Seminar on New MVAT Audit Report – Form 704

CA Rajat Talati, Mumbai 1

Seminar on New MVAT Audit Report – Form 704

6.12.2008 Organised by

Mulund CA CPE Study Circle of WIRC of ICAI

Presentation by Rajat Talati

chartered Accountant [email protected]


Overview

The new MVAT Form 704 is divided into three parts –

Part – I deals with audit & certification Part – II deals with general information Part – III are the schedules of turnovers

and tax calculations and annexures Effectively assessment of turnovers and tax

liability / refund


Instructions

No enclosures unless prescribed or essential for furnishing information

All boxes / fields to be filled in For multi-state activities GP & NP ratios to be

given on all India basis. All other ratios at state level only.

Tax liability to be computed “as required by law” where documents not available or are insufficient.

Auditor to sign and seal all pages


GENERAL POINTS

Instruction No. 9 in Form 704 at Pg. 1: Link with returns Part 3 of Report, linked with Type of Return filed Return filing instructions, applicable to report Auditor shall follow Return Instructions for filling

Schedules of Audit Report Only PDF form

No space for additional info. /observations


GENERAL POINTS

Fill up only relevant/ applicable Sch of Part 3 & Annexure (ref. note 6) Non applicable Schedules - need not be printed

– give note Auditor ‘must’ give his remarks in table 3 of

part I must??? Not possible to ascertain precise

reason for every difference


GENERAL POINTS

Remark for Short Comings/ Deficiencies in Compliance of law:

i.e. shortages, Incomplete, Improper, Incorrect Data or Document.

In brief or In detail (if required) Report at Table-3 in Part 1 giving

reference of Row & Column of relevant Schedule


Audit & Certification Clause 1: Report about “statutory” audit under “IT

Act, 1961” “statutory” audit will cover only companies, trusts,

societies, statutory bodies, etc. Intention to cover dealers not covered under any

statute, viz individuals, HUFs, firms, etc Some dealers may not be liable to any audit other than

MVAT audit Clause 2: Scope limitation clause

Responsibility of management for maintenance of books and records.

Auditors’ responsibility to express an opinion on “sales tax related records” and “financial statements”


Audit & Certification Application of AAS and conduct of audit to “obtain

reasonable assurance that records and financial statements are free from material mis-statement(s)”

Application of test checks Assessment of accounting principles and estimates and

evaluating over financial statement presentation Clause 3(A): Details of dealers and returns verified Clause 3(B): certifications

Auditor has read and understood the instructions All information and explanations have been obtained Books, documents and records are sufficient for verification

of returns Records relating to movement of goods properly maintained. Tax invoices issued are in accordance with provisions


Audit & Certification Gross turnover of sales declared in returns includes all

transactions of sales Gross turnover of purchases declared in returns includes all

transactions of purchases. Adjustments of turnover is based on entries in books and

documents Deductions from turnovers is supported by documents Adjustments / deductions not claimed in returns are not

required or authorised. Rate of tax applied on sales is correct and computation of tax

payable is proper Computation of set off and adjustment is correct Computation of CQB is in conformity of the provisions


Audit & Certification

Tax payable / refund claimed in returns is correct Other information provided in returns is correct Dealer is conducting business from place(s) declared

by him as his main place and additional places Entries in bank statements have been reflected in

books Transactions in books are fully reflected in bank

statements Whether the dealer has maintained stock register? Whether proper records of receipts, despatch and

delivery of goods are maintained?


Audit & Certification Clause 4: Computation of tax liability and CQB

and differences. Clause 5: Advise to dealer

Pay additional tax or repay refund received Claim additional refund or reduce claim Reduce tax liability Revise closing balance of CQB Any other recommendation

Clause 6: Details of differences for each figure in schedules

Remarks on non-compilance, short comings and deficiencies.


Audit & Certification

Sr. No Particulars As per Returns (Rs.)

As per Audit (Rs.)

