VAT Basics

Dear Client,

Please note following basic but necessary information regarding VAT in Madhya Pradesh:

  1. Total 5 types of taxes have to paid in Madhya Pradesh (commercial tax department):
    1. VAT
    2. CST
    3. Entry Tax
    4. Professional Tax (persons) (Separate registration)
    5. Professional Tax (employer) (Separate registration)
  1. Due Date of Payment– VAT, CST and Entry tax have to be deposited monthly on or before 10th of next month. For last month of each quarter, due date shall be 30th of next month instead of 10th. For month of March, for transactions upto 25th March, due date is 31st March and for remaining period due date is 30th April.

However, where quarterly tax liability does not exceed Rs.15,000/-, dealer can pay taxes on quarterly basis. Due date in such case shall be 30 days after expiry of each quarter.

3. Interest on delayed payments is payable @ 18% p.a. upto delay of 3 months and @24% p.a. thereafter.

4. Professional Tax (Person) is to be deposited annually.

    1. Companies – Flat Rs.2500 per year
    2. Other dealer liable for VAT-
      1. Turnover between 10L – 50L – Rs.2000 per year
      2. Turnover above 50L – Rs. 2500 per year

5. Professional Tax (Employer) is to be deposited monthly for each employee whose salary exceeds Rs.1,80,000/- per year. (Rs.208 per month, i.e. Rs.2500 per employee per year)

6. Due date for filing returns is as follows:

    1. Q1 – 30th July (above 2 crore)/ 19th Aug
    2. Q2 – 30th Oct (above 2 crore)/ 19th Nov
    3. Q3 – 30th Jan (above 2 crore)/ 19th Feb
    4. Q4 – 30th Apr (above 2 crore)/ 19th May

7. Penalty for delayed returns shall be Rs.50/- per return per day (i.e. Rs.150/- for delay of VAT, CST and ET returns) for delay of 30 days. Beyond 30 days, penalty shall be Rs.500/- per return per day (i.e. Rs.1500 per day for all returns) subject to maximum of Rs.25,000/- per return (i.e. Rs.75000 for all returns). [sec. 18(4)(d) of MP VAT Act]

8. General rate of VAT and CST is 5% and 14%. However, in case of interstate sale against “Form-C” CST is chargeable @ 2%. In case of stock transfer to other state against “Form F”, no tax is leviable, however, input tax rebate on goods transferred or raw material consumed on such transfer shall be liable for reversal @ 5%.

9. Input tax rebate of VAT paid on all goods purchased from registered dealers for use in relation to business in Madhya Pradesh is available subject to following conditions:

    1. Full payment is to be made through banking channel for bills above Rs.40,000/-
    2. Complete party-wise list of all purchase and sales is submitted in quarterly e-returns.
    3. Seller is not a composition dealer.
    4. ITR on goods that are sold in interstate trade or commerce is restricted to CST collected thereon (w.e.f. 05/04/2016). Example – Goods purchased for Rs.105/- (100 Basic + 5 VAT). These goods are sold interstate for Rs.112.20(110 basic + 2.2 CST). In this case, ITR of Rs.2.2 only will be allowed instead of Rs.5/-.
    5. ITR on stock transfer to other state, tax-free finished goods is liable for reversal at 5%.
    6. ITR on Building material, fixtures, furniture and fittings, vehicles, office equipments, air conditioners etc. shall not be allowed. (noti. no. 28 – 2007)

10. Entry tax is payable on:

    1. All purchases from outside Madhya Pradesh
    2. Purchase of “ET not paid” goods from other local (municipal) area within Madhya Pradesh (eg- Entry tax shall be payable on goods purchased in Indore from a manufacturer in Bhopal. However, no ET shall be payable on goods purchased in Indore from a manufacturer in Indore. Please note- Goods purchased directly from “manufacturers” are always “ET not paid goods” and goods purchased from traders are generally “ET paid goods”)
    3. All purchases from unregistered dealers.

11. General rate of entry tax is 1% (for goods covered under 5% VAT category) and 2% (for goods covered under 14% VAT category). However, in case of manufacturers entry tax is payable @ 1% on all raw material and incidental goods except for items for which special notification has been issued by the department.

