SUMMER INTERNSHIP PROGRAMME 2014

PROJECT PRESENTATION

Submitted by:Madhu Bala

1014Kirloskar Institute of Advanced Management Studies

ACADEMIC YEAR 2013-2015

DOCUMENTATION and PROCEDURE of SALES

TAX(MVAT) in KPCL

Under Supervision of:

Mr. Ogale S S, DGM

Mr. Kanade R H, AGM

ACKNOWLEDGEMENTS

Faculty Guide Prof. Dr. V.S Pai

Alumuni Guide: Mr. Sunil Kumar Kataria

SIP Coordinator: Prof. Chetan G K

Objective of the Study• To study and understand the procedure and

documentation of sales tax with respect to state of Maharashtra.

• To understand its acts, rules and regulations and then see whether the same set of rules and procedures are followed in KPCL or not.

Primary Objective

• To know reasons why sales tax was replaced by VAT.• Comparison between CST 1956, VAT and SALES Tax act.

Secondary Objective

Introduction to the Concept

TAX

VAT

MVAT

• Taxes in India.• Types of taxes.

• Meaning And Concept.

• Advantages of VAT.

• limitation/criticism of VAT.

• Under Government Of Maharashtra.

• Concept, Acts And Rules.• Rates and schedules.

TAXES in INDIA

DIRECT TAX

INCOME TAX

WEALTH TAX

INDIRECT TAX

CUSTOMS SERVICE TAX EXCISE

SALES TAX

CENTRAL SALES TAX STATE TAX

VALUE ADDED TAX (VAT)

VAT is a broad-based commodity tax that is levied at multiple stages of production.

Indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers.

Based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit.

All over the world, VAT is payable on the goods and services as they form a part of national GDP. It means every seller of goods and service provider charges the tax after availing the input tax credit

It is the form of collecting sales tax under which tax is collected in each stage on the value added of the goods.

VAT will replace the existing system of inspection by a system of built-in self-assessment by traders and manufacturers. The tax structure will become simple and more transparent and tax compliance will improve significantly

Under VAT revenue is collected throughout the production process without distorting any production decisions

ADVANTAGES of VAT

•Simplification•Transparency•Fair and equitable•Computerization.•procedure of simplification.•Adjustment of tax paid on

purchased goods.•Greater reliance on self

assessment and voluntary compliance by dealers.

LIMITATIONS of VAT

•Burden on personal end consumer products.

•Revenue are lower.•Accounting expenses.•Increased tax passed to

consumer.•Vat avoidance.•Vat fraud.

VAT applies to all types of businesses

IMPORTERS MANUFACTURERS DISTRIBUTORS WHOLESALERS

RETAILERS WORKS CONTRACTORS

LESSERS

How VAT works

• When a dealer sell goods, the sale price is made up of two elements; the selling price of the goods and the tax on the sale.

• The tax is payable to the State Government. The tax payable on sales is to be calculated on the selling price.

• The tax paid on purchases supported by a, valid tax invoice is generally available as set-off (input, tax credit) while discharging the tax liability on sales.

EXAMPLE

Company A buys iron ore and other consumables

and manufactures stainless steel utensils

Partnership firm B buys the utensils in bulk from Company A and polishes

them

shopkeeper C buys some of the utensils and purchases packing,

material from vendor D

Vendor D packages them and sells the packed

utensils for the public.

MAHARASHTRA VALUE ADDED TAXMVAT 2002

Maharashtra is one of the 21 States which have introduced the Value Added Tax (VAT) system of taxation from 1st April 2005.

The design of Maharashtra State VAT is generally guided by the best international practices with regard to legal framework, as well as operating procedures.

The consensus has been arrived at through the discussions in the Empowered Committee of State Finance Ministers on implementation of State level VAT.

On 1st April 2005, VAT replaced the single point sales tax.

MVAT replaced 4 existing taxes

1. The Bombay Sales Tax Act, 1959.2. The Maharashtra Sales Tax on the Transfer of

Right to Use Any Goods For Any Purpose Act, 1985·

3. The Maharashtra Sales Tax on the Transfer of Property in Goods Involved in the Execution of Works Contract (re-enacted) Act, 1989·

4. The Bombay Sales of Motor Spirit Taxation Act, 1958.

Important things in MVAT

TIN

Schedule Rates

Forms Returns

Tax invoice

Audit

TIN

TIN stands for Tax-Payer Identification Number.

Is unique number allotted by Commercial tax department of respective State.

It’s an eleven digit number to be mentioned in all VAT transactions and correspondence.

Tin registration is must for Manufacture/Traders /Exporters/Dealers.

Can be done by online.

Schedule Rates in MVAT 2002SCHEDULE DESCRIPTION RATE

SCHEDULE A Essential Commodities (Tax free) NIL

SCHEDULE B Gold, Silver, Precious Stones, Pearls etc. 1 %

SCHEDULE C Declared Goods and other specified goods 5 %

SCHEDULE D Foreign Liquor, Country Liquor, Motor Spirits, etc.

