Class B.Com V Sem. (Tax)

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1 SYLLABUS Class B.Com V Sem. (Tax) Subject Service Tax, Entry Tax & Professional Tax Unit I Unit II Unit III Unit IV Unit V Provisions relating of M.P. Entry tax. Goods Taxable under Entry Tax and their rates. Calculation of Entry Tax. Main provisions of M.P. Professional Tax Act. Traders, employees and professionals covered under Professional Tax. Rates of Professional Tax for various categories assesses. Depositing liability of Professional Tax. 1

2 Unit IV M.P. ENTRY TAX Introduction Entry Tax ia a tax on goods entered in local area from outside for business or industrial purpose. It is levied by local bodies or authorities like municipal corporations, municipality Nagar Panchyat etc. which was imposed in M.P. in 1976 to replace octroi Duty. Meaning & Definition According to section 2(b) entry tax means a tax on entry of goods in the course of business into a local area for consumption, use for sale therein levied and payable in accordance with the provision of this Act. Special features of M.P. Entry Tax 1. Entry Tax Act 1976 also called the Madhya Pradesh Sthaniya Kshetra me Maal ke Pravesh par kar Adhiniyam Entry Tax is levied on goods entered in local area of Municipal Corporation etc. for business or industrial purpose. 3. The state Government of M.P. Passed and implemented a special act for entry tax that is entry tax Act 1976 which has 14 sections for various provisions. 4. Entry Tax is an indirect Tax. It is paid by purchasing dealer but last burden of entry tax on the consumer. 5. It is a single Point Tax. Once entry tax paid by first purchaser than another purchaser is not liable to pay it again. 6. Entry Tax is imposed and collected by the state government; the government distributed a major share of this tax to local bodies according their population; area and local needs. 7. Normally goods exempted under M.P. VAT are also exempted in Entry Tax Act, except Fabrics and sugar goods taxable under Entry Tax act. Under schedule II & III 8. Tax Rates of Entry Tax are divided in three parts 1%, 2% and higher rates. 9. Only those dealers are liable to pay entry tax are registered under M.P. VAT. 10. Provisions, relating to Returns, assessment, payments Recovery, Accounts, Appeal, Revision. Penalties etc of MPVAT also apply for entry tax. 11. Entry tax is administrated by Commercial Tax Department relating to M.P. VAT. Definitions of Entry Tax a. Entry of goods into a local Area (Sec. 2aa) b. Local area (sec. 2d) c. Local Authority (Sec. 2e) d. Local Goods (Sec. 2f) e. Entry of goods should be in the course of Business. (Sec. 3) f. Rate at which entry tax is payable (Sec.4) Provisions of Entry Tax 1. If these is no entry of goods into the local area from any other area and if the goods are of the same local area, no entry tax is payable. 2. Local area mean the area comprised within the limits of a local authority, the following are also included in local area Railway Premises, Growth Centre developed by MPAKVN, Industrial area like Pithampur and factory covered by two different local areas. 3. The liability to entry tax would arise only if entry of goods into a local area is for consumption, use or sale not for goods entry only for weighment. 4. When entry tax not payable (u/s 3) a. If goods purchased from a registered dealer. 2

