INTRICACIES IN MVAT AUDIT BY CA JANAK VAGHANI

Format of Audit Report v. SA 700 �Standard of Auditing (SA 700) issued by ICAI � requires Auditor to give audit report in prescribed format in SA �The IT and MVAT Audit Report Prescribed under the acts �Do not permit any Modifications �ICAI Announcement dated 29 th July 2013 permits �Auditor to give audit report in prescribed audit report by the statute

Complete Audit Report �Amendment in Section 61 of MVAT ACT from 1. 5. 2011 �Penalty for knowingly furnishing incomplete audit report �The Term “complete report” as per Explanation II �only if all the items, certification, tables, schedules and annexures are filled appropriately and are arithmetically self-consistent �Otherwise it is incomplete audit report subject to penalty

Complete Audit Report �The VAT Auditor should take utmost care in filling various schedules and annexure in form 704 �All applicable schedules and annexure should be properly filled �Only then applicable schedules and annexure should be selected in Part-I �Proper representation from the dealer should be obtained for non receipt of any required details

Certificate as per Clause (d) �In new form 704 in part I clause (d) and table 7 are introduced from 23 -08 -2013 �Accordingly the vat auditor is required to certify � “on the basis of an information available on the website of department, � the period under audit involves no issue in case of this dealer �in which a decision against the State Government or the Commissioner was delivered by the Tribunal and � the Reference and/or Appeal therein is pending �before appropriate forum � except detailed in table 7 herein below, if applicable. ”

Certificate as per Clause (d) �In Table 7 following particulars are to be given; �Sr. No. Reference/ Appeal No Name of Dealer �It is not required to give details of issue involved thereunder �If more than one issue is referred out of which only one is applicable then what? �When subsequently decision is given by the HC/SC in the same matter or in any other matter under the MVAT act or under other State acts should the vat auditor report it?

Certificate as per Clause (d) �Details to be given only on the basis of information available on the web site of the department �Purpose of department may not serve in some cases �When vat audit report is furnished before uploading data on the site or �reference or appeal is filed after furnishing of audit report �What about cases of dealers not required to furnish audit reports or who have not furnished audit reports? �Whether it applies to references/appeals filed under the earlier acts? �Whether it applies to writ petitions filed by the department?

ANNEXURES J-1 AND J-2 �Annexures J-1 and J-2 provides details of �Customer/Supplier wise sales and purchases �These details are to be given TIN wise where tax is charged separately in bill and sold to / purchased from registered dealer �Sales /Purchase to/from URD to be shown in Row 5001 �Surprisingly Row 5001 in J-2 amount of tax charged separately is required to be shown �To show it if tax is charged separately in bill otherwise to show nil under that column. � Where tax in not charged in tax invoice to mentioned in last row 5002 �In j-1 the amount of such sale should be shown net of tax amount to tally with amount of taxable sale

Annexures J-1 and J-2 �Details of sales and purchases should be given in annexures J-1 and J-2 �After deducting amount for goods returns or �Giving effect to any Debit Note or credit notes �If as a result of credit note the amount of sales or purchases results in minus figures then �It is not validated in Annexure J-1/J-2 �How to report?

Annexures J-1/J-2 �In Annexures J-2 TIN wise details to be given even no set-off is claimed by the dealer �In Annexure E in section 2 new row is added � for details of taxable goods from registered dealer �for which no set-off is claimed �Many dealers have not kept required details for such purchases on which no set-off is claimed �The vat auditor to give appropriate discloser to this effect

Issue of Proper Tax Invoice �The amendment in section 86 of MVAT Act �Requiring selling dealer to mention TIN from 1. 5. 2010 �The Vat Auditor to certify in clause (l) of Part I “The tax invoices in respect of sales are in conformity with the provisions of law” �The VAT Auditor should verify issue of tax invoices whether it contains TIN of purchasing dealer or not �To give appropriate remarks or comments for any deviations against clause (l)in Part I

Proper Tax Invoice Ø The Commissioner of Sales Tax has clarified the amendment to section 86 of MVAT Act by Trade Circular No 17 T of 2010, Ø Accordingly, if in tax invoice the TIN of purchasing dealer is not mentioned then it is not a valid tax invoice as such no set-off will be allowed Ø In clause (h) of Part I the VAT Auditor is require to certify that “The setoff is worked out only on the basis of tax invoices in respect of the purchases” Ø The VAT Auditor should verify tax invoices for purchase of goods on which set-off is claimed whether it contains TIN of the claimant dealer Ø To give appropriate remarks or comments for any deviations against clause (h) in Part I

Revised Returns �As per amended section 20 (4) of the MVAT Act from 1. 5. 2011 the dealer can file revised return only once in each of following circumstances: - On his own within 10 months from the end of year for which it relates -As per advise of VAT Auditor within one month from the end of the prescribed period for furnishing of vat audit report -As per advise of any Departmental Authority in any proceedings within one month -Now as per amended section single annual return can be filed to give effect to advise given by the vat auditor or by the department

Revised Returns �The receipt of goods from outside the State as well as C form purchases should be properly shown in periodical returns as inter-Stock transfer as the case may be inter-State purchase �otherwise the department is not issuing the dealer required F/C forms �The department should consider this single annual return for issue of Forms.

Letter of Submission �The dealer is expected to give details of VAT/CST paid based on his acceptance of VAT Auditor’s Recommendations. �The time limit for submission for letter of submission is one month from the due date of furnishing of vat audit report �And time limit for submission of letter of Submission is 10 days �The department should extend the time limit for submission of letter to one month from the due date for submission of vat audit report

Direct Recovery of Tax –Section 32 A �Section 32 A provides for recovery of any amount of tax �Payable as advised by the vat auditor and �Accepted by the dealer but not paid �Therefore the vat auditor should took utmost care in giving final report and advise to pay tax �It is advisable to take prior approval of dealer before uploading on the site �Like wise care should be taken while submitting letter of submission

Direct Recovery of Tax –Section 32 A �The vat auditor is not required to advise to pay tax on account of: �Differential amount of tax payable for want of C/F forms etc. �Any issue mentioned in table 7 �For pending TDS Certificates in view of provision of section 31(9)which provides that -Where tax is deductible at source by any employer, - the person making the said supply shall not be called upon to pay tax himself -to the extent to which the tax has been deducted in respect of the said supply

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