Difference (Rs.)

Report, Remarks & Observations for each difference found in amt as per Return and Audit

Remark means “comment, noticeable point, observation, opinion, statement, note.”

Remark for Non-Compliance of provisions of MVAT/CST law w.r.t e.g. Returns, Exemptions, Computation of Turnover, Tax Rate, Set-off claims, Record, etc.


General information – to be collected from dealer Details of divisions and units for which separate books

are maintained. Names and version of accounting software Major changes during the year Address where books of accounts are kept Whether profession tax returns filed and payment made Whether profession tax enrollment has been paid Financial ratios / information for current and previous

year with reasons for change. GP : NP NP : NTO of sales


General information – to be collected from dealer

Net sales in Maharashtra Cash sales : total sales Cash purchases : total purchases Local sales : net sales Inter-state sales (excl. exports) : net sales Exports : net sales Set off : net sales Tax : net sales Opening stock including WIP Closing stock including WIP Closing stock : net sales


General information

Details of bank accounts with BSR code Details of activity code number of the

dealer Details of new local suppliers for purchases

exceeding Rs.5 lakhs on which set off was claimed


Part 3/ Sch I- Normal VAT Dealer

1. Computation of Sales Turnover: 1a. GTO of Sales= Total Sales & Service Income

Net T.O.+ Tax Collected+ Lab chs+ job work chs+ stock transfers

Sec 2(33) ‘T.O. of sales’= Sales- G/R –Deposit/R

Sec 2(25) ‘SP’ = SP-Tax collected Sec 2(24) ‘Sale’ = Sale of goods (it does not

include labour/ service chs) GTO of Sales in Audit Report is assigned a

specified coverage.



1b Less: TO of Inter-State sales & stock transfers covered under other Schedules

(TO+ Tax) which is covered & reported in Other Schedules i.e. II To V (not CST Sch VI)e.g. Restaurant, Bakery, PSI Unit, etc.

1c. Balance: Balance TO (1a-1b) Balance TO relevant to this Schedule



1d Less: Allowable Credit Notes issued for goods returned/ discount/ rate difference

Net TO + tax as per CN / 6 months for G/R, Sales Cancellation/ Rejection, DOC evidence, Entries in accounts Ignore non allowable credit notes.

1e Less: Net VAT amount Tax collected separately Tax element as per Rule 57(1) where tax inclusive.



1f Less: Local Stock Transfer within Maharashtra on which Agent pays tax. Stock Transfer Memo ,Dispatch proof Agent’s Confirmation (for TIN, T.O. & Tax paid) VAT paid challan copy

1g Less: Sales under Section 8(1), (Taken in Schedule VI) CST Act T.O. (Exports, Form H, Inter state sales &

High Seas Sale) Inter state stock transfer. CST collected.



1h Less: Sales of Tax Free goods Schedule A goods

(e.g. Agricultural Implements, (notified), books & periodicals, etc.

1i(i) Less: Sales fully exempt u/s 8(2) as per Notification Sales of fuel & lubricants to Foreign

Aircrafts



1i(ii) Less: Sales fully exempt u/s 8(3) Sales of specified goods, interse between

SEZ, STP, EHTP, EOU. 1i(iii) Less: Sales fully exempt u/s 8(3A)

Sales based on Import & Export Policy 1i(iv) Less: Sales fully exempt u/s 8(3B)

Sales by CSD / INCS to members of armed forces, etc.



1i(v) Less: Sales fully exempt u/s 8(3C) WC for Textile Processing

1i(vi) Less: Sales fully exempt u/s 8(4) Sales by PSI Unit following Exemption Route.

1i(vii) Less: Sales fully exempt u/s 41(4) Sales of Motor Spirit & Petroleum products,

interse between Oil Cos. & Motor Spirits sold in retail by Petrol Pumps.

Note: Returns do not have the exempt Sales T.O. under different sub sections of Sec 8.