3 b. If goods after entry into a local area sold outside state or an course of interstate trade or in the course of export. c. In respect of exempted goods. d. Any taxable goods entered by an industrial unit established by a registered dealer from one local area to another local area either same industrial growth centre developed by AKVN for consumption as raw material. 5. Entry tax payable by dealer under M.P. VAT Act a. A dealer whose annual turnover upto is exceeding 5 lakhs. b. There is no condition that such goods should be liable to tax under VAT. c. A dealer liable for purchases tax is also a dealer liable to pay tax under VAT and therefore shall be liable to pay entry tax. d. The expression liable to tax has been used to identify the persons from whom the tax can be realized. Sugar on which no sales tax or VAT payable can be subjected to entry tax. 6. Enrollment by persons liable to pay tax a. Every person liable to pay tax shall within 30 days of the date to his liability. b. Make an application giving all details for getting himself enrolled with the commercial tax officer having jurisdiction over the local area where in such person effects. c. Application details like Name of persons, Date of tax liability, place of work, nature of Work contract parties, value and period of validity of contract. d. The commercial tax officer record the particulars of such person in a register in form XIV and assign an enrollment number to him with in fifteen days of the receipt of the application. e. Every person should enroll himself separately for more then on local area entry of goods and if a person failing to apply for enrollment shall be liable to payment of a penalty which may extend to Rs Rate at which entry tax is payable (sec.4) Entry tax is charged on taxable quantum of taxable goods at the rates specified in the schedules II & III w.e.f the effective rates entry tax are given schedule II as per under a. Goods 1% - Goods Taxable 5% for the VAT Act, are taxable 1% under Entry tax b. Goods 2% - such goods which are under MP VAT are taxable 2% for entry tax c. Cloth and sugar are 1% under entry tax but exempted under MP VAT. d. Special rates of entry tax in following items are i. Petrol and Diesel (1%) ii. Pan Masala containing tobacco and gutka containing tobacco (25%) iii. Pan Masala and Gutka (12.5%) iv. Cigars, cheroots, cigrattes, cigarillos of tobacco and bidies (10%) v. Liquefied petroleum gas for domestic use (6.47%) vi. Iron and steel (2%) vii. All types of steel bars and angels (5%) viii. Coal including coke in all its forms but excluding Charcoal (3%) 8. Filing of Entry return a. Rule 8 (1) Provides that every dealer liable to pay tax under the Act shall furnish a Normal return in form VII. b. E-filing of return Rule 8 A contains provisions relating to e-filing of returns by the notification of state Govt. through the official web portal of the dept. is www. Mp tax, net or and verification of return in form v-b shall be submitted. 9. Every dealer shall pay the tax or penalty due from or imposed upon him by challan in form IX 10. Provisions Related to assessment, re-assessment, and collection and enforce the payment of entry tax from dealer including any penalty payable by dealer administrated by authorities commercial tax Dept. of Govt. of M.P. 3

4 11. Certain Provisions of VAT Act relating to returns, assessment, self-assessment, re-assessment, payment and recovery of tax, accounts, detection and prevention of tax evasion, refund, appeal revision, rectification, offences and penalties and other miscellaneous matters shall necessary modifications apply for the purposes of entry tax act. 12. Liability of entry tax applicable in some special situation as under a. Goods sent outside M.P. for processing (Job work and return entry of fresh goods. b. Goods received from outside the state for job work in a local area. c. Sales through adatiya (agent) if tax has not been paid by the principal in respect of goods. d. Goods consumed or used in executive of a works. Contract area liable for entry tax. e. No requirement of use as raw material or incidental goods. f. Sim card fulfills all these requirements and is covered in the category of goods and is liable for entry tax. g. Tax payable as entry of goods into a local area of consumption or use in the manufacture of telecommunication equipments. h. Tax payable on blending of different varieties of tea after entry into a local area for new texture, colour, flavor and taste. Goods Taxable under Entry Tax and their Rates For the purpose of entry tax goods are classified in two sections 1. Exempted goods 2. Taxable goods U/s 3(4) of M.P. entry tax act the following goods are exempted not taxable in case of entry of such goods for business or industrial purpose in local area. 1. Exempted goods under M.P. VAT also exempted for entry tax. 2. Goods for public distribution system, 3. Gold and silver, 4. Ghee (Industrial Input) 5. Proprietary preparations of baby food such as Amul; 6. Pumping sets, 7. Sewing an knitting machine 8. Tractor & Trailers. 9. Cotton (ginned or unginned) & Cotton waste, 10. All types of yarn and yarn waste, 11. Components and spare parts of motor vehicles, 12. All kinds of footwear/chappals and straps except (excess price of 250 Rs. Per Pair) 13. Optical goods (except exceed Rs. 250 per unit) 14. All kinds of metal castings. 15. Ferrous and ferrous metals and alloys Taxable goods and their tax rates List of taxable goods and their effective entry tax rates of given in schedule II of entry tax act. The following goods are covered as taxable goods u/s 4 and 12 of entry tax. Schedule II (Effective from 1/14/12) 1. Part I Goods 1% Entry tax 2. Part II Goods 2% Entry Tax 3. Part III Goods taxable at special rate Calculation of entry tax payable Value of taxable goods entered in local area in course of business shall be determined for calculating entry tax liability. In case of goods purchased, value of goods is the purchase price otherwise market price. 4

