COMMISSIONER OF COMMERCIAL TAXES
Sub: Salient features of the modifications and changes under different tax enactments effective from 1.4.2009- reg.
In the Budget 2009-10, certain changes and modifications in the rates of tax and the provisions in the laws administered by the Department have been announced. To give effect to the same and also other rationalization measures, the Mysore Betting Tax Act, 1932, the Karnataka Entertainments Tax Act, 1958, the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, the Karnataka Tax on Luxuries Act, 1979 and the Karnataka Value added Tax Act, 2003 have been amended by the Karnataka Taxation Laws (Amendment) Act, 2009 (Karnataka Act 7 of 2009) and the Karnataka Value Added Tax (Amendment) Act, 2008 (Karnataka Act 5 of 2009). Notifications have also been issued under the MBT Act, the KST Act, he KTPTCE Act, the KTL Act and KVAT Act. The copies of the amendment Acts and the notifications issued have already been forwarded through intranet to the departmental officers who should carefully peruse the same and note the various changes and modifications effective from 1.4.2009 (except for a few changes made retrospectively). However, the more important ones are explained here for ready reference.
A. Karnataka Value Added Tax Act, 2003
I. Amendments to the Act:
1. Amendment of Section 2:
By insertion of a new clause (13-A) of Section 2, 'Electronic Tax Register' that may be required to be installed and used by the class of dealers to be notified by the Commissioner under the newly inserted sub-section (2-A) of Section 31, has been defined.
2. Amendment of section 11:
By retrospective amendment to sub-section (c) of Section 11, it is specified that a dealer engaged in the execution of works contracts who is claiming deduction in his total turnover towards amounts paid to a sub-contractor in respect of works contractors executed by him would be ineligible for deduction or rebate of any tax paid to such sub-contractor. By this clarificatory amendment, it is made clear that such main contractor would be eligible for input tax rebate or deduction of tax paid on purchase of inputs put to use by him in the execution of works contract by him.
3. Amendment of Section 19:
By amendment of the heading of the Section and by insertion if a new sub-section (3), dealers are now made to repay any input tax deduction already availed by them on goods held in stock, if they opt for composition tax payment scheme. This is in addition to the current requirement of repayment of input tax deduction in the event of change in use.
4. Amendment of Section 23:
By amendment to Section 23, a dealer registering voluntarily and who subsequently becomes liable to get registered under Section 22 for the reasons specified under that provision is made eligible to claim under Section 13, input tax deduction on goods held in stock that were purchased by him within three months prior to the date of he becoming liable to get registered under Section 22. It may be noted that the claim of input tax deduction is subject to the provisions of Section 11.
5. Amendment of Section 27:
By insertion of a proviso to sub-section (1), provision has been made for transfer of registration in the case of dealer who is an individual to his or her legal heirs if they make an application requesting for such transfer. It may be noted that such transfer would be subject to such conditions as may be prescribed under the rules.
6. Amendment of Section 31:
(1) By insertion of a new sub-sections (2-A) and (2-B) to Section 31, the Commissioner is empowered to notify the class of dealers who would be required to install and use 'Electronic Tax Registers' for issue of tax invoices and sale bills and also maintenance of account of their sales. In order to make such Electronic Tax Register tamper-proof, they would be required to be secured it in the manner to be prescribed under the rules. It may be noted that, the KVAT Rules, 2005 is proposed to be amended suitably in this regard and only after such amendment to the rules, the class of dealers required to install and use Electronic Tax Registers would be notified. It may also be noted that the registered dealers required to install and use Electronic Tax Registers, would be allowed to recover the cost of such Electronic Tax Registers in the manner and subject to such conditions as may be prescribed by the rules and that it is proposed to amend the rules in this regard.
(2) By amendment to sub-section (4), all dealers with annual total turnovers exceeding Rs. 40 lakhs or now made to get their accounts audited instead of earlier annual taxable turnover limit of Rs. 40 lakhs.
