Tax in composition method

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 February 2012 From the gross receipt of work contact amount , where in tax is not seperately charged. whether reduction of tax is available u/ rule 57 of Marashtra VAT Rule?
1. Say gross contract value 100000/- and tax rate is 8% under composition method-
Tax on sale wil be 8000/- or Rs. 7407/- (100000x8/108)
Kindly reply.

CA Sunil Anwani

CA Sunil Anwani (Expert)
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24 February 2012 As per inclusive i.e. including VAT charged i.e. Rs.7407.

Querist : Anonymous

Querist : Anonymous (Querist)

24 February 2012 Rule 57 allows reduction of sale price for levy of tax. In this words used are " sales tax is payable whereas is not seperately charged.
Tax is defined under sect. 2 which shows that, sales tax is different than composition tax.
Sect. 43 says that, " pay lumpsum by way of composition. In this sect. word sales tax payable is not used. rule 57(2)(b)proviso may please be consider.
Kindly consider the above.
Give your valuable opinion whether deduction of lumpsum tax payable whch is not seperately charged will be reduce to to arrive the sale price for levy of tax u/r. 57.

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CA Sunil Anwani

CA Sunil Anwani (Expert)
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25 February 2012 As per Sec 7
If it is under Composition Method than you have to pay @8% or 5% whichever case may be and if you not opting for composition than you can calculate tax inclusive of VAT.

But if you are going under composition than you have to pay tax on amount of contract. as per Sec.7 of MVAT Act which is reiterated as follows-

eight per cent. of the total contract value of the works contract in any other case, after deducting from the total contract value of the works contract, the amount payable towards subcontract involving goods to a registered sub-contractor."

Querist : Anonymous

Querist : Anonymous (Querist)

26 February 2012 Not clear from your 1 st reply. in reply "tax was shown by you at Rs.7407/-"
I have query about composition method for which tax was shown at Rs. 8000/- or 7407/-.

In composition method whether deduction u/r. 57 reduction of tax is allowable if tax is not separately charged in gross contract value of Rs. 100000/-.
Please explain.

CA Sunil Anwani

CA Sunil Anwani (Expert)
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28 February 2012 In Composition method you have to pay tax on gross contract value i.e. Rs.8000 as per your example.