12. Form 49 is to be issued for bringing prescribed goods into Madhya Pradesh. For list of prescribed goods, visit http://dineshgoyal.com/vat/list-of-goods-for-form-49/

13. Form C/Form F can only be issued if CST registration is obtained.

14. First interstate sale– Intimation is to given to department within 30 days of first interstate sale transaction.

15. Submission of Audit Report– Audit report along with financial statements is to be submitted each year on or before 15th November.

16. Composition Scheme

    1. In case of Works Contractor– Dealer has option to apply for Composition for each works contract within 30 days. Brief details are as follows:
      1. Flat rate of 1% VAT on total value of works contract [Condition- all purchases should be made from registered dealer in MP. Purchases upto Rs.1 lac can be done from unregistered dealer in MP]
      2. Flat rate of 5% VAT on total value of works contract [No conditions]
      3. Exemption from Entry tax [noti. no.16/2007]
      4. No Input tax rebate on purchased goods shall be available.
      5. Application has to be made within 30 days for each works contract.
      6. Each application is subject to approval from CTO.
    2. In case of Traders– Dealer has to apply for composition each year before 30th April. Details are as under:
      1. Flat rate of tax @ 0.5%
      2. Condition- All purchase must be made from registered dealer within Madhya Pradesh.
      3. Turnover should not ordinarily exceed Rs.1 crore.
      4. No input tax rebate on purchased goods shall be available
      5. Customers shall not be eligible for input tax rebate.
    3. In case of manufacture of Cooked Food– Dealer has to apply for composition each year before 30th April. Details are as under:
      1. Flat rate of tax @ 3%
      2. Turnover should not ordinarily exceed Rs.1 crore.
      3. No input tax rebate on purchased goods shall be available
      4. Customers shall not be eligible for input tax rebate.
    4. In case of manufacture of Goods other than cooked food
      1. Flat rate of tax @ 4%
      2. Turnover should not ordinarily exceed Rs.1 crore.
      3. No input tax rebate on purchased goods shall be available
      4. Customers shall not be eligible for input tax rebate.

17. Annual Assessment– Assessment is annually done by the department. [Last date: 31st Dec. of subsequent year after end of financial year.] However, where all the taxes are paid on time and returns are filed on time, case may not be selected for assessment. Also, generally govt. notifies self assessment schemes each year for small dealers.

We have tried to provide basic but necessary details in brief. However, there may be special cases where above provisions do not apply.

Also, you may please note, for enabling simplicity, minute details have not been given in above article. Hence, you are requested to kindly ask for an opinion by sending us a query with specific details before entering into transactions that are not of regular nature.

Hope our above article will help you understand MP-VAT.

Regards,

Dinesh Goyal & Co., Chartered Accountants

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51 thoughts on “VAT Basics

  1. In case of manufacture of Cooked Food– Dealer has to apply for composition each year before 30th April. Details are as under:
    Flat rate of tax @ 3%
    Turnover should not ordinarily exceed Rs.1 crore.
    No input tax rebate on purchased goods shall be available
    Customers shall not be eligible for input tax rebate.

    in which sec mp vat act

    1. Sir,

      There is no specific entry named “Building material”. Each and every item is taxed separately as per rates mentioned in schedule II. eg- cement 14%, bricks 5% and so on.

  2. Hello. My query is regarding a chemical manufacturing unit registered under MP VAT.
    1) Does entry tax apply on any capital goods purchased from other state before the commencement of business ie before the start of production.
    2) If entry tax has been paid for few months, on incoming raw materials purchased from other state once the production has started, will it be difficult to obtain the 5 years exemption on entry tax provided in the Industrial Promotion Policy,2014.

    1. Tanushree,
      1. Entry tax is not applicable on purchase of capital goods before commencement of business.
      2. In our opinion it would not make any difference while applying for exemption even if entry tax has been paid for few months

  3. Hello Sir,
    My query is regarding online sales. I sell mobiles online through paytm where paytm act as a facilitator. Mobiles charge 14% VAT. When I sell mobile online through PAYTM, what are my tax liabilities regarding VAT and CST?

