C form
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
19 September 2011
If "C" Not Taken From department And oms Goods Purchased then what is the reporting requirement under form 704.
21 September 2011
The Para 2A of Form 704 Part I requires auditor to certify following:
u Correctness and Completeness of returns.
Auditor has to certify whether returns are correct or complete in all aspect i.e., whether returns are per Maharashtra Value Added Tax Act, 2002 or The Central Sales Tax Act.
Auditor is certifying it, subject to his observations and comments about non-compliance, shortcomings, and deficiencies in the returns filed by the dealer as given in Para 3 and 5..
The Audit Report further requires under Para 2B, to certify and comment on:
u Sixteen Reporting Requirement:
These Sixteen reporting requirements are as follows:
2(B) Subject to *my/our remarks about non-compliance, shortcomings and deficiencies in the returns filed and tax liability computed and presented in respective schedules and Para-4 of this Part, I/We certify that,—
(a) I/We have obtained all the information and explanations, which to the best of *my/our knowledge and belief, were necessary for the purposes of the audit.
(b) *I/We have read and followed the instructions for preparation of this audit report. Considering the nature of business of the dealer and the Form in which the dealer is expected to file return(s), we give the information as required in Part-3 in Schedule I/II/III/IV/V/VI (score out whichever is not applicable) along with the applicable annexure(s).
(c) The books of account and other sales tax related records and registers maintained by the dealer along with sales and purchase invoices as also Cash Memos and other necessary documents are sufficient for computation the tax liability under the MVAT Act and the CST Act.
(d) The gross turnover of sales and purchases, determined by us, includes all the transactions of sales and purchases concluded during the period under audit.
(e) The adjustment to turnover of sales and or purchases is based on entries made in the books of account during the period under Audit and same are supported by necessary documents.
(f) The deductions claimed from the gross turnover of sales and other adjustments thereto including deduction on account of goods return, adjustments on account of discounts as also debit/credit notes issued or received on account of other reasons, are supported by necessary documents and are in conformity with the provisions of the relevant Act.
(g) Considering the schedule and entry wise classification of goods sold, classification of exempted sales, sales at reduced rates are correct. The tax leviable on sales is properly computed by applying applicable rate of tax and/or composition tax.
(h) Computation of set-off admissible in respect of purchases made during the period under Audit and adjustments thereto are correct. While ascertaining the correctness, *I/We have taken into account the factors such as goods returned, adjustments on account of discounts as also debit/credit notes issued or received on account of other reasons and these claims and adjustments are supported by necessary documents. The set-off is worked out only on the basis of tax invoices in respect of the purchases.
(i) Wherever the dealer has claimed sales against the declarations or certificates; except as given in Annexure-H and Annexure-I, all such declarations and certificates are produced before me. I/we have verified the same and they are in conformity of the provisions related thereto.
(j) Computation of Cumulative Quantum of Benefits (CQB), wherever applicable, is in conformity with the provisions of the Act in this regard.
(k) The records related to the receipts and dispatches of goods are correct and
Properly maintained.
(l) The tax invoices in respect of sales are in conformity with the provisions of law.
(m) The Bank statements have been examined by *I/we and they are fully
reflected in the books of account.
(n) *I/we certify that *I/we have visited the principal place of business or a place of business from where major business activity is conducted by the dealer. The dealer is conducting his business from the place/places of business declared by him as his principal place of business/and the additional place of business.
(o) Due professional care has been exercised while auditing the business and based on my observations of the business processes and practices, stock of inventory and books of account maintained by the dealer, I fairly conclude that,—
(i) dealer is dealing in the commodities mentioned in the Part-2 of this report;
(ii) Sales tax related records of the dealer reflect true and fair view of the volume and size of the business for period under audit.
(p) I have verified that the purchases effected by the dealer in respect SEZ Unit
of the dealer are used in the said Unit.
3. Out of the aforesaid certificates; the following certificates are negative for the
reasons given hereunder:-
While certifying the above, auditor will have to keep in mind that in MS Excel format of Form 704, there is limitation. An auditor can enter reasons for Negative Certifications. In Case of “No Negative Certificates” write “N.A”.
Thus while mentioning any disclosure against the above given Sixteen Certificates, auditor will have to put reasons for negative certificates only. If there in No Negative Certificate, than the standard format for Form 704, it self contains “N.A.”. So one will have to be very careful while finalizing this Para.
It will be important to note that, if any normal disclosure is to give against above certificates, they may be given in Para 5 only. Because any normal disclosure here will be treated as Negative Certificate.
There after Auditor is required to give Advice on Filing of revised returns and pay taxes.
This one of the most important requirement of Form 704, which makes this Audit Report an Assessment Order it self. Thus to mention the details in the given format shall be done with at most care and documentation. As any negative note here will be the final findings of Audit, which will affect the tax liability and quantification of that will be our prime responsibility, which in turn will require greater accountability on our part.
The filing of revised returns will be primarily based on above advice only. Thus it gains significant importance, after issue of Circulars for extension of date for filing of returns.
Topic No. 2:
Form 704-Audit Report or Certificate?
As per “Guidance Note on Audit Report and Certificate for Special Purpose” issued by ICAI:
Certificate means “A written confirmation of the accuracy of facts stated therein and does not involve any estimate or the opinion”.
Report means “A formal statement usually made after an enquiry, examination or reviews of specified matters under report and includes the reporting auditor’s opinion thereon.”
Form 704 requires Auditor to Advise on filing of returns and differential tax liability. This advice is nothing but Opinion. Though it is mention in Form 704 that it is a report, its disclosure requirements are features of certificate also. Thus it is a combination of both report and certificate.
“Means greater risk and disclosure requirement on shoulders of Auditor.”
Topic No.3:
What is mean by Qualification, Remark, Observation, Opinion or Disclosure?
Qualification:
As per Concise Oxford Dictionary (COD) “Qualified” has a double sense, and mean a condition or status and an acceptance are qualified-where it is conditional.
Any requirement or opinion of Form 704, answered in Negative, Adverse way or Disclaimer will take form of a Qualification.
An Auditor shall remember following points before Qualifying, that any qualification:
u - Should be Material and quantifiable.
u - Should be with reasons.
u - Should Start with words- “Subject to” or “Except that”
u - May be in Bold and Italic format.
u - Should be stated in Part I of Form 704 i.e., Audit Report.
u - Auditor should follow the “statement on qualification in auditors report” issued by ICAI.
u - Should refer AAS 28: Auditors Report on Financial Statements.
What will be an Unqualified MVAT Audit report?
An Unqualified MVAT Audit Report may be “A report where the returns are correct and complete and there is no material defects in the turnover and liability reported and determined as per books of accounts maintained by the dealer.”
An auditor should also consider following aspects before Qualification of Form 704:
u Which item require qualification (i.e., Part I- Certification or Opinion) or (Part II- Statements or Observations).
u Whether the auditor is in disagreement with something done or is unable to form an opinion. (i.e., Ratio adopted for Branch Transfer, Compliance of conditions of Composition Scheme, etc).
u Whether the matter affects the returns filed and liability or affects only a particular item. (i.e., Incorrect Form of return, periodicity of return, Set off on Misc. purchases, etc).
u Whether the matter involves any contravention of provisions. (i.e., Incorrect rate of tax, Contravention of “C” Forms, etc)
As per COD Observation means “ the action or process of closely observing or monitoring or a comment based on something one has seen, heard, or noticed.
As per COD Remarks means “a remark expressing an opinion or reaction”
Topic no. 4:
Practical issues and its suggested disclosures.
SUGGESTED DISCLOUSERS IN AUDIT REPORT
ISSUE 1:
(Returns filed for incorrect period)
Remark:
“Certified that I / We have verified correctness and completeness of the below mentioned sales tax returns. Dealer has relied on Trade Circular No. 26T of 2006 date 18-9-2006 point no 6c, and has not filed revised returns in place of incorrect period returns..”
ISSUE 2:
(Returns filed for incorrect period)
Remark:
“Certified that I / We have verified correctness and completeness of the below mentioned sales tax returns. Dealer has relied on Trade Circular No. 26T of 2006 date 18-9-2006 point no 6c, and has not filed revised returns in place of incorrect period returns.
Remark:
“The dealer has filed quarterly return for the period _____ instead monthly return of period _,__,_. Which not in pursuance of Rule No.17 of MVAT Rules, 2002. Dealer has relied on Trade Circular No.26T of 2006, Dated 18-9-2006, Point No.6c, and has not filed revised return.”
ISSUE 3:
(Some returns filed in wrong forms)
Remarks:
n “Certified that I / We have verified correctness and completeness of the below mentioned sales tax returns. Dealer has relied on Trade Circular No. 26T of 2006 date 18-9-2006 point no 6d, and has not filed revised returns.”
Remark:
n “The dealer has filed return for the period _____ in Form No.___ instead of Form ____. Which is not in pursuance of Rule No.17 of MVAT Rules, 2002. Dealer has relied on Trade Circular No.26T of 2006, Dated 18-9-2006, Point No.6d, and has not filed revised return.
ISSUE 4:
(Additional Place of business not included in R.C. but turnover considered in Return)
Remark:
n “The additional place mentioned in Sr. No. 1 or _______________ is not included in Registration Certificate under MVAT Act, 2002 obtained by the dealer, but the turnover of sales and purchases and taxes there on are included in the Returns filed for the period under audit. This disclosure is in line with clause no. 4 of Trade Circular No. 26T of 2006 dated 18.9.2006.”
ISSUE 5:
(Turnover of URD Period included Audit Report)
Remark:
n “The dealer has obtained Registration from date____. Being first year of operations the books of accounts are prepared from ____ to 31st March 2009. Figures of URD period from___ to _____ period are disclosed in this report. This disclosure is in line with clause no. 5 of Trade Circular No. 26T of 2006 dated 18.9.2006.”
ISSUE 5:
(Turnover of URD Period included Audit Report and dealer has applied for administrative relief)
Remark:
n “The dealer has obtained Registration from date____. Being first year of operations the books of accounts are prepared from ____ to 31st March 2009. Figures of URD period from___ to _____ period are disclosed in this report. This disclosure is in line with clause no. 5 of Trade Circular No. 26T of 2006 dated 18.9.2006. Further dealer has applied for administrative relief on Dt._____ and received the permission for grant on Dt__________. The Setoff as per rule 55 (1) has been availed by the dealer for the URD period.”
ISSUE 6:
(Purchases debited to P&L A/c.)
