8th floor,Vikrikar Bhavan,
Mazgaon, Mumbai 400010.
To
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No.VAT/AMD-2012/ IC/ADM-8
Sub: Taxability of Furnishing Cloth notified under entry 101 of Schedule C appended to MVAT Act, 2002.
Ref.: (1) Finance Department Notification No. VAT-1512/C.R.-91 (1) /Taxation.- 1 dated 27th August 2012.
(2) Finance Department Notification No. VAT-1512/C.R.-91 (2) /Taxation.- 1 dated 27th August 2012.
(3) Finance Department Notification No. VAT-1512/C.R.-91 (3) /Taxation.- 1 dated 27th August 2012.
(4) Finance Department Notification No. VAT-1512/C.R.-91 (4) /Taxation.- 1 dated 27th August 2012. Gentlemen / Sir / Madam,
The Hon'ble Deputy CM and Finance Minister in his Budget Speech on 26th March 2012, declared to levy tax on the sales of Furnishing Cloth at the last point of sale. To give effect to this declaration, the Government has issued above referred 4 notifications. As a result of issuance of notifications cited at Ref. (3) and (4), the sales of the Furnishing Cloth notified under entry 101 of Schedule "C" of MVAT Act are taxable @ 5% with effect from 1st September 2012.
However, by virtue of notification cited at Ref. (1), with effect from 1st September 2012, the sales of notified Furnishing Cloth are exempted from tax, in respect of all sales made other than at the last point.
The implications of these notifications are explained as follows:
1. Finance Department Notification No. VAT-1512/C.R.-91 (1)/Taxation.- 1 dated 27th August 2012.
(1) By virtue of provisions contained under clause (c) of sub-section (4) of section 41, the State Government, had issued a notification and exempted from tax all stages of sales of furnishing cloth except the stage of the last point of sale within the State. An Explanation is added to the said notification which states that the last point of sale means the sale made within the State for consumption.
[2] Whether, the sale is made for consumption or otherwise may be determined in the following manner:
(a) If a registered dealer say "A", effect sells of notified Furnishing Cloth to another registered dealer say "B" and both are holding valid TIN under MVAT Act, then all such sales shall be treated as sales not made for consumption and will be eligible for exemption from payment of tax. Needless to say that the selling dealer has to exercise due diligence regarding credentials of purchasing dealer and verify the correctness of TIN of the purchasing dealer.
However, when a registered dealer sells notified Furnishing Cloth to another registered dealer with a reasonable knowledge of facts showing that the sales made to the other registered dealer is for consumption, then such selling dealer shall be liable to pay tax. The selling dealer in such case should mention in his tax invoice that the "Sales are for consumption".
(b) When sales are effected by registered dealer holding valid TIN to another dealer or person who is not holding TIN, then in order to claim exemption of tax, the onus will be on the selling dealer to prove that the sales are not meant for consumption.
(c) If any dealer effects the sale of notified furnishing cloth to end consumer, then the sale will attract tax.
(d) Whereas, if a registered dealer effects inter-State sales of notified Furnishing Cloth, then same will be taxable as per the provisions of CST Act, 1956.
2. Finance Department Notification No. VAT-1512/C.R.-91 (2)/Taxation.-1 dated 27th August 2012.
(1) The State Government has also amended the earlier notification issued under section 42 for composition dealers i.e. Finance Department Notification No VAT. 1505/CR-105/Taxation-1 dated 1st June 2005.
(2) As a result of this amendment, the dealer dealing in the Furnishing Cloth will not be entitled to opt for the Composition Scheme, provided for retailers, so far as the composition relates to the turnover of sales of Furnishing Cloth.
3. Finance Department Notification No. VAT-1512/C.R.-91 (3)/Taxation.-1 dated 27th August 2012.
(1) The State Government, Finance Department had earlier issued a Notification No- VAT. 1510/CR-47A/Taxation.-1 dated 17th March 2010 and notified the Fabrics that are taxable under sub-entry (a) of entry 101 appended to Schedule "C. There are eight items in this notification.
(2) Since, these items are not Furnishing Cloth; they continue to remain taxable at multiple points. In other words, the items covered by this notification are TAXABLE & VATABLE i.e. tax will be levied at each stage of sale and subject to rates set off shall be available.
(3) Now, the State Government had issued another notification No. VAT-1512/C.R.-91 (3)/Taxation.-1 dated 27th August 2012 and accordingly notified Furnishing Cloth under sub-entry (a) of entry 101 of Schedule "C with reference to the Headings, Sub-headings and Tariff Items of the Central Excise Tariff Act, 1985. This notification shall come into effect from 1st September 2012. Thus the Furnishing Cloth as notified under this notification will be exempted from tax in respect of all points of sales except in the case where such sales are last point sales.
(4) The taxability in this respect is discussed at the Point No. -1(2) above.
4. Finance Department Notification No. VAT-1512/C.R.-91 (3)/Taxation.-1 dated 27th August 2012.
(1) The State Government, Finance Department had earlier issued a notification under sub-entry (b) of entry 101 of Schedule "C" of MVAT Act, 2002 bearing no. VAT.1505/CR-120/Taxation.-l dated 1st June 2005 and notified varieties of Textile and Textile articles. This notification contains the items up to serial number 29.
(2) Since, these items are not Furnishing Cloth; they continue to remain taxable at multiple points. In other words, the items covered by aforesaid notification are TAXABLE & VATABLE i.e. tax will be levied at each stage of sale and subject to rules, set off shall be available.
(3) Now, the State Government has amended aforesaid notification by notification No. VAT-1512/C.R.-91 (3)/Taxation.-1 dated 27th August 2012. The Furnishing Cloth is notified with reference to Headings, Subheadings and Tariff Items of the Central Excise Tariff Act, 1985.
(4) The items at serial number 30 are Furnishing Cloth and are exempted from tax in respect of all points of sales except in the case where such sales are last point sales.
(5) The taxability in this respect is discussed at the Point No. - 1(2) above.
5. Liability to obtain registration:-
The dealer who effects the sales of Furnishing Cloth shall be liable to obtain registration under following circumstances, -
a. has exceeded the relevant limit of turnover of sales of Rs. 5 Lakh on or before 31st August 2012 and has effected the sales or purchase of taxable goods of Rs. 10,000/- say on 5th September 2012, then he shall apply for registration within 30 days from date on which he has fulfilled relevant conditions mentioned in section 3(4) of MVAT Act i.e. in this case within 30 days of 5th September 2012.
b. exceeds the relevant limit on or after 1st September 2012, then within 30 days from the date on which such turn-over has exceeded.
6. This circular cannot be made use of for legal interpretation of provisions of law as it is clarificatory in nature.
7. If any member of the trade has any doubt, he may refer the matter to this office for further clarification or may contact to the Help Desk.
8. You are requested to bring contents of this circular to the notice of the members of your association.
Yours faithfully
(S. P. Kadu Patil)
Commissioner of Sales Tax,
Maharashtra State, Mumbai