5 If the goods have been purchased, the value of goods shall be the purchase price as defined u/s 2(s) of the VAT Act, according to which transportation charges insurance charges, local taxes, excise duty, cost of packing, trade commission and any other charges or cost incurred or paid in respect of such goods will be include in purchase price. The following points also considerable while determining value of goods 1. Fright and other expanses before entry includible. 2. Expenses after entry not includible. 3. Discount receives on purchases is deductible against purchase price 4. Excise duty including purchase price 5. Job work charges to be included in goods value 6. Credit note by selling dealer deductible against goods value 7. Goods sent head office to Branch at cost price, then entry tax is payable on such cost price. Plus transportation expenses. 8. Job work goods sent in other local area are liable for entry tax on market value. 9. Purchase returns should be claimed for the same purchase year and can deductible from purchaser. Procedure and proforma for calculation of taxable value and entry tax payable on goods purchased A. Statement of purchases made by a registered dealer is prepared as proforma no. VII. Prescribed for entry tax payable. The following point should be kept in view and followed for preparing such statement. Proforma: Return of Entry Tax Payable (Form VII) A. Total value of goods purchased or obtained otherwise Add: Following expenses regarding goods purchases i. Cost of packing ii. Transportation charges iii. Insurance charges iv. Excise duty v. Local taxes vi. vii. Trade commission, brokerage Any other charges or cost incurred in respect of such goods Less: (i) Trade discount at the time of purchasing of goods (ii) Purchase Return during the year Total value of goods purchased B. Less: Deductions 1. Value of goods local purchased (goods purchased in same local area of e.g. a dealer of Indore purchases goods from another seller of Indore) 2. Value of tax free or exempted goods under entry tax (food grains, salt, agricultural equipments, liquor, books, tractor, yarn, gold, silver etc.) 3. Tax paid goods purchased from registered dealer of another place or city or town of M.P. (Entry tax already paid by selling dealer of another place of M.P.) 4. Goods sold outside the state e.g. purchased in Delhi and sold in Chandigarh (+) (-) 5

6 5. Goods sold in Interstate trade e.g. dealer of Indore goods sold to dealer of Udaipur 6. Explosives and Tendupatta purchased for resale. Taxable goods under entry Tax (-) Calculation of Entry Tax Payable Taxable goods Purchase Value Entry Tax 1. Goods 1% 2. Goods 2% 3. Goods Taxable at special rates (2% to 25%) Total