    1. Kriti,
      When you sell mobiles through Paytm you will have to pay VAT in case of sale is made within MP or CST in any other case. Rate for both VAT and CST is same in your case. You can get input tax rebate of VAT paid on your local purchases.

  4. If dealer sells only exmpted goods under MPVAT within MP and neither he purchased goods from outside the MP and nor sold goods outside the MP. His turnover from this exempted goods trading activity is more than Rs. 15 Lacs. Kindly Suggest me is he liable for registration under MPVAT Act?

    1. Sir,
      Entry no. 71 of Schedule I for renewable devices or equipments, including their parts includes solar power equipment and hence the same shall be exempt from VAT.

  5. sir, I AM Contractor and have TIN No. But Only Provide Service to customer. and Gernally get contract without material. should i Filed Return. Or My service Will be chargable for vat..

    1. Sir,
      If you hold a TIN registration, you are bound to file returns whether or not you are supplying goods. No VAT shall be leviable if you are only executing service contracts and no goods are transferred to your customer from you.

  6. Dear Sir,
    My company is working in MP and its in construction sector. So, my query is whether there is any implications of VAT as client is saying that there is no VAT in MP in construction sector. I

  7. Dear Sir,
    When we apply for TIN via uploading duly completed form and documents and also we submit physically at CTD Office, than in how much time we will get Provisional TIN or Information regarding Rejection?
    Thanks Sir!

  8. hello sir
    sir If I ordered an online product of worth 55000 (led& some gold jewellery) from an online website did i have to pay any type of tax if yes then what are they and how much

    since i am asking this for my brother because he is facing the same situation his product is held at indore airport which is coming by overnite courier

    on contacting at airport they are saying that you have to pay tax of 26000 approx is this legimate

    or what is the problem for these situtation

  9. sir

    if i do online shopping of worth 55000 ( LED + Jewellery ) from a online website like Flipkart/Amazon will I have to pay some sort form of tax like entry tax or whatever else

    i am asking because such situtation is facing by my brother presently his product is held at indore airport which is coming by overnite courier on contacting them they are asking for form 50 and they had calculated the tax of 26000 approx what is all these matters reply soon

    thanks in advance

    1. Kindly ignore my last reply. Yes, if specified goods are being brought inside state of Madhya Pradesh without Form 49/50, tax authorities may impose penalty of two times the tax applicable in Madhya Pradesh (vat 14% + entry tax 2%)

      1. i mean to say from when or which year /time this rule has been come into picture
        and one more thing is this tax is legimate when it’s all tax is paid at state from where it is ordered

      2. i mean to say from when or which year /time this rule has been come into picture
        and one more thing is this tax is legimate when it’s all tax ilike vat or whatsover are paid at state from where it is ordered

      3. This rule is in existence from a long time. Generally courier companies do not accept consignment without Form 50.
        An appeal can be filed with the department with all facts and circumstances. I’m sure you’ll get relief.
        You can also get in touch with relevant officer dealing in checkpost penalty and explain her the facts. If they are satisfied with the fact that transaction was genuine and there was no intention of tax evasion you may not have to even file an appeal.

      1. Yes you are not eligible for any tax if it bought for personal purpose. But laws apply to everyone equally and goods should be accompanied by prescribed forms.

      2. if i paid all the tax like vat and other similar tax at the state from where i had purchsed then also i have to pay tax

      3. i didn’t get you (Yes you are not eligible for any tax if it bought for personal purpose. But laws apply to everyone equally and goods should be accompanied by prescribed forms.)

  10. just remove my some of my repeated query i had do so because due to some technical issues i am unable to sure that the comment is succesfully posted or not

  11. Is there any benefit/ exemption in MP VAT for works contract to 12AA trust or temple construction ?
    Will purchase tax be applicable in case of purchases withour ‘Pakka” Bills?

  12. Can we revise the return even after VAT Audit report is filed for correction of difference occuring between return and audit. If yes, What is the due date?

    1. Due date for revision of return was 30th October. However, the portal does not restrict you to file a revised return even after the said date. You can file a revised return anytime before the assessment.

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