Remark:
n “The dealer has effected purchases of Misc. and administrative expenses which are debited to profit and loss account of Rs.______on which no setoff has been claimed. Such purchases are not reported in Annexure E and J-2 as the case may be. Refer Circular No.26T of 2006 point no. 7”.
ISSUE 7:
(Misc. Purchases not included in Turnover of Purchase)
Remark:
n “The dealer has not included purchases for administrative use in the returns filed. However, details in respect of administrative Expenses involving purchases are not ascertainable as the dealer has not maintained records in respect of the same and the same have not been included in the turnover of purchases. Consequently, the dealer has not claimed set-off of the tax paid on such purchases in the returns filed.
n
n Refer: disclosure is based on Trade Circular No.26T dated 18.9.06 point no. 6b”
ISSUE 8:
(Capital Assets Purchases not included in Turnover of Purchases for e.g. Motor Car)
Remark:
n “The dealer has not included purchases for capital assets in the returns filed. The turnover of purchases of capital assets Rs.-_____ has not been included. Consequently, the dealer has also not claimed set-off as per rule 54(a) i.e. Motor Car of the tax paid on such purchases in the returns filed.”
ISSUE 9:
Working capital employed.
Footnote:
n “Working capital figure is calculated from difference between current assets and current liabilities figures mentioned in audited balance sheet attached to this report. Refer Balance Sheet or Annexure A attached to Tax Audit Report”
ISSUE 10:
(Original returns are not available with the dealer)
Remarks:
u “Certified that I / We have verified correctness and completeness of the ______________ mentioned MVAT or CST tax returns from the copies of the returns, authenticated by the dealer, in absence of the returns in dealer’s possession and our report is based upon such verification.”
ISSUE 11:
(CST returns not filed, being no inter-State or export sales during the period.)
Remark:
n “During the period, the dealer has not effected any sales in the course of inter State trade or exports and as therefore not filed returns under the CST Act,1956 in accordance with the administrative concession granted vide Trade Circular No. 15 of 1981 dated 2.7.1981.Thus no details are reported in Schedule VI accordingly”
ISSUE 12:
(Petrol Pump Dealers in motor spirits have not paid VAT on sales thereof being exempted U/s 41(4).)
Remark:
n “The dealer is dealing in retail trade of petroleum products i.e., Petrol Pump dealer and has not paid tax on the sale price of motor spirits in the returns filed by him as per section 41(4). These sales are exempted sales in the hands of dealer. The same has been considered for Annexure F of ratio analysis
ISSUE 13:
(Medicine dealer, credit notes of MRP period received after 1st June 2007. Due Expiry credits, etc.)
Observations:
n “The dealer has received Credit notes of Expiry Goods, in which manufacture or wholesaler has separately shown Tax based on the MRP of Sale Price of Goods. The above credit notes are reduced from the turnover of purchases and accordingly adjustment has been made in Net Turnover of purchases ”
ISSUE 14:
(Advise to file revised returns)
Remark:
n “The dealer has been advised to file revised returns for the all Months/Quarters/Six monthly, ending upto March 2009. The dealer has filed the revised returns after 31st Dec 2009 and cognizance of the same has been taken in this Audit report which is based on the same. “
ISSUE 15:
(Adjustment of refund in prior period tax liability in the same financial year)
“The dealer has adjusted refund of the month Sept 08 of Rs_____ against tax liability of the month May 08 of Rs_____. The Interest of Rs_____ has also been adjusted against the refund for the late payment/ adjustment. This in line to Section 50.”
ISSUE 16:
(“C” FORMS NOT RECEIVED ON SALE TILL THE DATE OF AUDIT)
Note:
n “The dealer has not received C forms of amount Rs._____ till the date of signing of this report. Differential tax liability is in tune of Rs_____. Dealer is of view that there is no need to determine and pay differential tax liability on above sales, as per proviso to rule 12(7) of CST Act.”
ISSUE 17:
(Purchases in contravention of “C” Forms)
Remark:
n “The contravention of purchases against declarations in Form “C” has been determined only in respect of and to the extent of the purchases against which the dealer has issued declaration in Form “C” to the suppliers. Inter State purchases, where the dealer has not issued the declarations in Form “C” through undertaken to issue the same, have not been considered for the purpose of determining contravention of Section 8[3]”
ISSUE18:
(Credit notes for goods returns after 6 months were deducted from the turnover of sales)
Remark:
n “The dealer has reduced amounts of credit notes in respect of sales returns which are after 6 months of sale out of sales affected during the year under the MVAT Act, 2002 as well as under CST Act, 1956 from the gross turnover. The amounts of such credit notes are Rs._____/-under the MVAT Act and Rs.___/- under the CST Act. These amounts are not deductible from the turnover of sales. The liability for tax on such credit notes is Rs.____/- under the MVAT Act and Rs.___/- under the CST Act.”
ISSUE 19:
(Refund/set off carried forward by dealer to Next Financial year)
Remark:
n “The dealer has carried forward set off of Rs_____ which is reflected in March 08 returns and books of accounts in next financial year 2008-09. This is not in pursuance of rules 55(3) of MVAT Act, 2002 and Trade Circular No. 26T of 2006 dated 18-9-06 point no.24a.
ISSUE 20:
(Retailers Composition scheme & cash sales)
Remark:
n “The dealer has not issued any Bills, Cash Memo or Invoice for Cash Sales. Sales are booked from Cash book as a regular accounting practice. Being No records of sales invoices is available, we are unable to know whether the 9/10th sales are to persons other than dealer as per section 42(b) by the dealer. Subject this all other conditions are complied as per the explanation and information given by dealer and as per audit check carried out of the records maintained.”
ISSUE 21:
(Pro rata method for bifurcation of sales, were identification is impossible.)
Note:
n “The dealer is consistently following pro-rata method for bifurcation of sales on tax rate wise based on Purchases and tax rates of items purchased. The sales identification is impossible due to peculiar nature of retail business. Dealer has relied on Circular No. 53T of 2007. Thus our disclosure is based on above explanation give by dealer”
ISSUE 22:
(Dealer shifting to Normal Taxation from Composition Scheme.)
Note:
n “The dealer was under Composition Scheme from ____ to ____. Due to crossing of Turnover on ____ date, dealer has shifted to Normal Taxation. Dealer is under Normal Taxation from ____ to _____. Our disclosures under this report includes both periods and is based on books of accounts maintained by the dealer”
ISSUE 23:
(Invoices, Returns, etc, destroyed in Floods or impounded by other tax authorities)
Remarks: Source a Guide to MVAT Audit page 47 published by WIRC of ICAI.
Case—I: Where the accounts are reconstructed and corroborating evidence is fully available
The dealer has informed us that the books of account for the period ……… (Date) to ……….. (Date) were destroyed due to flooding of the office premises. The dealer has reconstructed
the accounts for the period ………….. (date) to ……………. (date) based on the corroborating documents available with him as well as those obtained from the concerned third parties. Our certificates in Para 2B are to be read subject to above.
Case—II: Where the accounts are reconstructed and corroborating evidence is available for some part of the period.
The dealer has informed us that the books of account for the period ……… (date) to ……….. (date) were destroyed due to flooding of the office premises. The dealer has reconstructed
the accounts for the period ………….. (date) to ……………. (date) based on the corroborating documents available with him as well as those obtained from the concerned third parties.
However, the dealer is unable to reconstruct the accounts for the balance period from ………. (date) to …………. (date) and/or is unable to provide the documents/ evidence corroborating the figures for the period. We have, therefore, been unable to carry out the procedures necessary for certifying the items listed below for the (balance) period from ……….. (date) to …………… (date). Our certificates in Para 2B are to be read subject to this.
Case—III: Where the dealer has not been able to reconstruct the accounts or is also not able to provide corroborating evidence for entire/ significant part of the period.
The dealer has informed that the books of account for the period ……… (date) to ………….. (date) were destroyed due to flooding of the office premises. The dealer has not been able to reconstruct the accounts and/or has not been able to provide corroborating documents for the accounts reconstructed by him/ them. In view of the above, I/we are not in position to certify the certificates in Para 2B.
ISSUE 24:
Rate of Tax & Computation of Tax (Correct rate of tax is 4 % instead of 0%)
Remark:
n “Considering the classification of goods sold and the rate of tax applicable, computation of sales tax payable as shown in the returns is not correct as the sales tax payable on sales of__[ description of the goods] has been computed at the rate of 0% under schedule Entry A__ instead of at 4% under schedule Entry C __ As a result, the computation of Sales tax payable in the returns has been understated by Rs. ……………../- on turnover of sales of Rs…………/-
Remark:
n “The dealer has classified ___ [description of the goods] sold during the year under entry A_ [schedule entry number] and not paid tax, at the rate of 0 % on sales of Rs.___/-. However, considering the classification of the goods sold, the same should be covered under entry __ of Schedule C___ of the MVAT Act, 2002. The differential liability for tax on sales of _____ [description of the goods] is Rs. __ which would be the liability payable by the dealer.”
ISSUE 25:
Annexure A & B:
(Filing of returns and payment of tax was after the due date and / or the due date was failing on holiday.)
Observations:
n “There was delay in filing the returns and payment of tax for the period _______. The return for the period _______ was filed on _____as _____ [Date] the last date for filling of the return, was a holiday. Accordingly, there is no delay in filing the return for the period __________”
ISSUE 26:
Rate of Tax & Computation of Tax, opinion defer of dealer but based on record, accepted by auditor)
Remark1:
n “The dealer has classified sales of __[description of the goods] under entry__[ Schedule entry number] following the decision of the ___ (Court) in the case of ____/- or following the clarification issued by the Commissioner of Sales Tax vide Trade Circular No.___ or DDQ No.___ ”
Remark 2: Refer page 138 of Guide to MVAT Audit published by WIRC of ICAI:
Certain disputes about the classification of the product ____________and rate of tax thereon have arisen in the years_________ for which assessment/appeals are pending. The figures of tax payable mentioned in the above statement may require modification when these disputes are resolved. Therefore, the amount of tax payable as stated in the above statement will have to be accordingly modified. If department’s view is accepted, then impact on tax liability of dealer would be of Rs.___________.”
ISSUE 27:
(Tax amount is not equal to the sales tax payable)
Remark:
n “The dealer has collected tax on Sales of ___ [Description of the goods] of Rs.____/- at 4% but computed and paid the tax at 12.5% in the returns. Similarly, in respect of Sales Rs.___/- on which tax was not charged and collected separately, the dealer has not claimed deduction under rule 57 [1]. Therefore, the tax amount is not equal to the sales tax payable.”
