Value Added Tax in Madhya Pradesh

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MADHYA PRADESH VALUE ADDED TAX ACT

VAT Tax payable on value addition.

Value Addition is not profit it is difference between sale prices and purchase price.

METHODS OF CHARGING VAT

1. Subtraction Method

         In this method tax is charged on difference of Sale Price and Purchase Price.

i.e. Taxable Amount = Net Sales- Net Purchase

2. Tax Credit Method

         In this method tax on Sales is separately calculated and there from Input tax rebate is subtracted.

INPUT TAX REBATE (ITR) [Sec. 14] An input tax rebate is available on local purchase of goods on which tax is being paid. ITR shall be available for full amount of tax paid on a. Purchase of Raw Material.

b. Packing Material. c. Incidental goods. d. Consumable stores and Plant and Machinery. e. Goods purchased for use as plant, machinery, equipments and parts thereof.

ITR shall be available even if finished goods are transferred outside the state (SOS). But, in that case ITR shall be available only in respect of tax paid in excess of 4%.

ITR is available on purchase itself and one need not to wait till sale of said goods.

ITR is not available in case of following: a. Goods received as sample. b. Goods received as replacement. c. Goods used for manufacturing or processing of goods given as free sample, gift or replacement. d. Goods procured from out-side the state. e. ITR will not be available if tax is not shown separately in purchase bill/invoice.

ITR in respect of Plant & Machinery

Plant and machinery, equipments and parts thereof will also be eligible For input tax rebate. The Plant and Machinery, equipments, etc. Shall be eligible for rebate in same quarter in which it is Purchased irrespective of when they are put to use.

ITR will be available to the extent of tax paid in excess of 4%, if a. Finished goods are tax-free. b. Packing material used to pack tax-free goods. c. Machinery is used for Production of tax-free goods.

ITR in case of manufacture of goods for other on job basis will be available because there is no condition for sale by dealer.


How And When To Claim ITR

            A dealer who is liable to pay tax quarterly can claim ITR and adjust it against tax payable by him.
            In case of dealer who is liable to pay monthly tax, the amount of ITR should be calculated for each month and should be adjusted against tax payable for that month.
                                           
           If ITR is not claim within that month or quarter it can be claimed in next month or quarter.

How To Calculate ITR

           ITR need not be calculated on one to one basis it will be calculated on the total sales and total purchase basis. Sales value is of importance in this case.

Carry Forward/refund of ITR

          Except in case of export of goods or pertaining to plant & machinery, refund of ITR shall not be allowed in same year.
          Amount of ITR shall be adjusted under CST or VAT but not against entry tax. Unadjusted ITR can be carried forward till two years and then it can be refunded.

Payment of Tax

          Tax is payable in challan in Form 26. Tax is payable monthly if tax amount 15000/- or more. In default payment of tax interest is charged @ 1.5% per month of the tax payable from day tax is due.


ITR in respect of Opening Stock

ITR in respect of Opening Stock is available on date of commencement of the VAT act .ITR on Opening Stock will be available for

1. Registered Dealers 2. In respect of goods of nature tax paid goods in MPCT Act. 3. Goods purchased after 1/4/05. 4. Goods are for resale 5. Opening Stock should not include Capital Goods. 6. Opening stock including raw/packing material, finished goods, WIP (as finished goods).

Calculation of ITR on Finished Goods & WIP

ITR in respect of Finished Goods shall be calculated as following
    First of all the quantity of raw material and packing material used for
    manufacturing have to determined and amount of input material from
    registered  dealers in M.P. by paying tax will have to be determined, and 
    then  their purchase price will have to be determined on any suitable           
    basis, like FIFO and tax paid thereon have to be calculated.

ITR on Opening Stock How and When to be availed.

            ITR in respect of opening stock is to be availed in 3 equal installments within the 9 months from date of commencement of the act. If such rebate cannot be availed in year 2006-07 then it can be carried forward to next year. ITR in respect of Opening Stock shall be availed in Form 66 by 30th May.

If tax is not shown separately in the bills

               As per Rule 82(6) if tax is not shown separately in purchase bill pertaining to opening stock, ITR will be available to the extent of 75% of purchase price.