7 Unit-V PROFESSIONAL TAX Professional tax is a direct tax which is imposed by the State Govt. on such person who are working as employees, traders, contractors, transports, professionals etc from Rs to Rs per annum per person according to their earning or turnover or receipts. Collection from professional tax about 500 crores per year in the state. It is call also employment tax. It is collected on annual basis. Main features or provision of professional tax act ) It tax is levied on employment, trade, profession or other such activity belonging to done by a person to earn his livelihood. 2) Employees, traders, contractors, transporters and professionals persons covered under professional tax. 3) Formers, unorganized sector, laborers, small traders, workers on daily wages are not liable to pay or not covered under this tax. 4) It is a direct tax. It is borne by the tax payer. 5) This tax is payable from Rs to Rs annual by different categories of persons as per entry of the professional tax schedule applicable to them. These are in all 10 main entries covering different categories of persons. 6) It is charged at annual basis according to nature of employment, professional are taxed on the base of practicing period. 7) Registration is compulsory for the persons covered under professional tax have to obtain registration. Income of employees need not to get registered but employer should be registered according to provisions of professional tax act. 8) If employers deduct professional tax monthly basis against their salaries then it should pay such amount within 10 th of the next month. In other case (annual basis) it should pay on or before 30 th September in financial year. 9) The state government has appointed various authorities under the VAT act to function as assessing authorities under the professional tax act. 10) Application for registration as employer is to be failed in Form-1 within 30 days of becoming liable to deduct professional tax from the employees. 11) Application for registration as a person is to be filed in Form-3 Sec.-8(3). 12) Apart from the employer the other persons furnish application for registration in prescribed Form-3, e-filling of application rule 3-A. Provide for e-filling of registration on the official web portal of the department are and 13) An application for obtaining a certificate of registration under sub section of Sec.-8 and should be signed by proper person. 14) Granting registration certificate in Form-2 by the professional tax assessing authority after satisfying with all the related documentation. 15) The employer or person holding a registration certificate shall display at his work place. 16) If any person want to any change in certificate the he should submit the application for amendment in it under Rule-3. 17) On receipt of an intimation under Rule-5 registration certificate may be cancelled by the tax authority after satisfying the reasons. 18) If a certificate of registration is lost, destroyed or defaced or becomes illegible, holder shall apply to tax authority for duplicate copy of registration certificate. 19) Where an employer or person liable to registration has willfully failed to only for such certificate within in the time tax assessing authority my impose penalty not exceeding Rs. 20 for each day for delay subject to a maximum of Rs ) Where a person liable to registration has given false information in application submitted to the tax authority my impose a penalty not exceeding Rs

8 21) Every employer has to be file a quarterly return in form 7 and annual return in Form-8 for professional tax u/s-9. Accompanied by a treasury challan in proof of payment of full amount of tax. 22) Where an employer has without reasonable cause failed to file such return with in the professional penalty not exceeding Rs. 20 for each day of delay. 23) Professional tax by other person is to be deposited before 30 th Sep. or within 30 days of registration u/s-12 and annual return in form-9 is to be filed before 30 th June of the next year. 24) A person has without reasonable cause failed to file such return within the prescribed period. Tax Assessing authority impose a penalty not exceeding Rs. 5 for each day of delay subject to a maximum of Rs ) Where such employer or person fails to furnish return by the prescribed date or knowingly furnishes incomplete or incorrect return for any period of any year, he may be assessed annually to tax for such period. 26) If a person has furnished all the returns and has paid the tax due or if he has paid maximum tax of Rs his assessment shall be deemed to be assessed. 27) In case of delayed payment of tax by an employer/person, if in lieu of penalty leviable u/s 13, an amount equal to the penalty has been paid alongwith the tax. 28) In case a notice for assessment issued by assessing authority and if employer/person fails to comply with term of notice, authority shall after such enquiry as it deems fit, may make best judgment assessment Sec.-11(3). 29) If any person has been under assessed or has not been assessed to tax the assessing authority may at any time within a period of 3 calendar years. 30) If any person fails without reasonable cause, assessing authority may impose upon him a penalty equal to 2% per month of the tax amount subject to maximum of 2/3 of tax amount. 31) Tax Recovery of professional Tax sec. 15 By a notice in the prescribed form a copy at which shall be sent to the employer or person, at this last address known to the officer issuing the notice. 32) Any person making any payment in compliance with a notice issued u/s 15-A(1) shall be deemed to have made the payment under the authority of the employer or person and the treasury receipt. For such payment shall constitute a goods and sufficient discharge of the liability of such a person to the employees to extent of the amount specified in the receipt. 33) Authority may be taken for recovery at the arrears of tax, interest and penalty, if any due from the employer of person. 34) Provision relating to appeal. (Sec.17) Appeal is to be filed within 30 days from the days of receipt of the impugned order. No appeal shall be entertained after the expiry of 30 days. 35) No appeal order shall be passed without giving the appellant a reasonable opportunity of hearing. 36) Revision (u/s-18) The commission Professional Tax may or his own motion revise any order passed by any authority under this act no order shall be revised after the expiry of 3 years passing date of impugned order. 37) No order shall be passed without giving the assessee reasonable opportunity of being heard. Types of Persons Liable to Pay professional Tax Persons liable to pay professional tax are classified in 10 categories from tax rate and basis of charging point of view. Simply, the following types of person are covered under professional tax liability - 1) Employees and Employers. 2) Traders, Dealers. 3) Businessmen, industrialists. 4) Companies, Partnership firms, Cooperative Societies. 5) Legal practitioners 6) Medical practitioners. 7) Professionals chartered Accountants, Company Secretaries etc. 8) Technical consultants Engineers, Architects 9) Contractors 10) Commission agents, Bookers Dalas 11) Insurance agents 8