ISSUE 28:
(Registration Certificate not available under CST Act for verification)
Remark:
n “The certificate of registration under the CST Act not available with the dealer. I/We am/are unable to verify the goods purchased against form “C” with the class of goods mentioned therein and ascertain contravention, if any”
ISSUE 29:
(Class of goods is not listed in CST RC- Purchases against C Forms)
Remark:
n “In the certificate of registration under the CST Act, 1956, no classes of goods eligible for purchases against Form “C” have been mentioned. The list of goods for the purposes of section 8[3] of the CST Act was appended / mentioned in the application for registration under CST Act, though the same has not been included in the certificate of registration issued. In the light of the class of goods sought to be included in the CST RC at the time of registration, in my /our view there is no contravention of provisions of section 8[3][b] of the CST Act,”
ISSUE 30:
(Class of goods is not listed in CST RC-Purchases against C Forms-Application filed)
Remark:
n “In the certificate of registration under the CST Act, 1956, no classes of goods eligible for purchases against Form “C” have been mentioned. The list of goods for the purposes of section 8[3] of the CST Act was appended / mentioned in the application later on submitted to Registering Authority dated____ for inclusion of goods registration under CST Act, though the same has not been included in the certificate of registration issued. In the light of Trade Circular No, 26 T dated 18.9.06 Point No.18, for the class of goods sought to be included in the CST RC at the time of registration.”
ISSUE 31:
(Method for computation of ratio for reduction of set off on branch transfers is not reasonable. Refer rule 57(9) (b) (ii))
Remark:
n “The dealer computes the ratio for the purpose of reduction of the set-off on account of branch transfer of manufactured goods on the basis of sale price in respect of sales and at cost in respect of goods transferred to branches. This results in a higher ratio in favor of sale and lower reduction in the set-off. As against the ratio of ___: __Computed by the dealer, the ratio computed on the basis of quantities / sale price of the goods sold and transferred to branches is __:__The set-off is therefore required to be further reduced by Rs. ___/”
ISSUE 32:
(Contravention of condition of Composition Scheme)
Remark:
n “The dealer has imported ______________ [description of the goods] for the purpose of the business on __________ [Date], or Issue Tax Invoice, etc in contravention of the condition of the composition scheme notified by the State Government. The tax payable by the dealer as a result of this contravention after adjustment of set off is Rs.________/-”
Issue No. 33:
(Gross profit to Gross Sales: Method of Computation and Observations, if any.)
Annexure F, Sr.No.1:
“ The dealer has obtained the tax audit report under Income Tax Act, 1961 duly audited by an qualified chartered accountant for the year 2007-08, 2008-09, ratios are calculated there and cognizance of same taken and disclosure is made accordingly. The method followed is “Gross Profit divided by Gross sales” as mentioned in tax audit report”
Issue No. 34:
(Net profit before tax to Gross Sales: Method of Computation and Observations, if any.)
Annexure F, Sr.No.2:
“ The dealer has obtained the tax audit report under Income Tax Act, 1961 duly audited by an qualified chartered accountant for the year 2007-08, 2008-09, ratios are calculated there and cognizance of same taken and disclosure is made accordingly. The method followed is “Net Profit divided by Gross sales” as mentioned in tax audit report”, No adjustment for tax made if included in net profit as shown in profit and loss account, if any.”
Issue No. 35:
(Previous Year figures not available, being newly registered dealer)
All ratios:
Method of Computation and Observations, if any.)
Annexure F:
“The dealer has started business on date_____; hence books of accounts are maintained from that date to 31st march 2009, which is the first year of business. Hence the information of pervious year is not provided.”
Issue No. 36:
(Previous Year figures not audited)
All ratios:
Method of Computation and Observations, if any.)
Annexure F:
“The dealer books of accounts are not unaudited for the pervious year being turnover were below the specified limit under The income tax act or MVAT Act, Hence the figures mentioned in pervious year are unaudited and reliance has be place on returns filed by the dealer.”
Issue No. 37:
Annexure F:
Ratio of Net Local Sales in Maharashtra State of Total Sales (Rs) (excluding tax under VAT & CST Acts)
Works contract- composition scheme applied- Net local sales:
“The dealer is a works contactor, hence the contract value as per rule 58/ contract value as per composition scheme are considered as Net local sales”
Issue No. 38:
Annexure F:
Disclosure on Multi State Activity- Ratios:
“The dealer has maintained separate trial balance for the Maharashtra state and has reconciled it with Balance Sheet. The figures of Closing stock and WIP are obtained for the trail balance of Maharashtra State.”
_______________________________________________________________________________________________________
Issue No: 39
Reconciliation statement of Sales and purchases not provided by the dealer;
Remark:
“In Annexure K, the reconciliation statement of sales and purchases has been not provided being the same has not been provided by the dealer.”
Issue No: 40
Reconciliation statement of Sales provided bur purchases not provided by the dealer;
“In Annexure K, the Sales reconciliation statement has been given as provided by the dealer. The same is considered in this audit report and turnover and tax liability reported in 704 is duly reconciled with it. The dealer has not provided reconciliation of Purchases, as per information and explanation given by the dealer, the setoff ledgers are reconciled but Turnover of Purchases as per MVAT Act and Books are not reconciled. The Information in given to the extend possible”
Issue No; 41
Survey u/s 133 conducted on dealer, dealer has disclosed unrecorded Stock of Rs.____
“On _____ date survey u/s 133 was conducted by the Department of Income Tax on the dealer. The dealer has disclosed Unrecorded Stock of Rs_______. The Dealer has accounted Un-register dealer purchases in tune of Rs.______ accordingly.
Issue No; 42
Search or Inspection U/s 64 of the MVAT Act, 2002 has been conducted on the dealer.
“On___ date, as per powers of section 64, search or inspection of the premises of the dealer was conducted. The dealer has disclosed unrecorded sales of Rs________ or Unrecorded purchases of Rs.___________ and the same are accounted in the books of accounts of dealer subsequently. The dealer has filed the revised accordingly and paid the tax of Rs____.”
Issue No; 43
Option of Composition availed by the dealer for CST works contracts:
“The dealer has opted for composition for CST works contracts as per section 42. The dealer has also relied on the case of “Mahim Patram Private Limited” (6 VST 248) of Supreme Court.”
Issue No; 44
Goods return within 6 months from the date of sale as applicability of section 63 (5) and (6) to CST sales.
“The dealer has reduced the sale/ purchase price of goods in the period in which credit/ debit notes are accounted for goods returns within 6 months for the date of CST sale as per section 63(5) and (6) based on the circular No. 26T of 2006. As per SC case of BASF India Ltd. (117 STC 543) the effect of goods returned within 6 months is normally have to be given in the period in with the original sales was made.”
Issue: 45
Business commenced during the Year;
“The dealer has commenced business during the year on Date_______. Dealer has obtained Voluntary registration on Date____ or Applied for registration on ______ after crossing the Turnover of 5 lakhs. The dealer has been allotted registration i.e., _____. As per rule 18(1) of MVAT rules, 2005 the dealer has filed first return from 1st April to of the year to end of quarter in which he becomes liable i.e., from 1st April to _____. Thereafter dealer has filed quarterly returns upto 31st March 2009.”
Issue No; 46
Business closed during the year;
“The dealer has closed his business operation w.e.f ______. The application of closer has been duly filed in From 103 with dept of Sales tax on ________. As per rule 18 (2) of MVAT rules 2005, the dealer has filed his last return till the closure date_____ of the business. Setoff of Rs.____as per rule 53(5) has been disallowed on the closing stock of goods other than capital goods.”
Issue No; 47
Business transferred during the year, and dealer carried forward the business due to death, etc:
“The dealer has continued the business after death of Mr.____________ who was the proprietor of the business and father of the dealer on ________. The application for transfer of business has been duly filed in Form 103 on ________. As per section 44 and rule 55(7) the tax liability and setoff has been calculated by the dealer and accordingly filed the returns.”
Issue No; 48
Merger or De merger of Companies:
“ Pursuant to the scheme of arrangement for amalgamation of the company M/s _______w.e.f. 01.04.2008, as approved by the shareholders in the Extra Ordinary General meetings and subsequent sanction by the Hon'ble High Court of _______ vide order dated ________, and received by M/S _______on _____, _____ Co. is amalgamated with ____ Co. Thus, all the transactions of sales and purchases made by _______ Co. during the year 01.04.2008 to ______ (Date of merger) were treated as transaction of______ Co. and as such accounted for in the Financial books of ______ Co. However in terms of Section 47 of the Maharashtra Value Added Tax Act, 2002 the transaction of sales and purchases of _____ Co. are segregated from the Books of _______ Co. and reported in Form 704. Similarly transaction of local sales and purchases between erstwhile two companies’ viz. ____ and ____ are treated as transaction between two companies. However, transaction of inter–State sales and purchases between these Transfers for want of provision like Section 47 of MVAT Act and CST Act.”
Issue No; 49
Cognizance of Branch Audit report, if conducted by separate MVAT Auditor u/s 61:
“I/We have taken into consideration the audit report and/or the audited statements of accounts and the particulars in Form 704 received from the branch auditor __________ for __________ Branch, for the year 2008-2009 duly appointed by the dealer for auditing the accounts of the above mentioned branch not audited by me/us.”
Issue No; 50
Accounting Treatment and disclosure of VAT Setoff:
For Accounting purchases other than capital goods, the Dealer has followed Para 6 and 7 of AS-2 “ Valuation on Inventories” were “ Cost of Purchases” includes only those taxes, which are not subsequently recoverable by the enterprise form the taxing authorities.” Accordingly a separate ledger of Setoff receivable has been mentioned.
Issue: 51
Accounting Treatment and disclosure of Capital Goods and Setoff thereof:
The dealer has followed Para 9.1 of AS-10 “Accounting of Fixed Assets”, which provides that “The Cost of an item of fixed assets comprises its purchase price, including import duties and other non-refundable taxes or levies and directly attributable cost of bringing the assets to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price…”
Issue: 52
Accounting treatment and its disclosure of Composition Tax, Inclusive Tax on sales in works contract, or effect of rule 57, etc is to be given in books of accounts.
The dealer has not charged VAT separately but has made a composite charge, i.e., tax has not been shown separately in invoice. As per rule 57 dealer has calculated the tax and segregate the portion of sales which is attributable to tax and credited the same to “VAT Payable Account” at periodic intervals as per returns filed.
