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Project - MVAT Audit

BY ANURADHA JOSHI

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Company Profile` India's largest central Air Conditioning company annual

turn over Rs 2900 crores,

` Network -29 offices,6 modern manufacturing facilities,

1200 dealers , 2800 employees.

` Establish leadership-commercial refrigeration

` Primary focus :

A)corporate marketB)commercial market

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Introduction of VAT

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Merits of VAT-

` Eliminates Multiple Tax

` Lowering of Tax Burden

` Fairness

` Tax transparency

` Higher tax revenue

` Uniformity

` Simpler

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Demerits of VAT

` Rate is not uniformed across the country

` It does not cover goods as well as services

` General rate of 12.5% is too high

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How VAT actually works?

` Sale price is made up of two elements -The selling price of the goods and

The tax on the sale.

` Tax payable to State Government.

` The tax payable on sales is to be calculated on theselling price.

` The tax paid on purchases supported by a, valid

tax invoice is generally available as set-off (input,

tax credit) while discharging the tax liability onsales.

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Case study

Company A buys iron ore and other consumables andmanufactures stainless steel utensils;Partnership firm

B buys the utensils in bulk from Company A and

polishes them; and sell to the End User. (The sale and

purchase figure shown in the example are excluding tax)

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Solution

Particulars Amount VAT 4%

Company A

Cost of iron are and consumables 50,000 2000

Sales of unpolished stainless steel utensils 1,50,000

Value added 98000

Company A is liable to pay VAT on

Rs.1,50,000/- @ 4%

6000

Less Set Off (2000)

Net VAT amount to pay with the Return

(Note: Tax invoice issued by Company A will

show sale price as Rs.1,50,000/- tax as

Rs.6,000/-. Therefore, the total invoice value

4000

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Particulars Amount VAT 4%

Partnership B

Purchases unpolished stainless steel utensils. 1,56,000

Sales polished stainless steel utensils 1,80,000

Value added 24000

Partnership B is liable to pay VAT on

Rs.1,80,000 at 4%

7,200

But can claim set off of tax paid on purchases (6,000)

Net VAT amount to pay with the Return 1200

End user

Purchases polished stainless steel utensils 1,87,200

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Particulars Amount (Rs.)

Suppliers of Company A 2,000

Company A 4,000

Partnership B 1,200

Total 7200

The State Government received the tax in stages.

The payments of tax were as follows:

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MVAT AUDITMVAT AUDIT

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Need of MVAT Audit

Maharashtra Value Added Tax Act 2002

Complicity in VAT calculation

The Role of Auditing and Auditors in MVAT-

AuditorEnsure about the Audit certificationEnsure about the Accounting policiesEnsure about the books of accounts

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Scope of MVAT Audit

Audit checks whether the self-declared taxand claim of input tax credit or refund arecorrect.

Act provides compulsory tax audit in case ofdealers specifying certain criteria.

If a dealer was having more than one

certificate of registration If a dealer was holding an entitlement

certificate

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Applicability of MVAT Audit Provisions

His turnover of sales or purchasesexceeds rupees Sixty lakhs in an year

He holds license in specified forms issuedunder various laws or rules formanufacturing, storing, distributing,

selling liquor, etc.

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Submission of Audit Report

When ?

How ?

Contents:

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Central State Tax

` Definition

` Objectives

Inter-state trade or commerce,

Trade happens outside a state

To provide for levy, collection and distribution of

taxes on sales of goods

` Levy and collections of tax underCST-

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OBSERVATIONS

` Complicated VAT structure

` Time consuming government formalities

` Unawareness about vat system creating

confusions to take benefits of vat system

` Beneficial for government as tax is collected atevery stage of stock movement

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LEARNINGS

` Overall culture in the corporate firms.

` Maharashtra value added tax audit and tax formalities.

` Understanding Auditors duties and responsibilities.

` Accounting on SAP for TDS and other value added tax

like MVAT and CST

` Filling up of form 704 for vat audit

` Collection of various forms of declarations

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Conclusion

` VAT system is better than old sales structureBecause

VAT system that avoids double taxation of

commodities

VAT has other advantages for both business and

government

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Conclusion

` Difference between VAT and CST

CST VAT

The tax is collected at

one stage of purchase or

sale of goods.

The tax burden would be

shared by all the dealers

from first to last.

The tax is levied at asingle point Retailers are not subjectto tax except for the

retail tax

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