1j Less: Job work/ Labour chs Pure labour/ service chs. No material involved

1k Less: Other allowable Reductions/ Deductions Transit Insurance chs collected Installation chs collected Resale of goods manufactured by exempted PSI

Unit, as per Rule 57(2)



Rent for immovable property Interest/ Dividend Income Commission Income, if included in GTO

of sales 1l Balance Turnover

Taxable Net Sales T.O.


2 Computation of Tax Payable under MVAT Act

Tax Rate

As per Returns As per Audit Difference

T.O. Tax T.O. Tax

12.5%

4%

1%

….%


2. Computation of Tax Payable under MVAT Act

Difference assumed to be in Tax Amt Goods sold as per Notification u/s 8 liable

to VAT @ 4%, be shown here. Reference of relevant Schedule Entry, not

asked for.


2. Computation of Tax Payable under MVAT Act

2A Excess Tax Collected*Refunded to customer*Else forfeiture, so payable

(Excess Tax Collected, if refunded to buyers before passing of Forfeiture Order, then Forfeiture issue does not arise- Transelektra Domestic Prod. Ltd. SA 402/ 2002/ 26-2-08).


3. Computation of Turnover of Purchase including Branch Transfer

3a: Total turnover of Purchases Corollary of Sales 3b: Less: T.O. of Purchase Covered under

Schedule II to VExclude purchase not relevant for this Schedule.

3c Balance T.O. (3a-3b) 3d Less: Goods Returned, Rate Difference.,

Discount. Allowable Debit Note/Credit Note Time Limit of 6 months Separate Tax Element



3n Less: Local RD Purchase of Taxable Goods Not supported by Tax Invoice Where Tax not shown separately in

Invoice 3o Balance: Local Purchase Supported by

Tax Invoice. Refer Annexure I



3P(i) Local RD Pur. Supported by Tax Invoice, but Not eligible for setoff u/r 54 Eg: Passenger Motor Vehicle, IPR, WC related to

Immovable Prop.,etc (Annexture I, Pt.no.2)

3P(ii) Local RD Pur. Supported by Tax Invoice, but Liable for Retention u/r 53 Eg: Fuel, Furniture & Fixture, Office

Equipments, etc. (Annexure I, Pt.no.4)



3P(iii) Local RD Pur. Supported by Tax Invoice, Eligible for Full Setoff Eg: Plant & Machinery, Raw Materials,

Packing Materials, etc. Mismatch between data under col. 3P &

Annexure I How to give Data when affected by rule

53(2),53(3), etc?


Annexure I to Schedule 1 Computation of Setoff :-

Tax Rate @

As per Returns As per Audit

T. O. Tax T. O. Tax

Total Rs.

`1A Details of Tax Paid Purchases of Inputs, Raw Material, Business Expenses, Packing materials, etc.



1B Details of Tax paid on Capital Assets (i.e. Plant & Machinery, Furniture &

Fixtures, Office Equipments, etc.) Data as Above

1C Total of 1A & 1B – Data as Above



2. Details of Tax Paid on purchases, Not eligible for Setoff u/r 54:

Data as above E.g. Software for self use, copy right

3. Details of Tax Paid on Purchases Eligible for Setoff:

Data as above

4. Details of Tax Paid on Purchases, Liable for Retention u/r 53:

Data as above



5. Details of Allowable Setoff i.e. Total of 3 – Total of 4

As per Return As per Audit Difference

Total Setoff Rs.


4. Computation of Tax Payable :

4A Aggregate of Credit Available Return Audit Diff.

4B Sales Tax Payable & Adjustment of CST/ET

4C Net Tax Payable/ Refundable

4D Details of Amount Paid with Returns & Challans

4E Details of RAO


5: Details of TDS Deductible/Deducted by Dealer as Employer

Period of Form 405

TDS Deductible

TDS Deducted

TDS Paid

Paid Date Interest Payable

Total Rs.

Note: Period-wise & Party-wise TDS liability, with Interest.