Issue No; 53
Instruction No. 12 to Audit Report;
Non availability of Trial Balance in case of dealer having Multi State Activity:
“The dealer is carrying on business in Multi States, i.e., in state other than Maharashtra. It’s HO/ Branch is at _____ in Maharashtra for which MVAT and CST registration is obtained by the dealer. As per information and explanation provided by the dealer, separate books of accounts are not maintained State Wise. Further dealer do not have an accounting system or software for preparing State wise trial balance. The dealer maintains accounts in SAP/ERP software on all India bases and have common data base. Separate Sales and purchase register is maintained by the dealer for the transactions of Maharashtra State, on the basis of which the dealer regularly files MVAT and CST returns. The Sales and Purchase reconciliation of Books of accounts and Form 704 is provided in Annexure “K”. Due to non availability of trial balance of Maharashtra State from dealer the same has not been attached which was required as per instruction no 12 to Audit report.”
Issue No; 54
Instruction No. 19 to Audit Report;
Where dealer is required to maintain the records about the sales, purchases, Imports and Exports under Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act in such cases the Auditor should invariably correlate the details of sales, purchases, Imports and Exports disclosed under the said Acts and disclosed under MVAT Act. Any material difference noticed should be reported at Para 5 of Part-1 accordingly. (Instruction 19)
“As per information and explanation provided by the dealer and on the basis of Statutory Audit Report under The Companies Act or Income Tax Act, provided by the dealer, the compliance of Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act would have been considered there in. In compliance to above instruction, we have relied on the audited financial statement of the dealer and the copies of returns filed by the dealer under respective acts. As per information and explanation provided by the dealer there are no such material differences to report in Form 704.”
ISSUE: 55
Non Filing of Form 405 or delay in filing;
“The dealer has not filed the annual return of TDS deduction as per rule 40 (d) within three months from the end of the financial year. The dealer has deducted and paid the TDS as per Annexure D”.
Issue No; 56
Delay in Filing of Form 405;
“The dealer has delayed in filing the annual return of TDS deduction as per rule 40 (d) within three months from the end of the financial year. The dealer has filed Annual 405 on ______.The dealer has deducted and paid the TDS as per Annexure D”.
Issue: 57
Compliance of CQB- Proportionate basis- retrospective amendment on 27-8-2009 w.e.f. 1-4-2005 in section 95 of MVAT Act, 2002:
“The dealer has recomputed the CQB on the basis of the retrospective amendment to section 95 on 27-08-2009 in which ratio of Production capacity or on the basis of ‘Additional Investment’. Due to which there is increase in the CQB by Rs__________ and the effect of the same in taken in the March 09 return by the dealer”.
Issue: 58
Non- Compliance of CQB- Proportionate basis- retrospective amendment on 27-8-2009 w.e.f. 1-4-2005 in section 95 of MVAT Act, 2002:
“The dealer has not recomputed the CQB on the basis of the retrospective amendment to section 95 on 27-08-2009 in which ratio of Production capacity or on the basis of ‘Additional Investment’. Due to which there is increase in the CQB by Rs__________ and the effect of the same is not taken in the March 09 return by the dealer. The CQB reported as per Form 704 is subject to increase by the same”
Issue: 59
Non Maintenance of Stock Register;
“The dealer has not maintained Stock register, as per information and explanation given by the dealer, due to her peculiar nature of retail business there are numerous items and maintenance of stock register on day to day basis not possible. The same has been reported in Tax Audit Report under Income Tax Act, 1961.”
Issue: 60
Verification of Bank Statements: Clause m certification:
“The Statutory Audit of Books of Accounts of Dealer has been conducted by an in depended auditor under the companies act or under Income tax Act. The dealer has provided the audited books of accounts to us. As per the information and explanation provided by the dealer, the statutory auditors have audited the books of accounts with the bank statements and drawn profit and loss account and balance sheet. The dealer has certified that the books of accounts drawn are in agreement to all bank statements. With reference to Para 1C in part 1 of 704, the limitation of audit, we have certified the same on the above basis and explanation provided by the dealer.”
Issue: 61
Interest under section 30(4):
“Interest under section 30(4) is applicable from 27-6-2009. The business audit of the dealer was conducted on Date__________. The dealer has filed revised returns for the period 1-4-2008 to 31-3-2009 on _____ date. Hence Additional Interest @ 25% of differential tax liability of Rs_________ has been calculated and paid by dealer on______ date.”
Issue: 62
Address of the Place of Business of the Dealer where books of account are kept: -
For example, in SAP system,
“The dealer has maintained books of account on integrated computerized system which is accessible from all places of business by the authorized persons to the extent of the authority given to them. Therefore, all places of business can be construed as maintaining books of account as required under this column.”
Issue: 63
Disclosure on the Method of Valuation of Branch Transfer:
“The dealer has followed consistently the valuation of branch transfer on the basis of value as per excise purpose or expected sales realization or MRP less certain percentage. The retention of setoff is calculated as per rule 53(3) and 53(9) (b) (II) by the dealer”
Issue: 64
Petrol Pump dealers and revised returns in Form 235
“The dealer has filed revised return in Form 235 as per amendment w.e.f 1-7-2009. Accordingly Schedule V and other details in Form 704 have been considered for disclosure of turnover of motor spirit exempt u/s 41.”
Issue; 65
Composition Scheme for retailer- Crossing of Turnover of Rs.50 lakhs during the year.
“The dealer has crossed the limit of Sales Turnover of Rs. 50 lakhs on _______ date. From 1-4-2008 to _____ date has computed tax liability under composition scheme and filed returns accordingly. From _______ to 31-3-2009 the dealer has calculated tax liability as per normal dealer and filed returns accordingly. Information in Schedule I and II has been given along with other information of Form 704 accordingly.”
Issue: 66
Composition scheme for Chemist and druggist- rate of tax @6% retrospective from 1-10-2008.
“The dealer is retailer for medicines and other general goods, the Turnover of C-29 and Schedule A is ¾ of the total turnover, and hence tax @ 6% has been paid by the dealer based on Notification No.VAT-1505/CR-55/Tax.1 Dt. 21-11-2008.”
Issue: 65
WCT-TDS deducted by the employer, but certificated not received by the Dealer. Section 31(4) credit not available of TDS.
“During the financial year WCT-TDS deducted by the M/s______________, who is employer of the dealer of Rs.________. Dealer has not received Certificate of TDS deducted during the year. Hence TDS has not been adjusted against the Tax liability by the dealer according the section 31(4). The details in Annexure C as not been provided being no certificate received by the dealer”
Issue: 66
Setoff-Sub Contractor under composition scheme, being principal contractor under composition scheme as per rule 53(4) (b):
“The dealer is a sub contractor in case of a contract entered with principal contractor M/s____________. The contract amount is Rs.____________. The set off on corresponding goods used in this works contract has been calculated as per rule 53(4) (b) and retention of 4% has been taken, being principal contractor is under composition scheme”
Issue: 67
Mandap keeper under composition Scheme- Form 233 instead of Form 232.
“Dealer is a Mandap Keeper under composition scheme as per section 42(4), filing returns in Form 233 as Form 232 does not contain the required details. Hence Schedule III has been reported in this Audit Report instead of Schedule II, which is applicable to dealer legally according to rule 17”.
Issue: 68:
Change of Mode of Incentive in the Financial Year by the Dealer under PSI.
“During the year dealer has obtained permission from DIC via letter Dt.________ and the same has been intimated to Sales tax dept on ____________. The suitable amendment has been made in EC of the dealer for the change. i.e., from Deferment to Exemption or Exemption to Deferment.”
Issue: 69
End of EC limit in between the financial year.
“ The EC limit of Rs_______ exhausted on Dt.________ due crossing of Amount of Incentives or Time limit as prescribed in the EC. The dealer has filed return upto Dt___ i.e, Quarter __ as a PSI unit and thereafter as a Normal Dealer upto 31st March 09. The Tax liability and setoff has been calculated accordingly by the dealer. Schedule I and IV has been reported accordingly in this Form 704”
Issue: 70
Adjustment to Opening Balance of CQB or Closing Balance of CQB due to P.Y. assessment order.
“Assessment order No.____ Dt_______for the F.Y. ____ has been received by the dealer on ________. Due to which CQB has been enhance or reduced by Rs____________. The effect of the order has been taken in Qtr__. The CQB Closing balance has been adjusted accordingly during the year by the dealer”
Issue 71:
Due date of return and extension of 10 days for the filing or e-return- Annexure A or B.
“The due date for filing e-return for the month ____ has been extended via Circular no___ dt____. The dealer has filed return on _______. In Annexure A or B the date as mentioned and extended has been mentioned”
Issue 72:
Method used for calculation of Setoff retention on goods used in manufacture of tax free goods – rule 53(2)(a)
“The dealer is unable to identify the goods used in manufacturing of tax free goods; hence the value of the inputs attributable to tax free output can be arrived at by proportionate method prescribed in rule 53(9)(b-i).
Issue 73:
Annexure J: TINWISE details of sales and purchases not available.
“The dealer has provided the information as Annexure J to the extend available and possible. The same has been reported on the basis of above. As per dealer’s accounting system the information is provided and there is no impact on tax liability”
Issue 74;
Instruction No. 19: Where dealer is required to maintain the records about the sales, purchases,
Imports and Exports under Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act in such cases the Auditor should invariably correlate the details of sales, purchases, Imports and Exports disclosed under the said Acts and disclosed under MVAT Act, 2002. Any material difference noticed should be reported at Para 5 of Part-1 accordingly.
“As per information and explanation provided by the dealer and on the basis of records provided, the dealer is a retailer, accordingly records as mention in Instruction 19, are not applicable”
Issue 75;
Instruction No. 19: Where dealer is required to maintain the records about the sales, purchases,
Imports and Exports under Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act in such cases the Auditor should invariably correlate the details of sales, purchases, Imports and Exports disclosed under the said Acts and disclosed under MVAT Act, 2002. Any material difference noticed should be reported at Para 5 of Part-1 accordingly.
“The dealer is a manufacturer and records related to Excise are been maintained by him. As per explanation provided by the dealer, there is no material difference in sales or purchases of Principal items as disclosed in returns of Excise and MVAT Act. During the year no Imports or exports made the dealer.”
PLEASE REMEMBER!