9 12) Surveyors, loss assessors 13) Management consultant 14) Members of stock exchange 15) Estate agents and property brokers. 16) Whole time directors of the companies 17) Transporters 18) Banks, Insurance companies 19) Liquor Licences 20) Money Lenders 21) Service Providers 22) Video parlours 23) Hotel operators 24) Owners of services stations and 25) Such persons other above mentioned, who are engaged in any profession, trade calling employment. Professional Tax in Case of Employees Categories or Employees a. Employee whose annual salary or wages not more then Rs. 1,80,000 b. Employee whose annual salary is Rs. 1,80,000 or more Professional Tax Nil 2,500 Deduction and depositation of the tax In case of employee who is in the category of Rs. 2,500 Rs. 208 per month for eleven months and Rs. 212 for twelfth month. Dealers, Traders, Shopkeepers Etc Professional tax is levied o persons engaged in trading activities are liable to pay professional tax on the basis of their annual turnover or businessmen run by them. W.e.f Dealers liable to pay tax under the Madhya Pradesh VAT Act, whose annual gross turnover. (a) does not exceed Rs. 10,00,000 Nil (b) Exceeds rupees 10,00,000 but less than Rs. 50,00,000 Rs. 2,000 (c) Is Rs. 50,00,000 and above Rs. 2,500 Professionals and Practitioners In this category the following professional or consultant covered as practitioners (a) Legal practitioners including solicitors and notary public (b) Medical practitioners including medical consultants and dentists. (c) Technical and Professional consultants including Architects, Engineers, R.C.C. Consultants, chartered Accountants, Actuaries and Management Consultants. (d) Chief Agents, Principal Agents, Special Agents, insurance Agents, surveyors or Loss Assessors licensed under the insurance Act, (e) All contractors (f) Commission Agents, Dalas and Brokers other than Estate workers, Option I on the basis of period standing in profession Above mentioned professionals is liable to pay professional tax on the basis of longevity of practicing. A practitioner shall be liable to pay professional tax according to his practicing period. Where the standing in profession or calling of 1. Is less than five years Nil 2. Is five years or more but less than ten years Rs. 1, Is ten years or more but less than fifteen years Rs. 2, Is fifteen years or more Rs. 2,500 Option II on the basis of Income Instead of Standing in profession a professional may opt another option to pay professional tax on his income basis. persons who opt income option and whose annual income 1. Does not exceed Rs. 50,000 Nil 2. Exceeds Rs. 50,000 but does not exceed Rs. 60,000 Rs. 1,000 9

10 3. Exceeds Rs. 60,000 but does not exceed Rs. 1,20,000 Rs. 1, Exceeds Rs. 1,20,000 Rs. 2,