnover of dealers required to get their accounts audited has been increased from INR 6 million to INR 10 million. Tax payment and Return filing Earlier, different tax period for the purposes of paying tax and filing returns were specified, on the basis of dealer s turnover and tax liability. Now, all dealers are uniformly required to pay tax monthly within 21 days of subsequent month to which the tax relates to. Returns to be filed quarterly within 25 days from the end of the relevant quarter (for physical copy submission it should be done within 28 days from the end of the relevant quarter). Input tax credit (ITC) Earlier ITC on capital goods was allowed in three equal instalments in three consecutive years without any restriction with regard to tax period. With effect from 1 April 2013, 2nd and 3rd instalments will be available in the corresponding tax periods in two successive financial years. Earlier there was no specific restriction with regard to ITC on goods transferred on right to use basis. Post amendment, ¼ ITC would be available in tax period of purchase. 2nd, 3rd and 4th instalments would be available in the corresponding tax periods in three successive financial years. With effect from 17 June 2012, in case of interstate sales against Form C and inter-state stock transfer, corresponding ITC was required to be reduced by prescribed proportions. Post amendment, ITC is required to be reduced only on inter-state stock transfer, and not inter-state sales. Kerala The amendments stated below are effective from 1 April 2013.

5 Online filing of refund applications With effect from 1 April 2013, refund applications are required to be filed online only, in Form no 21AA. The said Form is a common online refund application form for the following refund claims: against export sales; Input tax in respect of capital goods; Excess input tax credit at the end of the financial year; Excess payment as a result of return revision; Input tax for the stock held during transfer of registration type from PIN to TIN; and Tax paid in excess of 4 percent during interstate stock transfer. Separate applications have to be submitted for refund claim under different heads. The refund can be claimed only against the invoices which have been uploaded in KVATIS while filing returns. However, in case of refund claim pertaining to excess input tax credit refund at the end of financial year, the invoice details are not required. After submission of the refund application, the applicant shall download and submit hard copy of the same along with documents to prove the claim. The claim will be refunded to the applicant either as manual refund or as credit against tax dues in any future return. Increase in tax rate Sr No Name of goods Rate Increase 1 All 13.5 % goods Increased to 14.5 % 2 Works contract From 13.5 % to 14.5% 3 Cigarettes, Cigars, Cheroots, Cigarillos and tobacco From 15 % to 20% Incentive to new registrants Dealers who have not obtained registration yet, may voluntarily apply for the same, between 1 April 2013 and 30 September, Such dealers will not be liable to any tax or penalties for not obtaining registration. However, this benefit is not applicable to the following persons: Importers; works contractors; manufacturers; and dealers against whom penal proceedings were initiated for non-registration and non-payment of tax under this Act, before 1 April, 2013: Incentive to hospitals Sale of laboratory store items and consumables to patients by certain hospitals (run by charitable institutions which avail exemption under the Incometax Act, 1961 and purchases medicines from compounded dealer) will be exempt from VAT for the period prior to 1 April 2013, if such hospitals obtain registration on / before 30 June Tamil Nadu Tax rate on IT products namely MP3 and MP4 players has been increased from 5 percent to 14.5 percent with effect from 21 March Gujarat The following changes are effective from 1 April Sale of second- hand used 2 wheelers, medium and heavy duty commercial vehicle will now attract 1 percent tax, with maximum limit of INR 500 for 2 wheelers and INR 5000 for medium and heavy duty commercial vehicle, subject to fulfillment of prescribed conditions; Purchases of second-hand used 2 wheelers, medium and heavy duty commercial vehicles from non-registered dealers has been exempt from tax.

6 Karnataka Entry tax on goods The threshold limit for registration purposes of dealer for levy of entry tax on goods has been increased from INR 2 lakhs to INR 5 lakhs. The exemption limit for paying entry tax for a dealer bringing goods into the state has been raised from INR 2 lakhs to INR 5 lakhs. The aforesaid changes are effective from 1 April Disclaimer Only few important and relevant amendments notified till 10 April 2013 have been considered above. Such amendments are general in nature and are not intended to address the circumstances of any particular individual or entity. The amendments are based on our interpretation of the tax laws and notifications and the same is not binding on any particular entity or the tax authorities. Appropriate professional advice after a thorough examination of the amendments should be sought before arriving at any business decisions related thereto.

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