The vat auditor will have to make suitable observations, remarks, qualifications, etc. depending on the facts of the case and guidelines issued in this regards.
u Correctness and Completeness of returns.
Auditor has to certify whether returns are correct or complete in all aspect i.e., whether returns are per Maharashtra Value Added Tax Act, 2002 or The Central Sales Tax Act.
Auditor is certifying it, subject to his observations and comments about non-compliance, shortcomings, and deficiencies in the returns filed by the dealer as given in Para 3 and 5..
The Audit Report further requires under Para 2B, to certify and comment on:
u Sixteen Reporting Requirement:
These Sixteen reporting requirements are as follows:
2(B) Subject to *my/our remarks about non-compliance, shortcomings and deficiencies in the returns filed and tax liability computed and presented in respective schedules and Para-4 of this Part, I/We certify that,—
(a) I/We have obtained all the information and explanations, which to the best of *my/our knowledge and belief, were necessary for the purposes of the audit.
(b) *I/We have read and followed the instructions for preparation of this audit report. Considering the nature of business of the dealer and the Form in which the dealer is expected to file return(s), we give the information as required in Part-3 in Schedule I/II/III/IV/V/VI (score out whichever is not applicable) along with the applicable annexure(s).
(c) The books of account and other sales tax related records and registers maintained by the dealer along with sales and purchase invoices as also Cash Memos and other necessary documents are sufficient for computation the tax liability under the MVAT Act and the CST Act.
(d) The gross turnover of sales and purchases, determined by us, includes all the transactions of sales and purchases concluded during the period under audit.
(e) The adjustment to turnover of sales and or purchases is based on entries made in the books of account during the period under Audit and same are supported by necessary documents.
(f) The deductions claimed from the gross turnover of sales and other adjustments thereto including deduction on account of goods return, adjustments on account of discounts as also debit/credit notes issued or received on account of other reasons, are supported by necessary documents and are in conformity with the provisions of the relevant Act.
(g) Considering the schedule and entry wise classification of goods sold, classification of exempted sales, sales at reduced rates are correct. The tax leviable on sales is properly computed by applying applicable rate of tax and/or composition tax.
(h) Computation of set-off admissible in respect of purchases made during the period under Audit and adjustments thereto are correct. While ascertaining the correctness, *I/We have taken into account the factors such as goods returned, adjustments on account of discounts as also debit/credit notes issued or received on account of other reasons and these claims and adjustments are supported by necessary documents. The set-off is worked out only on the basis of tax invoices in respect of the purchases.
(i) Wherever the dealer has claimed sales against the declarations or certificates; except as given in Annexure-H and Annexure-I, all such declarations and certificates are produced before me. I/we have verified the same and they are in conformity of the provisions related thereto.
(j) Computation of Cumulative Quantum of Benefits (CQB), wherever applicable, is in conformity with the provisions of the Act in this regard.
(k) The records related to the receipts and dispatches of goods are correct and
Properly maintained.
(l) The tax invoices in respect of sales are in conformity with the provisions of law.
(m) The Bank statements have been examined by *I/we and they are fully
reflected in the books of account.
(n) *I/we certify that *I/we have visited the principal place of business or a place of business from where major business activity is conducted by the dealer. The dealer is conducting his business from the place/places of business declared by him as his principal place of business/and the additional place of business.
(o) Due professional care has been exercised while auditing the business and based on my observations of the business processes and practices, stock of inventory and books of account maintained by the dealer, I fairly conclude that,—
(i) dealer is dealing in the commodities mentioned in the Part-2 of this report;
(ii) Sales tax related records of the dealer reflect true and fair view of the volume and size of the business for period under audit.
(p) I have verified that the purchases effected by the dealer in respect SEZ Unit
of the dealer are used in the said Unit.
3. Out of the aforesaid certificates; the following certificates are negative for the
reasons given hereunder:-
While certifying the above, auditor will have to keep in mind that in MS Excel format of Form 704, there is limitation. An auditor can enter reasons for Negative Certifications. In Case of “No Negative Certificates” write “N.A”.
Thus while mentioning any disclosure against the above given Sixteen Certificates, auditor will have to put reasons for negative certificates only. If there in No Negative Certificate, than the standard format for Form 704, it self contains “N.A.”. So one will have to be very careful while finalizing this Para.
It will be important to note that, if any normal disclosure is to give against above certificates, they may be given in Para 5 only. Because any normal disclosure here will be treated as Negative Certificate.
There after Auditor is required to give Advice on Filing of revised returns and pay taxes.
This one of the most important requirement of Form 704, which makes this Audit Report an Assessment Order it self. Thus to mention the details in the given format shall be done with at most care and documentation. As any negative note here will be the final findings of Audit, which will affect the tax liability and quantification of that will be our prime responsibility, which in turn will require greater accountability on our part.
The filing of revised returns will be primarily based on above advice only. Thus it gains significant importance, after issue of Circulars for extension of date for filing of returns.
Topic No. 2:
Form 704-Audit Report or Certificate?
As per “Guidance Note on Audit Report and Certificate for Special Purpose” issued by ICAI:
Certificate means “A written confirmation of the accuracy of facts stated therein and does not involve any estimate or the opinion”.
Report means “A formal statement usually made after an enquiry, examination or reviews of specified matters under report and includes the reporting auditor’s opinion thereon.”
Form 704 requires Auditor to Advise on filing of returns and differential tax liability. This advice is nothing but Opinion. Though it is mention in Form 704 that it is a report, its disclosure requirements are features of certificate also. Thus it is a combination of both report and certificate.
“Means greater risk and disclosure requirement on shoulders of Auditor.”
Topic No.3:
What is mean by Qualification, Remark, Observation, Opinion or Disclosure?
Qualification:
As per Concise Oxford Dictionary (COD) “Qualified” has a double sense, and mean a condition or status and an acceptance are qualified-where it is conditional.
Any requirement or opinion of Form 704, answered in Negative, Adverse way or Disclaimer will take form of a Qualification.
An Auditor shall remember following points before Qualifying, that any qualification:
u - Should be Material and quantifiable.
u - Should be with reasons.
u - Should Start with words- “Subject to” or “Except that”
u - May be in Bold and Italic format.
u - Should be stated in Part I of Form 704 i.e., Audit Report.
u - Auditor should follow the “statement on qualification in auditors report” issued by ICAI.
u - Should refer AAS 28: Auditors Report on Financial Statements.
What will be an Unqualified MVAT Audit report?
An Unqualified MVAT Audit Report may be “A report where the returns are correct and complete and there is no material defects in the turnover and liability reported and determined as per books of accounts maintained by the dealer.”
An auditor should also consider following aspects before Qualification of Form 704:
u Which item require qualification (i.e., Part I- Certification or Opinion) or (Part II- Statements or Observations).
u Whether the auditor is in disagreement with something done or is unable to form an opinion. (i.e., Ratio adopted for Branch Transfer, Compliance of conditions of Composition Scheme, etc).
u Whether the matter affects the returns filed and liability or affects only a particular item. (i.e., Incorrect Form of return, periodicity of return, Set off on Misc. purchases, etc).
u Whether the matter involves any contravention of provisions. (i.e., Incorrect rate of tax, Contravention of “C” Forms, etc)
As per COD Observation means “ the action or process of closely observing or monitoring or a comment based on something one has seen, heard, or noticed.
As per COD Remarks means “a remark expressing an opinion or reaction”
Topic no. 4:
Practical issues and its suggested disclosures.
SUGGESTED DISCLOUSERS IN AUDIT REPORT
ISSUE 1:
(Returns filed for incorrect period)
Remark:
“Certified that I / We have verified correctness and completeness of the below mentioned sales tax returns. Dealer has relied on Trade Circular No. 26T of 2006 date 18-9-2006 point no 6c, and has not filed revised returns in place of incorrect period returns..”
ISSUE 2:
(Returns filed for incorrect period)
Remark:
“Certified that I / We have verified correctness and completeness of the below mentioned sales tax returns. Dealer has relied on Trade Circular No. 26T of 2006 date 18-9-2006 point no 6c, and has not filed revised returns in place of incorrect period returns.
Remark:
“The dealer has filed quarterly return for the period _____ instead monthly return of period _,__,_. Which not in pursuance of Rule No.17 of MVAT Rules, 2002. Dealer has relied on Trade Circular No.26T of 2006, Dated 18-9-2006, Point No.6c, and has not filed revised return.”
ISSUE 3:
(Some returns filed in wrong forms)
Remarks:
n “Certified that I / We have verified correctness and completeness of the below mentioned sales tax returns. Dealer has relied on Trade Circular No. 26T of 2006 date 18-9-2006 point no 6d, and has not filed revised returns.”
Remark:
n “The dealer has filed return for the period _____ in Form No.___ instead of Form ____. Which is not in pursuance of Rule No.17 of MVAT Rules, 2002. Dealer has relied on Trade Circular No.26T of 2006, Dated 18-9-2006, Point No.6d, and has not filed revised return.
ISSUE 4:
(Additional Place of business not included in R.C. but turnover considered in Return)
Remark:
n “The additional place mentioned in Sr. No. 1 or _______________ is not included in Registration Certificate under MVAT Act, 2002 obtained by the dealer, but the turnover of sales and purchases and taxes there on are included in the Returns filed for the period under audit. This disclosure is in line with clause no. 4 of Trade Circular No. 26T of 2006 dated 18.9.2006.”
ISSUE 5:
(Turnover of URD Period included Audit Report)
Remark:
n “The dealer has obtained Registration from date____. Being first year of operations the books of accounts are prepared from ____ to 31st March 2009. Figures of URD period from___ to _____ period are disclosed in this report. This disclosure is in line with clause no. 5 of Trade Circular No. 26T of 2006 dated 18.9.2006.”
ISSUE 5:
(Turnover of URD Period included Audit Report and dealer has applied for administrative relief)
Remark:
n “The dealer has obtained Registration from date____. Being first year of operations the books of accounts are prepared from ____ to 31st March 2009. Figures of URD period from___ to _____ period are disclosed in this report. This disclosure is in line with clause no. 5 of Trade Circular No. 26T of 2006 dated 18.9.2006. Further dealer has applied for administrative relief on Dt._____ and received the permission for grant on Dt__________. The Setoff as per rule 55 (1) has been availed by the dealer for the URD period.”
ISSUE 6:
(Purchases debited to P&L A/c.)