7. Amendment of Section 35:
By amendment to sub-section (1) of Section 35, it is clarified that in respect of certain dealers like those who have opted for composition scheme under Section 15 and those with annual turnover of less than Rs.15 lakhs, the return along with the tax due shall be paid within fifteen days after the end of the relevant tax period.
8. Amendment of Section 52:
(1) By insertion of a new clause (b-1) and amendments to clause (e), the authorized officers are empowered to direct dealers to produce Electronic Tax Registers for examination and also to seize such Electronic Tax Registers, where they suspect evasion of tax.
(2) By insertion of a new sub-section (1-A), audit parties authorized by the Comptroller and Auditor General of India have been empowered to direct registered dealers to produce accounts and other documents for examination by them.
(3) By Amendment to sub-section (2), audit parties authorized by the Comptroller and Auditor General of India have also been given access to computerized accounts and documents maintained by the registered dealers.
9. Insertion of new Section 53:
By amendment to clause (b) of sub-section (2), the Commissioner is empowered to notify the documents to be carried by the owner or person-in-charge of a goods vehicle. It may be noted that the recently introduced scheme of requiring certain class of dealers to obtain delivery notes electronically would be covered under this provision.
10. Amendment of Section 62:
By substitution of clause (ii) of sub-section (6-A), the appellate authorities are now required to pass orders disposing of appeals within a period of ninety days from the date of final hearing.
11. Amendment of Section 64:
By insertion of proviso to sub-section (3), the current restriction which permits initiation of revision proceedings only after expiry of sixty days has been removed in cases where the orders or proceedings are totally in favour of the dealers.
12. Amendment of Section 74:
By amendment to sub-section (4), it is clarified that penalty of Rs. 50 per day would be levied on failure to submit the copy of the audited statement of accounts as long as such failure continues.
13. Amendment of Section 77:
(1) By amendment to the heading and insertion of a new sub-section (1-A), provision has been made to provide for prosecution of a registered dealer who refuses to install or use an Electronic Tax Registers or who removes or tampers with the seal used to secure an Electronic Tax Registers or destroys or attempts to destroy an Electronic Tax Register.
II. Tax concessions extended by notifications:
1. Tax exemption on food grains etc.:
By Notification-II No.FD 63 CSL 2009, dated 30.3.2009, tax exemption has been extended on paddy, rice, wheat, pulses, flour and soji of rice and wheat and maida of wheat from 1.4.2009 to 31.3.2010. It may be noted that inter-State sale of these goods whether supported by declarations in Form C or not, is also exempted from tax under the CST Act, 1956.
2. Tax exemption on certain other goods:
By notification-III No.FD 63 CSL 2009, dated 30.3.2009, tax has been exempted on sale of baje (calamus root) and footwear of all kinds costing up to Rs.100/- per pair. It may be noted that inter-State sale of these goods whether supported by declarations in Form C or not, is also exempted from tax under the CST Act, 1956.
3. Tax reduction on tamarind, etc.:
By notification-IV No.FD 63 CSL 2009, dated 30.3.2009, tax on sale of tamarind, seegekai (soapnut), coconut, copra, desiccated coconut powder and arecanut has been reduced to 2%.
4. Notification of pre-cured tread rubber as industrial inputs:
By notification-V No.FD 63 CSL 2009, dated 30.3.2009, tax on sale of pre-cured tread rubber with Central Excise Tariff sub-heading 4008 29 40 has been notified as industrial inputs that are liable to tax at 4% from 1.4.2009.
5. Tax reduction on certain goods sold as canteen stores.:
By notification-VI No.FD 63 CSL 2009, dated 30.3.2009, tax on sale of toilet articles of all kinds, television sets, audio and video cassette and disc players, washing machines, refrigerators, micro-wave ovens and weighing scales by the Canteen Stores Department to the regimental or unit run canteens or the numbers of armed forces and by the regimental or unit run canteens to the members of the armed forces, military pensioners and families of the deceased military pensioners has been reduced to 4%. It may be noted that if on the purchase of these goods the Canteen Stores Department or regimental or unit run canteen has paid tax at 12.5%, then it would be eligible to claim adjustment or refund of tax paid in excess of 4%.
