STATE
SALES TAX
Many
enterprises in India are in the business of selling, reselling
of computers, various computer parts and software. Some of them
are also providing various services such as installation and maintenance.
These enterprises need to know about sales tax and Works Contract.
Last
time we covered basics of Central Sales Tax, which covers Sales
Tax on goods, sold between two states in India.
In
this article we will look at the Sales Tax, which is on goods
sold in one particular state.
Here
we will discuss in general the principles and basics of State
Sales Tax and in particular of Bombay Sales Tax (BST) which is
the effective legislation in Maharastra.
Basically sales tax is a tax on sale of goods. The liability to pay sales
tax arises on making sales of goods. No state can levy sales tax
on any sale or purchase where such sale or purchase takes place
(a) outside the state and (b) in the course of import of goods
into or export of goods outside India.
Some
important definitions under BST are:
BUSINESS:
It
includes any trade, commerce, manufacture or any adventure or
concern in the nature of trade, commerce or manufacture whether
carried on with or without profit motive or whether actual profit
is earned or not. Further it also includes any transaction, which
is incidental, or ancillary to such trade, commerce, manufacture,
adventure or concern and it also includes any transaction which
is incidental or ancillary to commencement or closure of such
trade, commerce.
DEALER:
The
definition of dealer is very important, as most of the provisions
of the Act are applicable to only dealer. Dealer includes any
person who carries on the business of buying or selling of goods,
in the state whether for commission, remuneration or otherwise.
It also includes any State or Central Government who carries on
such business and societies, clubs or other associations of persons
are also included, when they buy from or sell goods to their members.
GOODS:
Means
every kind of moveable property not being newspapers, money, actionable
claims, stocks, shares and securities;
Sale
Price means the amount payable to a dealer as
consideration for the sale of any good less any sum allowed as
cash discount according to the practices normally prevailing in
the trade but inclusive of any sum charged for anything done by
the dealer in respect of goods at the time of or before the delivery
thereof. However, it does not include freight or delivery cost
or cost of installation where such cost is separately charged.
REGISTRATION
AS A DEALER
Under the
provisions of some state laws the dealers are divided into several
categories such as manufacturer, importer, reseller etc. and such
as dealer is required to obtain a registration certificate to
that effect.
Registration,
under the Bombay Sales Tax Act, can be obtained only by that dealer
who has effected a certain minimum turnover. A dealer is compulsorily
required to obtain registration if his turnover of sales or purchases
exceeds relevant limits during any year commencing on the 1st
day of April. For the liability to pay tax there are three categories
of dealers, namely:
Importer:
Importers are those who are engaged in import of goods in the
State of Maharashtra.
Manufacturer: Manufacturers are those who are engaged
in the manufacture of goods in the State of Maharashtra.
Reseller: Resellers are those who are resellers of
goods in the State.
Application be made within 30 days of exceeding
the prescribed turnover of the sales or purchases in any financial
year.
Prescribed
Limits of the turnover after which the dealer must apply are as
under:
| Category of dealer |
Total turnover (Total sales/purchases) shall exceed |
Total turnover of taxable goods shall exceed |
Other conditions |
| Manufacturer |
Rs. 1,00,000/- |
Rs. 10,000/- |
Value of any goods manufactured
by him shall exceed Rs.10,000/- |
| Importer |
Rs. 1,00,000/- |
Rs. 10,000/-
|
Value
of any goods brought by him into the state shall exceed Rs.
. 10,000/- |
| All other dealers |
Rs. 2,50,000/- |
Rs. 10,000/- |
|
| Voluntary Registration |
No limits |
No limits |
Advance of Rs. 30,000/-is
required to be paid which is adjustable towards dealers Liability
of tax, Interest, Penalties |
RATES
OF TAXES UNDER BST
|
SHEDULE
UNDER BST ACT which lists various goods
|
TYPES
OF GOODS
|
RATE
OF TAX
|
|
A
|
Goods
of prime importance
|
Nil
|
|
B
|
Declared
goods
|
Up
to 4%
|
|
CI
|
Other
goods
|
½%
to 4%
|
|
CII
|
Other
goods
|
4%
and more
|
Sales
tax on Software packages is at present 4% in Maharastra.
TAX
WHEN PAYBLE UNDER BST
The
Sales tax will be payable at the time of first sale. All subsequent
sales of same goods will be allowed as re sales and no tax is
attracted on the such subsequent sale in Maharastra.
Filing
of Returns and payment of taxes.
The
sales tax has to be collected by the registered dealer. The tax
has to be paid to the Government treasury, along with a return
within the time as may be prescribed by the State Government in
the State sales tax Act. The dealer is required to furnish the return
in the prescribed form. At the time of assessment, the dealer
has to furnish all the documentary evidence.
ADVANTAGES OF REGISTRATION UNDER BST
·
Dealer will be entitled to collect Sales Tax payable
by the purchaser of goods. An unregistered dealer cannot collect
tax, even though tax is payable by him.
·
Set off
of the taxes paid on purchases is available only to a Registered
dealer.
·
Incentive
in the form of Sales Tax exemption / deferral etc. are available
only to registered dealers.
·
If registered under Central Sales Tax Act also,
dealer are entitled to purchase from outside the State of Maharashtra
at a concessional rate of Tax @ 4 per cent on C form declaration.
Works Contract tax
Works
contract tax is levied on the transfer of property in goods in
the course of execution of a works contract. Generally, the term
"works contract" means a contract for executing works
-, a contract which, in addition to services rendered, involves
the transfer of property in goods.
A
contract, which does not result in transfer of property in goods,
would not attract works contract tax.
Some
of the States in India charge works contract tax on Annual Mainetance
Contract say of computers, networks etc which may be comprehensive
or non-comprehensive.
In
Maharashtra, works contract tax is governed by the Maharashtra
Sales Tax on Works Contracts (Re-enacted) Act 1989. As per the
Act, works contract tax is levied on the turnover of sales, in
respect of goods transferred in the execution of the contract.
For the purposes of the computation of turnover of sales of a
seller, sale price has been defined to mean the purchase price/value
of the goods transferred in the execution of the works contract.
Under
the Act, the rates of works contract tax have been specified for
various types of works contracts falling under the schedule to
the Act. Where certain contracts are not covered by the schedule,
works contract tax would be levied on each of the goods transferred,
at rates specified under the schedule to the Act. Therefore, works
contract tax would be payable at applicable rates depending on
the classification of the goods. However, the Act also provides
for the payment of a lump sum by way of composition at the prescribed
rate in lieu of the works contract tax payable, with the prior
approval of the Commissioner of Sales Tax.
The
Act provides for registration under the Act and rate of taxes
and payment of taxes.
In the following instance it is held that
replacement of free parts under the Annual Maintenance Contract
is not a transaction of sale within
the meaning of section 2(1)(L) of the Maharastra Works Contract
Act. The contract is a service contract and not a works contract.(M/s.
Tata Infotech Ltd. Order No. WC- 2000/DDQ-5/Adm-12/B-740 Mumbai
dated 03.70.2000).
© Zarana Khona
2001 email: zarana@indiaitlaw.com