Remark:
n “The dealer has effected purchases of Misc. and administrative expenses which are debited to profit and loss account of Rs.______on which no setoff has been claimed. Such purchases are not reported in Annexure E and J-2 as the case may be. Refer Circular No.26T of 2006 point no. 7”.
ISSUE 7:
(Misc. Purchases not included in Turnover of Purchase)
Remark:
n “The dealer has not included purchases for administrative use in the returns filed. However, details in respect of administrative Expenses involving purchases are not ascertainable as the dealer has not maintained records in respect of the same and the same have not been included in the turnover of purchases. Consequently, the dealer has not claimed set-off of the tax paid on such purchases in the returns filed.
n
n Refer: disclosure is based on Trade Circular No.26T dated 18.9.06 point no. 6b”
ISSUE 8:
(Capital Assets Purchases not included in Turnover of Purchases for e.g. Motor Car)
Remark:
n “The dealer has not included purchases for capital assets in the returns filed. The turnover of purchases of capital assets Rs.-_____ has not been included. Consequently, the dealer has also not claimed set-off as per rule 54(a) i.e. Motor Car of the tax paid on such purchases in the returns filed.”
ISSUE 9:
Working capital employed.
Footnote:
n “Working capital figure is calculated from difference between current assets and current liabilities figures mentioned in audited balance sheet attached to this report. Refer Balance Sheet or Annexure A attached to Tax Audit Report”
ISSUE 10:
(Original returns are not available with the dealer)
Remarks:
u “Certified that I / We have verified correctness and completeness of the ______________ mentioned MVAT or CST tax returns from the copies of the returns, authenticated by the dealer, in absence of the returns in dealer’s possession and our report is based upon such verification.”
ISSUE 11:
(CST returns not filed, being no inter-State or export sales during the period.)
Remark:
n “During the period, the dealer has not effected any sales in the course of inter State trade or exports and as therefore not filed returns under the CST Act,1956 in accordance with the administrative concession granted vide Trade Circular No. 15 of 1981 dated 2.7.1981.Thus no details are reported in Schedule VI accordingly”
ISSUE 12:
(Petrol Pump Dealers in motor spirits have not paid VAT on sales thereof being exempted U/s 41(4).)
Remark:
n “The dealer is dealing in retail trade of petroleum products i.e., Petrol Pump dealer and has not paid tax on the sale price of motor spirits in the returns filed by him as per section 41(4). These sales are exempted sales in the hands of dealer. The same has been considered for Annexure F of ratio analysis
ISSUE 13:
(Medicine dealer, credit notes of MRP period received after 1st June 2007. Due Expiry credits, etc.)
Observations:
n “The dealer has received Credit notes of Expiry Goods, in which manufacture or wholesaler has separately shown Tax based on the MRP of Sale Price of Goods. The above credit notes are reduced from the turnover of purchases and accordingly adjustment has been made in Net Turnover of purchases ”
ISSUE 14:
(Advise to file revised returns)
Remark:
n “The dealer has been advised to file revised returns for the all Months/Quarters/Six monthly, ending upto March 2009. The dealer has filed the revised returns after 31st Dec 2009 and cognizance of the same has been taken in this Audit report which is based on the same. “
ISSUE 15:
(Adjustment of refund in prior period tax liability in the same financial year)
“The dealer has adjusted refund of the month Sept 08 of Rs_____ against tax liability of the month May 08 of Rs_____. The Interest of Rs_____ has also been adjusted against the refund for the late payment/ adjustment. This in line to Section 50.”
ISSUE 16:
(“C” FORMS NOT RECEIVED ON SALE TILL THE DATE OF AUDIT)
Note:
n “The dealer has not received C forms of amount Rs._____ till the date of signing of this report. Differential tax liability is in tune of Rs_____. Dealer is of view that there is no need to determine and pay differential tax liability on above sales, as per proviso to rule 12(7) of CST Act.”
ISSUE 17:
(Purchases in contravention of “C” Forms)
Remark:
n “The contravention of purchases against declarations in Form “C” has been determined only in respect of and to the extent of the purchases against which the dealer has issued declaration in Form “C” to the suppliers. Inter State purchases, where the dealer has not issued the declarations in Form “C” through undertaken to issue the same, have not been considered for the purpose of determining contravention of Section 8[3]”
ISSUE18:
(Credit notes for goods returns after 6 months were deducted from the turnover of sales)
Remark:
n “The dealer has reduced amounts of credit notes in respect of sales returns which are after 6 months of sale out of sales affected during the year under the MVAT Act, 2002 as well as under CST Act, 1956 from the gross turnover. The amounts of such credit notes are Rs._____/-under the MVAT Act and Rs.___/- under the CST Act. These amounts are not deductible from the turnover of sales. The liability for tax on such credit notes is Rs.____/- under the MVAT Act and Rs.___/- under the CST Act.”
ISSUE 19:
(Refund/set off carried forward by dealer to Next Financial year)
Remark:
n “The dealer has carried forward set off of Rs_____ which is reflected in March 08 returns and books of accounts in next financial year 2008-09. This is not in pursuance of rules 55(3) of MVAT Act, 2002 and Trade Circular No. 26T of 2006 dated 18-9-06 point no.24a.
ISSUE 20:
(Retailers Composition scheme & cash sales)
Remark:
n “The dealer has not issued any Bills, Cash Memo or Invoice for Cash Sales. Sales are booked from Cash book as a regular accounting practice. Being No records of sales invoices is available, we are unable to know whether the 9/10th sales are to persons other than dealer as per section 42(b) by the dealer. Subject this all other conditions are complied as per the explanation and information given by dealer and as per audit check carried out of the records maintained.”
ISSUE 21:
(Pro rata method for bifurcation of sales, were identification is impossible.)
Note:
n “The dealer is consistently following pro-rata method for bifurcation of sales on tax rate wise based on Purchases and tax rates of items purchased. The sales identification is impossible due to peculiar nature of retail business. Dealer has relied on Circular No. 53T of 2007. Thus our disclosure is based on above explanation give by dealer”
ISSUE 22:
(Dealer shifting to Normal Taxation from Composition Scheme.)
Note:
n “The dealer was under Composition Scheme from ____ to ____. Due to crossing of Turnover on ____ date, dealer has shifted to Normal Taxation. Dealer is under Normal Taxation from ____ to _____. Our disclosures under this report includes both periods and is based on books of accounts maintained by the dealer”
ISSUE 23:
(Invoices, Returns, etc, destroyed in Floods or impounded by other tax authorities)
Remarks: Source a Guide to MVAT Audit page 47 published by WIRC of ICAI.
Case—I: Where the accounts are reconstructed and corroborating evidence is fully available
The dealer has informed us that the books of account for the period ……… (Date) to ……….. (Date) were destroyed due to flooding of the office premises. The dealer has reconstructed
the accounts for the period ………….. (date) to ……………. (date) based on the corroborating documents available with him as well as those obtained from the concerned third parties. Our certificates in Para 2B are to be read subject to above.
Case—II: Where the accounts are reconstructed and corroborating evidence is available for some part of the period.
The dealer has informed us that the books of account for the period ……… (date) to ……….. (date) were destroyed due to flooding of the office premises. The dealer has reconstructed
the accounts for the period ………….. (date) to ……………. (date) based on the corroborating documents available with him as well as those obtained from the concerned third parties.
However, the dealer is unable to reconstruct the accounts for the balance period from ………. (date) to …………. (date) and/or is unable to provide the documents/ evidence corroborating the figures for the period. We have, therefore, been unable to carry out the procedures necessary for certifying the items listed below for the (balance) period from ……….. (date) to …………… (date). Our certificates in Para 2B are to be read subject to this.
Case—III: Where the dealer has not been able to reconstruct the accounts or is also not able to provide corroborating evidence for entire/ significant part of the period.
The dealer has informed that the books of account for the period ……… (date) to ………….. (date) were destroyed due to flooding of the office premises. The dealer has not been able to reconstruct the accounts and/or has not been able to provide corroborating documents for the accounts reconstructed by him/ them. In view of the above, I/we are not in position to certify the certificates in Para 2B.
ISSUE 24:
Rate of Tax & Computation of Tax (Correct rate of tax is 4 % instead of 0%)
Remark:
n “Considering the classification of goods sold and the rate of tax applicable, computation of sales tax payable as shown in the returns is not correct as the sales tax payable on sales of__[ description of the goods] has been computed at the rate of 0% under schedule Entry A__ instead of at 4% under schedule Entry C __ As a result, the computation of Sales tax payable in the returns has been understated by Rs. ……………../- on turnover of sales of Rs…………/-
Remark:
n “The dealer has classified ___ [description of the goods] sold during the year under entry A_ [schedule entry number] and not paid tax, at the rate of 0 % on sales of Rs.___/-. However, considering the classification of the goods sold, the same should be covered under entry __ of Schedule C___ of the MVAT Act, 2002. The differential liability for tax on sales of _____ [description of the goods] is Rs. __ which would be the liability payable by the dealer.”
ISSUE 25:
Annexure A & B:
(Filing of returns and payment of tax was after the due date and / or the due date was failing on holiday.)
Observations:
n “There was delay in filing the returns and payment of tax for the period _______. The return for the period _______ was filed on _____as _____ [Date] the last date for filling of the return, was a holiday. Accordingly, there is no delay in filing the return for the period __________”
ISSUE 26:
Rate of Tax & Computation of Tax, opinion defer of dealer but based on record, accepted by auditor)
Remark1:
n “The dealer has classified sales of __[description of the goods] under entry__[ Schedule entry number] following the decision of the ___ (Court) in the case of ____/- or following the clarification issued by the Commissioner of Sales Tax vide Trade Circular No.___ or DDQ No.___ ”
Remark 2: Refer page 138 of Guide to MVAT Audit published by WIRC of ICAI:
Certain disputes about the classification of the product ____________and rate of tax thereon have arisen in the years_________ for which assessment/appeals are pending. The figures of tax payable mentioned in the above statement may require modification when these disputes are resolved. Therefore, the amount of tax payable as stated in the above statement will have to be accordingly modified. If department’s view is accepted, then impact on tax liability of dealer would be of Rs.___________.”
ISSUE 27:
(Tax amount is not equal to the sales tax payable)
Remark:
n “The dealer has collected tax on Sales of ___ [Description of the goods] of Rs.____/- at 4% but computed and paid the tax at 12.5% in the returns. Similarly, in respect of Sales Rs.___/- on which tax was not charged and collected separately, the dealer has not claimed deduction under rule 57 [1]. Therefore, the tax amount is not equal to the sales tax payable.”