6. Tax exemption on Kannada Computer Software:
By notification-IX No.FD 63 CSL 2009, dated 30.3.2009, tax on sale of Kannada Computer Software has been exempted from 1.4.2009, It may be noted that inter-State sale of these goods whether supported by declarations in Form C or not, is also exempted from tax under the CST Act, 1956.
7. Tax reduction on organic waste converters and plastic tarpaulins:
By notification- X No. FD 63 CSL 2009, dated 30.3.2009, tax on sale of organic waste converters and plastic tarpaulins has been reduced to 4% from 1.4.2009. It may be noted that tax exemption on any tarpaulin being a textile or fabric falling under entry 4 of First Schedule continues to be available even after 1.4.2009.
B. Karnataka Sales Tax Act, 1957:
Tax concession extended by notification:
Exemption of sales tax on Diesel sold to fishermen:
By Notification-I No.FD 63 CSL 2009, dated 30.3.2009, tax exemption has been extended on 75,000 kilo litres of diesel sold to fishermen for use in fishing activities as per the indents issued on a monthly basis by the Director of Fisheries, Government of Karnataka for the year 2009-10.
C. Karnataka Entertainments Tax Act, 1958:
Amendments to the Act:
1. Amendment of Section 3:
(1) By amendment of clause (b) of sub-section (1), tax on non-regional language films has been reduced to 40% to 30%.
(2). By insertion of a new second provision to sub-section (1-A), admission to games or sports organized on commercial basis involving proprietory teams for prize money is made liable for 10% tax. It may be noted that not only cricket matches played as a part of IPL and ICL become liable to tax under this proviso, but all other games or sports which are organised on similar lines.
2. Amendment of Section 4-G: By amendment of section 4-G, Multi System Operators and DTH service providers are now made liable to pay tax at 6% of the amounts receivable by them. It may be noted that earlier they were liable to pay tax only on the amounts received by them.
3. Amendment of Section 6-A:
By insertion of a new sub-section (5), a time limit of one year from the date of filing of return by a proprietor has been fixed for making assessment in such a case. Assessment in all cases pending as on 1.4.2009 has to be made by 31.3.2010. The Commissioner has been empowered to direct assessment of cases accruing which have not been made within one year from the date of filing of return in cases accruing after 1.4.2009 and by 31.3.2010 in old cases. It may be noted that, however, the time limitation has not been made applicable to certain cases. Further, the Government has been empowered to notify deemed assessment in specified class of proprietors based on the returns submitted. It may be noted that no notification has been issued yet in this regard.
4. Insertion of Section 8-F:
By insertion of a new Section 8-F, provision has been made for filing of revision petition before the High Court against Appellate Tribunal orders.
D. KARNATAKA TAX ON PROFESSIONS, TRADES, CALLINGS AND EMPLOYMENTS ACT, 1956.
1. Amendment of Section 5:
By insertion of a new sub-section (5), provision has been made for levy of penalty for delay in obtaining enrollment or registration under the Act. It may be noted that while the defaulting employer or person should be given a reasonable opportunity of being heard before levy of penalty, there is no discretion of levy of penalty of Rs.1000 in the case of defaulting employer and Rs.500 in other cases.
2. Amendment of Section 6-A:
By insertion of a new sub-section (4), provision has been made for levy of penalty for delay in filing of statement or payment of tax due by an employer. It may be noted that while the defaulting employer should be given a reasonable opportunity of being heard before levy of penalty, there is no discretion of levy of penalty of Rs.250.
