Big Changes in MVAT Composition Scheme for Small Retailers w.e.f October 2014

Under new composition scheme, tax payer has to pay 1% on the total turnover of sales including tax free goods OR 1.5% on the sales of taxable goods.

one has to choose option from 1% or 1.5% of VAT rate.

E.g. if the total turnover is 50 lakhs which includes taxable goods of Rs. 40 lakhs and tax free goods of Rs. 10 lakhs and if option for 1% is selected then he has to pay VAT @ 1% on total sales of 50 lakhs i.e. Rs. 50,000. If he chooses 2nd option then he has to pay VAT @ rate 1.5% on taxable sales of 40 lakhs i.e. Rs. 60,000.

Object behind the change:

This scheme is targeted to give benefit to the dealers who find difficulty in maintaining the books of accounts

Following are the conditions of the composition scheme:

1) The total turnover of sales of retail sellers should not exceed 50 lakhs in the previous year.

2) The claimant dealer should not be manufacturer or an importer. He should be retailers of goods.

3) The taxable goods sold are purchased from registered dealer. Purchases of taxable goods from unregistered dealer shall be allowed only if meant for packing of goods.

4) The selling dealer shall not collect VAT separately in respect of sales. And he is not eligible to issue “Tax Invoice” in respect of sales made.

5) The claimant dealer shall not be entitled to claim setoff of the purchases made.

Existing Retailers: A dealer liable to file six monthly returns for the year 2014-15 or a dealer opted for the earlier composition scheme may enter into new scheme for the year 2014-15 by uploading Form 4A on or before 30th October 2014. The dealers who are liable to file monthly or quarterly returns for the year 2014-15 shall not be eligible to enter into the scheme in this year.

New Retailers: A newly registered dealer can opt for the scheme by filling Form 101. Those dealers who desire to opt out of the composition scheme shall intimate in Form 4B at the beginning of the year on or before the 30th April 2015.

The dealer, who contravenes any of the conditions of this notification, shall ceases to be eligible for the benefits of the scheme.