ISSUE 28:
(Registration Certificate not available under CST Act for verification)
Remark:
n “The certificate of registration under the CST Act not available with the dealer. I/We am/are unable to verify the goods purchased against form “C” with the class of goods mentioned therein and ascertain contravention, if any”
ISSUE 29:
(Class of goods is not listed in CST RC- Purchases against C Forms)
Remark:
n “In the certificate of registration under the CST Act, 1956, no classes of goods eligible for purchases against Form “C” have been mentioned. The list of goods for the purposes of section 8[3] of the CST Act was appended / mentioned in the application for registration under CST Act, though the same has not been included in the certificate of registration issued. In the light of the class of goods sought to be included in the CST RC at the time of registration, in my /our view there is no contravention of provisions of section 8[3][b] of the CST Act,”
ISSUE 30:
(Class of goods is not listed in CST RC-Purchases against C Forms-Application filed)
Remark:
n “In the certificate of registration under the CST Act, 1956, no classes of goods eligible for purchases against Form “C” have been mentioned. The list of goods for the purposes of section 8[3] of the CST Act was appended / mentioned in the application later on submitted to Registering Authority dated____ for inclusion of goods registration under CST Act, though the same has not been included in the certificate of registration issued. In the light of Trade Circular No, 26 T dated 18.9.06 Point No.18, for the class of goods sought to be included in the CST RC at the time of registration.”
ISSUE 31:
(Method for computation of ratio for reduction of set off on branch transfers is not reasonable. Refer rule 57(9) (b) (ii))
Remark:
n “The dealer computes the ratio for the purpose of reduction of the set-off on account of branch transfer of manufactured goods on the basis of sale price in respect of sales and at cost in respect of goods transferred to branches. This results in a higher ratio in favor of sale and lower reduction in the set-off. As against the ratio of ___: __Computed by the dealer, the ratio computed on the basis of quantities / sale price of the goods sold and transferred to branches is __:__The set-off is therefore required to be further reduced by Rs. ___/”
ISSUE 32:
(Contravention of condition of Composition Scheme)
Remark:
n “The dealer has imported ______________ [description of the goods] for the purpose of the business on __________ [Date], or Issue Tax Invoice, etc in contravention of the condition of the composition scheme notified by the State Government. The tax payable by the dealer as a result of this contravention after adjustment of set off is Rs.________/-”
Issue No. 33:
(Gross profit to Gross Sales: Method of Computation and Observations, if any.)
Annexure F, Sr.No.1:
“ The dealer has obtained the tax audit report under Income Tax Act, 1961 duly audited by an qualified chartered accountant for the year 2007-08, 2008-09, ratios are calculated there and cognizance of same taken and disclosure is made accordingly. The method followed is “Gross Profit divided by Gross sales” as mentioned in tax audit report”
Issue No. 34:
(Net profit before tax to Gross Sales: Method of Computation and Observations, if any.)
Annexure F, Sr.No.2:
“ The dealer has obtained the tax audit report under Income Tax Act, 1961 duly audited by an qualified chartered accountant for the year 2007-08, 2008-09, ratios are calculated there and cognizance of same taken and disclosure is made accordingly. The method followed is “Net Profit divided by Gross sales” as mentioned in tax audit report”, No adjustment for tax made if included in net profit as shown in profit and loss account, if any.”
Issue No. 35:
(Previous Year figures not available, being newly registered dealer)
All ratios:
Method of Computation and Observations, if any.)
Annexure F:
“The dealer has started business on date_____; hence books of accounts are maintained from that date to 31st march 2009, which is the first year of business. Hence the information of pervious year is not provided.”
Issue No. 36:
(Previous Year figures not audited)
All ratios:
Method of Computation and Observations, if any.)
Annexure F:
“The dealer books of accounts are not unaudited for the pervious year being turnover were below the specified limit under The income tax act or MVAT Act, Hence the figures mentioned in pervious year are unaudited and reliance has be place on returns filed by the dealer.”
Issue No. 37:
Annexure F:
Ratio of Net Local Sales in Maharashtra State of Total Sales (Rs) (excluding tax under VAT & CST Acts)
Works contract- composition scheme applied- Net local sales:
“The dealer is a works contactor, hence the contract value as per rule 58/ contract value as per composition scheme are considered as Net local sales”
Issue No. 38:
Annexure F:
Disclosure on Multi State Activity- Ratios:
“The dealer has maintained separate trial balance for the Maharashtra state and has reconciled it with Balance Sheet. The figures of Closing stock and WIP are obtained for the trail balance of Maharashtra State.”
_______________________________________________________________________________________________________
Issue No: 39
Reconciliation statement of Sales and purchases not provided by the dealer;
Remark:
“In Annexure K, the reconciliation statement of sales and purchases has been not provided being the same has not been provided by the dealer.”
Issue No: 40
Reconciliation statement of Sales provided bur purchases not provided by the dealer;
“In Annexure K, the Sales reconciliation statement has been given as provided by the dealer. The same is considered in this audit report and turnover and tax liability reported in 704 is duly reconciled with it. The dealer has not provided reconciliation of Purchases, as per information and explanation given by the dealer, the setoff ledgers are reconciled but Turnover of Purchases as per MVAT Act and Books are not reconciled. The Information in given to the extend possible”
Issue No; 41
Survey u/s 133 conducted on dealer, dealer has disclosed unrecorded Stock of Rs.____
“On _____ date survey u/s 133 was conducted by the Department of Income Tax on the dealer. The dealer has disclosed Unrecorded Stock of Rs_______. The Dealer has accounted Un-register dealer purchases in tune of Rs.______ accordingly.
Issue No; 42
Search or Inspection U/s 64 of the MVAT Act, 2002 has been conducted on the dealer.
“On___ date, as per powers of section 64, search or inspection of the premises of the dealer was conducted. The dealer has disclosed unrecorded sales of Rs________ or Unrecorded purchases of Rs.___________ and the same are accounted in the books of accounts of dealer subsequently. The dealer has filed the revised accordingly and paid the tax of Rs____.”
Issue No; 43
Option of Composition availed by the dealer for CST works contracts:
“The dealer has opted for composition for CST works contracts as per section 42. The dealer has also relied on the case of “Mahim Patram Private Limited” (6 VST 248) of Supreme Court.”
Issue No; 44
Goods return within 6 months from the date of sale as applicability of section 63 (5) and (6) to CST sales.
“The dealer has reduced the sale/ purchase price of goods in the period in which credit/ debit notes are accounted for goods returns within 6 months for the date of CST sale as per section 63(5) and (6) based on the circular No. 26T of 2006. As per SC case of BASF India Ltd. (117 STC 543) the effect of goods returned within 6 months is normally have to be given in the period in with the original sales was made.”
Issue: 45
Business commenced during the Year;
“The dealer has commenced business during the year on Date_______. Dealer has obtained Voluntary registration on Date____ or Applied for registration on ______ after crossing the Turnover of 5 lakhs. The dealer has been allotted registration i.e., _____. As per rule 18(1) of MVAT rules, 2005 the dealer has filed first return from 1st April to of the year to end of quarter in which he becomes liable i.e., from 1st April to _____. Thereafter dealer has filed quarterly returns upto 31st March 2009.”
Issue No; 46
Business closed during the year;
“The dealer has closed his business operation w.e.f ______. The application of closer has been duly filed in From 103 with dept of Sales tax on ________. As per rule 18 (2) of MVAT rules 2005, the dealer has filed his last return till the closure date_____ of the business. Setoff of Rs.____as per rule 53(5) has been disallowed on the closing stock of goods other than capital goods.”
Issue No; 47
Business transferred during the year, and dealer carried forward the business due to death, etc:
“The dealer has continued the business after death of Mr.____________ who was the proprietor of the business and father of the dealer on ________. The application for transfer of business has been duly filed in Form 103 on ________. As per section 44 and rule 55(7) the tax liability and setoff has been calculated by the dealer and accordingly filed the returns.”
Issue No; 48
Merger or De merger of Companies:
“ Pursuant to the scheme of arrangement for amalgamation of the company M/s _______w.e.f. 01.04.2008, as approved by the shareholders in the Extra Ordinary General meetings and subsequent sanction by the Hon'ble High Court of _______ vide order dated ________, and received by M/S _______on _____, _____ Co. is amalgamated with ____ Co. Thus, all the transactions of sales and purchases made by _______ Co. during the year 01.04.2008 to ______ (Date of merger) were treated as transaction of______ Co. and as such accounted for in the Financial books of ______ Co. However in terms of Section 47 of the Maharashtra Value Added Tax Act, 2002 the transaction of sales and purchases of _____ Co. are segregated from the Books of _______ Co. and reported in Form 704. Similarly transaction of local sales and purchases between erstwhile two companies’ viz. ____ and ____ are treated as transaction between two companies. However, transaction of inter–State sales and purchases between these Transfers for want of provision like Section 47 of MVAT Act and CST Act.”
Issue No; 49
Cognizance of Branch Audit report, if conducted by separate MVAT Auditor u/s 61:
“I/We have taken into consideration the audit report and/or the audited statements of accounts and the particulars in Form 704 received from the branch auditor __________ for __________ Branch, for the year 2008-2009 duly appointed by the dealer for auditing the accounts of the above mentioned branch not audited by me/us.”
Issue No; 50
Accounting Treatment and disclosure of VAT Setoff:
For Accounting purchases other than capital goods, the Dealer has followed Para 6 and 7 of AS-2 “ Valuation on Inventories” were “ Cost of Purchases” includes only those taxes, which are not subsequently recoverable by the enterprise form the taxing authorities.” Accordingly a separate ledger of Setoff receivable has been mentioned.
Issue: 51
Accounting Treatment and disclosure of Capital Goods and Setoff thereof:
The dealer has followed Para 9.1 of AS-10 “Accounting of Fixed Assets”, which provides that “The Cost of an item of fixed assets comprises its purchase price, including import duties and other non-refundable taxes or levies and directly attributable cost of bringing the assets to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price…”
Issue: 52
Accounting treatment and its disclosure of Composition Tax, Inclusive Tax on sales in works contract, or effect of rule 57, etc is to be given in books of accounts.
The dealer has not charged VAT separately but has made a composite charge, i.e., tax has not been shown separately in invoice. As per rule 57 dealer has calculated the tax and segregate the portion of sales which is attributable to tax and credited the same to “VAT Payable Account” at periodic intervals as per returns filed.