3. Amendment of Section 7:
(1) By substitution of sub-section (1), all employers are deemed to have been assessed based on the returns filed by them after 1.4.2008. The Commissioner has been empowered to notify the cases for scrutiny assessment. It may be noted that no notification has been issued yet in this regard.
(2) By substitution of sub-section (2), the Government has been empowered to notify deemed assessment in specified class of employers based on the returns submitted. It may be noted that no such notification has been issued yet in this regard.
4. Amendment of Section 21:
By amendment to Section 21, all officers authorized by the Commissioner are now empowered to inspect and search premises of employers or persons liable to tax under the PT Act and also require production of accounts and documents for examination as well as seize accounts and documents wherever necessary.
5. Amendment of Section 26:
By Amendment to Section 26, all officers authorized by the Commissioner under Section 21 are empowered to compound offences.
6. Amendments to the Schedule:
By omission of items (b) and (c) of entry serial number 1 of the schedule, salary or wages earners with monthly salary or wage of Rs.5,000 and above but less than Rs.10,000 are exempted from Professions Tax with effect from 1.4.2009.
II. Tax concession extended by notification:
Tax exemption on branches of certain educational institutions:
By Notification-VII No.63 CSL 2009, dated 30.3.2009, the tax payable by persons running educational institutions in respect of their branches teaching classes upto twelfth standard or pre-university education with effect from the first day of April, 2009 is exempted. It may be noted that a person who is running an education institution teaching classes upto twelfth standard or pre-university education without any branches of such institution, continues to be liable to pay tax at Rs.2,500 per annum under entry 37 of the Schedule. It may also be noted that if a person is running an educational institution with several branches then, while he is liable to pay tax at Rs.2,500 per annum for every branch which have classes beyond twelfth standard or pre-university education, he is exempted from payment of tax in respect of the branches which have classes upto twelfth standard or pre-university education.
D. KARNATAKA TAX ON LUXURIES ACT, 1979:
By substitution of sub-section (1) of Section 3, the rate of luxury tax payable by the proprietors of hotels has been revised as follows:
2. Amendment of Section 3-B:
By amendment of Section B, the tax payable by the proprietors of hotels on charges collected on luxuries like health club, beauty parlour, swimming pool, conference hall and like has been reduced from 20% to 10%.
3. Amendment of Section 3-C:
By amendment of Section 3-C, the tax payable by the proprietors of marriage halls has been reduced from 20% to 10%.
4. Amendment of Section 4:
By substitution of sub-section (3), proprietors of hotels provision has been made for levy of luxury tax only on actual amount of room rent collected by the proprietor of a hotel. It may be noted that any discounts allowed in the tariff or rack rates should be general and such discount rates should be published in the tariff cards or displayed for general public in the hotels. Special discounts allowed in specific cases should be supported by a written contract or agreement. Wherever these conditions are not fulfilled, the officers concerned shall take action to reject claims of tax exemption in such cases on amounts declared to have been allowed as discounts and levy tax on the tariff or rack rate.
5. Amendment of Section 12-A:
By amendment of Section 12-A, the Government now empowered to exempt or reduce tax payable by any class of marriage halls or clubs or hospitals by issue of a notification.
By Notifiation-VIII No.63 CSL 2009, dated 30.3.2009, the tax payable by the proprietors of marriage halls on charges collected in respect of industrial exhibitions held in their marriage halls is exempted from 1.4.2009.
E. MYSORE BETTING TAX ACT:
Substitution of Section 6:
By substitution of Section 6, provision has been made for levy of tax on bets placed with licensed bookmakers on any race at a rate not exceeding Rs.50,000 per each day of a race meeting as may be notified by the Government. It may be noted that the earlier provision provided for levy of tax at a rate not exceeding 25% of the bet amounts as notified by the Government. It may also be noted that by Notification No.FD 65 CSL 2009, dated 16.4.2009, the Government has notified the new rates of tax payable by licensed bookmakers on the bet amounts received by them.
(B. A. HARSH GOWDA)
Commissioner of Commercial Taxes.