SPECIFIED RATE

SCHEDULE E All other goods (not covered by A to D) 12.5%

RETURNS under MVAT 2002

•Form 704

•Dealers having annual turnover of Rs. 80 lakhs

ANNUAL RETURNS

•Dealer having tax liability of more than Rs. 10 Lacs in previous year or

•Dealer having entitlement for refund of more than Rs. 1 Crore during previous year and

•Retailer opting for Composition Scheme

MONTHLY RETURNS

•Others to file Quarterly return i.e. Liability of Rs. 1 to 10 Lacs or refund from Rs. 10 Lacs to Rs. 100 Lacs

QUATERLY RETURNS

•Dealer having tax liability of Rs. 1 Lacs or less in previous year or

•Entitlement for refund is Rs. 10 Lacs or less during previous year

SIX MONTHLY RETURNS

Tax invoiceA tax invoice can be in any form to suit business requirements. However, all tax invoices must show –

1. The words `Tax Invoice’ in bold letters either at the top or at a prominent place

2. A serial number. 3. The date of the transaction/sale/issue. 4. Description of the goods. 5. The quantity or number of goods involved in the transaction. 6. The price of the goods.7. the amount of VAT charged on the goods (this must be shown

separately) 8. A declaration certificate. 9. Supplier’s name, address and Registration Certificate number. 10. Name and address of buyer.

Business Audit

• Business Audit is a new function of the Sales Tax Department.

• Conducted by the Sales tax officials ordinarily at the dealer's place of business.

• Independent from the audit by a Chartered Accountant.

Business Audit Process

If any of the dealers business is selected for an

audit, then Sales Tax Office will inform them and then fix a suitable

date.

The audit officer will inspect the books of accounts and

supporting documents.

At that time dealer should make available any

information or documents that he may require tenable him to carry out the audit effectively and speedily.

The audit officer may like to understand dealer’s

business process and examine their stocks of

goods.

He may also like to interview the person or its

employees for this.

The audit officer cannot remove any books of accounts or

documents from their premises. However, audit officer can request

for copies

RETURN FORMS• For dealers, other than Composition dealers executing

works contract, engaged in right to use any goods and under Package scheme of incentive.FORM NO 231

• Dealers opting for composition scheme excluding works contractors / dealers opting composition for part businessFORM NO 232

• Dealers under composition for part business• Works contractors • Dealers engaged in activity of transfer of right to use goods FORM NO 233• Dealers under Package Scheme of

IncentiveFORM NO 234• Notified oil companies .FORM NO 235

ABOUT the COMPANY

KIRLOSKAR PNEUMATIC COMPANY LIMITEDHadapsar Industrial Estate

Hadapsar, Pune 411013

KPCL is one of the core group companies. Incorporated in 1958 under the chairmanship

of Late Shri Shantanurao Kirloskar. Certified for Integrated Management System

(IMS) Certifications of ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007, by TUV NORD.

Started its operations with the manufacture of Air Compressors and Pneumatic Tools. New product lines were then added, including Air Conditioning and Refrigeration systems, Marine HVACR, Process Gas systems and Hydraulic Power Transmission machinery.

MISSION

To demonstrate an edge

to our stake

holders in our

offerings for

converting/transmittin

g energy. We will

strive to

make our

company an

employer of choice

VALUES

CUSTOMERS FOCUS:- Our activities / actions will be focused on enhancing internal / external customer's satisfaction

COMMITMENT: - We commit to achieve our targets / goals. We will be responsible / accountable for our commitment

CONTINUAL IMPROVEMENT:- We will consciously work to improve our procedures, processes and systems with an objective to improve our business processes

ETHICAL BUSINESS PRACTICES: - We will be fair in our dealings with all our stakeholders. It will be based on integrity , honesty and transparency

PRODUCT DIVISION at KPCL

Air conditioning, refrigeration

& process gas division (ACR

& PG)

Transmission division (TRM)

Air compressor

division (ACD)

Competitors of KPCL

Vs

VAT paid by KPCL in last 5 years

2009-10 2010-11 2011-12 2012-130

20000000

40000000

60000000

80000000

100000000

120000000

140000000

12,79,53,657

04,11,06,653

11,99,51,996

10,64,32,349

Methodology followed

PERSONAL INTERVIEW• observe things like how soon after delivery of inventory from various

divisions and subdivisions , invoices are generated, how each and every invoice is supported by valid tax FORM

DIRECT OBSERVATION• personally used to ask how and why of things. Say for instance asking

company guide how and why excel I is used in updating sales invoices and supplier and customer C forms at the end of every quarter

ON THE JOB TRAINING• At KPCL I used to actually work to get the exposure and experience.

Daily I worked for sales tax department all the major works

Tabulation and Findings

Software's used in

KPCL

Forms used in KPCL

Documents prepared in

KPCL

Software/system used in KPCL

Microsoft EXCEL• All forms are updated in excel.• On daily basis.

ORACLE• Replaced existing UNIX in 2006.• When MVAT become electronic.• Advantageous over UNIX as have ERP.