Issue No; 53
Instruction No. 12 to Audit Report;
Non availability of Trial Balance in case of dealer having Multi State Activity:
“The dealer is carrying on business in Multi States, i.e., in state other than Maharashtra. It’s HO/ Branch is at _____ in Maharashtra for which MVAT and CST registration is obtained by the dealer. As per information and explanation provided by the dealer, separate books of accounts are not maintained State Wise. Further dealer do not have an accounting system or software for preparing State wise trial balance. The dealer maintains accounts in SAP/ERP software on all India bases and have common data base. Separate Sales and purchase register is maintained by the dealer for the transactions of Maharashtra State, on the basis of which the dealer regularly files MVAT and CST returns. The Sales and Purchase reconciliation of Books of accounts and Form 704 is provided in Annexure “K”. Due to non availability of trial balance of Maharashtra State from dealer the same has not been attached which was required as per instruction no 12 to Audit report.”
Issue No; 54
Instruction No. 19 to Audit Report;
Where dealer is required to maintain the records about the sales, purchases, Imports and Exports under Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act in such cases the Auditor should invariably correlate the details of sales, purchases, Imports and Exports disclosed under the said Acts and disclosed under MVAT Act. Any material difference noticed should be reported at Para 5 of Part-1 accordingly. (Instruction 19)
“As per information and explanation provided by the dealer and on the basis of Statutory Audit Report under The Companies Act or Income Tax Act, provided by the dealer, the compliance of Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act would have been considered there in. In compliance to above instruction, we have relied on the audited financial statement of the dealer and the copies of returns filed by the dealer under respective acts. As per information and explanation provided by the dealer there are no such material differences to report in Form 704.”
ISSUE: 55
Non Filing of Form 405 or delay in filing;
“The dealer has not filed the annual return of TDS deduction as per rule 40 (d) within three months from the end of the financial year. The dealer has deducted and paid the TDS as per Annexure D”.
Issue No; 56
Delay in Filing of Form 405;
“The dealer has delayed in filing the annual return of TDS deduction as per rule 40 (d) within three months from the end of the financial year. The dealer has filed Annual 405 on ______.The dealer has deducted and paid the TDS as per Annexure D”.
Issue: 57
Compliance of CQB- Proportionate basis- retrospective amendment on 27-8-2009 w.e.f. 1-4-2005 in section 95 of MVAT Act, 2002:
“The dealer has recomputed the CQB on the basis of the retrospective amendment to section 95 on 27-08-2009 in which ratio of Production capacity or on the basis of ‘Additional Investment’. Due to which there is increase in the CQB by Rs__________ and the effect of the same in taken in the March 09 return by the dealer”.
Issue: 58
Non- Compliance of CQB- Proportionate basis- retrospective amendment on 27-8-2009 w.e.f. 1-4-2005 in section 95 of MVAT Act, 2002:
“The dealer has not recomputed the CQB on the basis of the retrospective amendment to section 95 on 27-08-2009 in which ratio of Production capacity or on the basis of ‘Additional Investment’. Due to which there is increase in the CQB by Rs__________ and the effect of the same is not taken in the March 09 return by the dealer. The CQB reported as per Form 704 is subject to increase by the same”
Issue: 59
Non Maintenance of Stock Register;
“The dealer has not maintained Stock register, as per information and explanation given by the dealer, due to her peculiar nature of retail business there are numerous items and maintenance of stock register on day to day basis not possible. The same has been reported in Tax Audit Report under Income Tax Act, 1961.”
Issue: 60
Verification of Bank Statements: Clause m certification:
“The Statutory Audit of Books of Accounts of Dealer has been conducted by an in depended auditor under the companies act or under Income tax Act. The dealer has provided the audited books of accounts to us. As per the information and explanation provided by the dealer, the statutory auditors have audited the books of accounts with the bank statements and drawn profit and loss account and balance sheet. The dealer has certified that the books of accounts drawn are in agreement to all bank statements. With reference to Para 1C in part 1 of 704, the limitation of audit, we have certified the same on the above basis and explanation provided by the dealer.”
Issue: 61
Interest under section 30(4):
“Interest under section 30(4) is applicable from 27-6-2009. The business audit of the dealer was conducted on Date__________. The dealer has filed revised returns for the period 1-4-2008 to 31-3-2009 on _____ date. Hence Additional Interest @ 25% of differential tax liability of Rs_________ has been calculated and paid by dealer on______ date.”
Issue: 62
Address of the Place of Business of the Dealer where books of account are kept: -
For example, in SAP system,
“The dealer has maintained books of account on integrated computerized system which is accessible from all places of business by the authorized persons to the extent of the authority given to them. Therefore, all places of business can be construed as maintaining books of account as required under this column.”
Issue: 63
Disclosure on the Method of Valuation of Branch Transfer:
“The dealer has followed consistently the valuation of branch transfer on the basis of value as per excise purpose or expected sales realization or MRP less certain percentage. The retention of setoff is calculated as per rule 53(3) and 53(9) (b) (II) by the dealer”
Issue: 64
Petrol Pump dealers and revised returns in Form 235
“The dealer has filed revised return in Form 235 as per amendment w.e.f 1-7-2009. Accordingly Schedule V and other details in Form 704 have been considered for disclosure of turnover of motor spirit exempt u/s 41.”
Issue; 65
Composition Scheme for retailer- Crossing of Turnover of Rs.50 lakhs during the year.
“The dealer has crossed the limit of Sales Turnover of Rs. 50 lakhs on _______ date. From 1-4-2008 to _____ date has computed tax liability under composition scheme and filed returns accordingly. From _______ to 31-3-2009 the dealer has calculated tax liability as per normal dealer and filed returns accordingly. Information in Schedule I and II has been given along with other information of Form 704 accordingly.”
Issue: 66
Composition scheme for Chemist and druggist- rate of tax @6% retrospective from 1-10-2008.
“The dealer is retailer for medicines and other general goods, the Turnover of C-29 and Schedule A is ¾ of the total turnover, and hence tax @ 6% has been paid by the dealer based on Notification No.VAT-1505/CR-55/Tax.1 Dt. 21-11-2008.”
Issue: 65
WCT-TDS deducted by the employer, but certificated not received by the Dealer. Section 31(4) credit not available of TDS.
“During the financial year WCT-TDS deducted by the M/s______________, who is employer of the dealer of Rs.________. Dealer has not received Certificate of TDS deducted during the year. Hence TDS has not been adjusted against the Tax liability by the dealer according the section 31(4). The details in Annexure C as not been provided being no certificate received by the dealer”
Issue: 66
Setoff-Sub Contractor under composition scheme, being principal contractor under composition scheme as per rule 53(4) (b):
“The dealer is a sub contractor in case of a contract entered with principal contractor M/s____________. The contract amount is Rs.____________. The set off on corresponding goods used in this works contract has been calculated as per rule 53(4) (b) and retention of 4% has been taken, being principal contractor is under composition scheme”
Issue: 67
Mandap keeper under composition Scheme- Form 233 instead of Form 232.
“Dealer is a Mandap Keeper under composition scheme as per section 42(4), filing returns in Form 233 as Form 232 does not contain the required details. Hence Schedule III has been reported in this Audit Report instead of Schedule II, which is applicable to dealer legally according to rule 17”.
Issue: 68:
Change of Mode of Incentive in the Financial Year by the Dealer under PSI.
“During the year dealer has obtained permission from DIC via letter Dt.________ and the same has been intimated to Sales tax dept on ____________. The suitable amendment has been made in EC of the dealer for the change. i.e., from Deferment to Exemption or Exemption to Deferment.”
Issue: 69
End of EC limit in between the financial year.
“ The EC limit of Rs_______ exhausted on Dt.________ due crossing of Amount of Incentives or Time limit as prescribed in the EC. The dealer has filed return upto Dt___ i.e, Quarter __ as a PSI unit and thereafter as a Normal Dealer upto 31st March 09. The Tax liability and setoff has been calculated accordingly by the dealer. Schedule I and IV has been reported accordingly in this Form 704”
Issue: 70
Adjustment to Opening Balance of CQB or Closing Balance of CQB due to P.Y. assessment order.
“Assessment order No.____ Dt_______for the F.Y. ____ has been received by the dealer on ________. Due to which CQB has been enhance or reduced by Rs____________. The effect of the order has been taken in Qtr__. The CQB Closing balance has been adjusted accordingly during the year by the dealer”
Issue 71:
Due date of return and extension of 10 days for the filing or e-return- Annexure A or B.
“The due date for filing e-return for the month ____ has been extended via Circular no___ dt____. The dealer has filed return on _______. In Annexure A or B the date as mentioned and extended has been mentioned”
Issue 72:
Method used for calculation of Setoff retention on goods used in manufacture of tax free goods – rule 53(2)(a)
“The dealer is unable to identify the goods used in manufacturing of tax free goods; hence the value of the inputs attributable to tax free output can be arrived at by proportionate method prescribed in rule 53(9)(b-i).
Issue 73:
Annexure J: TINWISE details of sales and purchases not available.
“The dealer has provided the information as Annexure J to the extend available and possible. The same has been reported on the basis of above. As per dealer’s accounting system the information is provided and there is no impact on tax liability”
Issue 74;
Instruction No. 19: Where dealer is required to maintain the records about the sales, purchases,
Imports and Exports under Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act in such cases the Auditor should invariably correlate the details of sales, purchases, Imports and Exports disclosed under the said Acts and disclosed under MVAT Act, 2002. Any material difference noticed should be reported at Para 5 of Part-1 accordingly.
“As per information and explanation provided by the dealer and on the basis of records provided, the dealer is a retailer, accordingly records as mention in Instruction 19, are not applicable”
Issue 75;
Instruction No. 19: Where dealer is required to maintain the records about the sales, purchases,
Imports and Exports under Central Excise Act, 1944, the Customs Act, 1962 or under the State Excise Act in such cases the Auditor should invariably correlate the details of sales, purchases, Imports and Exports disclosed under the said Acts and disclosed under MVAT Act, 2002. Any material difference noticed should be reported at Para 5 of Part-1 accordingly.
“The dealer is a manufacturer and records related to Excise are been maintained by him. As per explanation provided by the dealer, there is no material difference in sales or purchases of Principal items as disclosed in returns of Excise and MVAT Act. During the year no Imports or exports made the dealer.”
PLEASE REMEMBER!
The vat auditor will have to make suitable observations, remarks, qualifications, etc. depending on the facts of the case and guidelines issued in this regards.
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