6. Determination of TO of Purchases & sales If reqd. reconciliation of Sales & Purchases : Returns / Profit & Loss A/c / Computed in Audit.


Audit Report Part 3- Sch VI- CST Sales Computation of CST

Sr. No

Particulars As per Returns

As per Audit

Difference

1 GTO of sales

1a less: Local Sales

1b less: Interstate sales u/s 6(3)

Sales of any goods under Form ‘J’ (to collect transaction wise) to Foreign Diplomats or Foreign Consulates in India or United Nation, etc.


Computation of CST

1c less: Goods Returned u/s 8A(1)(b) Within 6 months Credit Note Entries in Accounts

1d less: T.O. of sales outside the State Out & Out sales


Computation of CST

1g less: Interstate Stock Transfer u/s 6A

To own Branch/ Agent Stock Transfer Memos Dispatch Proof Form ‘F’ (One per month)


Computation of CST

2 Balance: Interstate Sales effected from Maharashtra

3 Balance: Taxable Interstate Sales

4 less: Tax Deduction u/s 8A(1)(a) Tax collected separately or inclusive

5 Balance: Net Taxable Interstate Sales (Col.3-Col.4)


Computation of CST

6A Sales Taxable Under Form ‘C’ (u/s 8(1) or

8(5)):One Form ‘C’ per Quarter)Tax @ Returns Audit Diff.

T.O. Tax T.O. Tax

2%

3%

4%

Total


Computation of CST

6B Sales Taxable without Form ‘C’ (u/s 8(2)) Table as above-

for difference, give Remark w.e.f 1-04-2007, CST @ local VAT rate applicable in

State. Instruction Note No. 8 for Form 704;

Insufficient/ No doc., then tax computation @ ? 6C Tax Collected in excess of tax payable –

Penalty u/s 10


CST Payable & Paid 9 Balance CST Payable (7e – 8e) OR 10 Balance CST Refundable (8e – 7e) 11A: CST paid with Returns/ challans:

Period Form of Return (III E)

Amt. paid

Paid date Due date

Interest payableFrom To

Total Rs.

11B: RAO Details

RAO No. Amt. adj. RAO Date

Total Rs.


Pending CST Forms

Sale Inv. No.

Inv. dt.

Net Taxble (Rs.)

Type of Form

Descpn. Of Goods

Sch. Entry

Diff. CST

Total Rs.

12: Pending Form List ( C / H / I / J / E-I / E-II )

13: Pending Form ‘F’ for Stock Transfers:

Trf. Memo No.

Memo dt.

Net Taxable (Rs.)

Description of goods

Sch. Entry

Differential CST

Total Rs.


14. Other Observations in CST

e.g. Incomplete or Invalid Form C/H/F, etc.----------------------------------------------------------------------------------------------------------------------------------

Encl: 1) Income Tax Audit Report & Annexures 2) Audited P&L A/c, B/S & Annexures


Reporting Done Away with in New Form

List of Record/ Registers verified. In case of Works Contract, Opted for Composition or

Vat provisions. Observations for delay in filing Returns or tax

payments Method followed for valuation of Stock Transfers. Reference of Sch. Entry, qua sales of Tax Free/

Taxable goods. Reference of documentation & operating procedures,

qua exports, imports, sale in transit, stock transfers, etc.


Reporting Done Away with in New Form

Contraventions of purchases under Form ‘C’. Details of purchases from URD, of Rs. 10,000/-

or more. VAT TDS record maintenance, issue of

certificates, Party wise details of transactions liable to TDS, but not deducted. (Period wise TDS deductible shall be reported)

Pending forms E-I/ E-II. Number of CST Forms collected & utilized. Enclosure of Statutory Audit Report.

(IT Audit Report shall be enclosed)


QUERIES?

THANK YOU ALL

Seminar on New MVAT Audit Report – Form 704

Documents

Transcript of Seminar on New MVAT Audit Report – Form 704