FORMS used in KPCL

C FORM

for interstate

sales

E1 FROM

direct dispatch to customers

H FORM

for export sales

2. Documents Prepared in KPCL VAT Return CST Return Sales Tax Payment Position C Form Suppliers C Form Customers VAT Audit WCT TDS Rectification Of C/ E1 Forms C Form Mail Returns C Form Letters Sales Tax JVS

ACK CST Application CA Certificate H Forms Covering Letters C Form

Suppliers Sales Tax Legal Debit Note And Credit Note C Form Forwarding Letters C FORM supplier forwarding

letters WCT TDS Purchases

a). Covering Letters C Form Suppliers

Every c form supplier is supported with a covering letter containing all the details like invoice no and value of each item in the c form and the address and other details of the suppliers.

b). ACK CST application

ACK stands for acknowledgement. An online application of C FORM is filed in favour of suppliers and in return KPCL gets an acknowledgement copy of the same.

AREA OF RESEARCH

Why VAT is preferred over sales

tax?

Difference between

VAT and CST.VAT effect

on inflation.

VAT effect on economic

growth.

Why VAT is preferred over SALES TAX?In sales tax, final sales are not covered by the tax system e.g. due to difficulty of covering all the retailers, particular commodities may not yield any tax whereas with VAT some revenue would have been collected through taxation of earlier transactions, or eliminates the problem of tax cascading, which often occurs with sales tax.

Sales tax is often applied again to the sales tax element of the cost, thus there is a problem of tax on tax. This is not the case with VAT, which makes it a neutral tax as it provides the least disturbance to patterns of production and the generation and use of income.

This is made possible by the fact that one person’s output is another’s input. As with sales tax imports are treated the same way as local goods while exports are zero- rated to avoid anti-export bias.

Difference between VAT & CSTUnder the CST Act, the tax is collected at one stage of purchase or sale of goods. Therefore, the burden of the full tax bond is borne by only one dealer, either the first or the last dealer.

The VAT system, the tax burden would be shared by all the dealers from first to last. Then, such tax would be passed upon the final consumers.

Under the CST Act, the tax is levied at a single point. Under the VAT system, the retailers are not subject to tax except for the retail tax.

Under the CST law, concessional rates are provided on certain taxes. The VAT regime will do away with such concessions as it would provide the full credit on the tax that has been paid earlier.

VAT effect on INFLATION

In considering the introduction of VAT, countries are often concerned that it would cause an inflationary spiral. However there is no evidence to suggest that this is true.

Survey of OECD countries that introduced VAT indicated that VAT had little or no effect on prices.

In cases where there was an effect it was a onetime effect that simply shifted the trend line of the consumer price index (CPI).

To guard against any unforeseen price effects the authorities may consider a tighter monetary policy stance at the introduction of VAT

VAT effect on Economic Growth

Economic growth can be facilitated through investment by both government and the private sector. Savings by both parties are required in order to finance investment in anon-inflationary manner.

Compared to other broadly based taxes such as income tax VAT is neutral with respect to choices on whether to consume now or save for future consumption.

Although VAT reduces the absolute return on saving it does not reduce the net rate of return on saving. Income tax reduces the net rate of return as both the amount saved as well as the return on that saving are subject to tax.

RECOMMENDATIONS

KPCL Finance Department particularly Sales Tax Department is maintaining all the documents and invoices as per the requirement of Department of Sales Tax under government of Maharashtra.

After the study of Documentation and Procedure of

MVAT in KPCL. No recommendations as KPCL is doing its work as

per the latest rule sand regulations of department of sales tax.

Limitations of the study

The project DOCUMENTATION AND PROCEDURE OF SALES TAX (MVAT)is a topic that revolves around laws, rules and regulations of the GOVERNMENT of MAHARASHTRA. Hence, there was very less scope for practical implementation and analysis.

It is a very vast domain and in a period of less than 8 weeks it was not possible to cover all aspects in details and study each and every law, procedure or exemption in detail.

Scope for Future Improvement

KPCL Finance Department particularly Sales Tax Department is maintaining all the documents and invoices as per the requirement of Department of Sales Tax under government of Maharashtra.

All the invoices are updated on daily basis.Hence no recommendations to KPCL on this

part.

BIBLIOGRAPHY

http://en.wikipedia.org/wiki/Taxation_in_India

http://www.archive.india.gov.in/citizen/taxes.php?id=5

http://www.authorstream.com/Presentation/aSGuest89962-890545-mvat-basics/

http://en.wikipedia.org/wiki/Sales_tax. http://kpcl.kirloskar.com/content/our-corpora

te-philosophy http://en.wikipedia.org/wiki/Sales_tax. http://mahavat.gov.in/Mahavat/MyFold/DO

WNLOADS/FORMS/DOWNLOAD_FORMS_MVAT/DOWNLOAD_FORMS_MVAT_06_03_11_3_46_16PM.pdf

http://mahavat.gov.in/Mahavat/MyFold/DOWNLOADS/FORMS/DOWNLOAD_FORMS_MVAT/Downloads-MVAT.073.pdf