Odisha VAT Amendment ACT 2015- a Summary

[CA.Tarun Agarwalla]

The Government of Odisha Vide its notification no 9848-I-Legis 5/2015-L dated 24th September 2015 has notified ‘THE ODISHA VALUE ADDED TAX (AMENDMENT) ACT, 2015, (Odisha Act 7 of 2015), an act to further amend ‘THE ODISHA VALUE ADDED TAX, ACT 2004’.

Further the Act has been assented by the honourable Governor of Odisha on 21st September 2015.

The Department of Finance, Vide notification no 28080 dated 19th October 2015 has stated that the deemed date for amended act to be enforceable shall be 1st of October, 2015.

A gist of the said amendment with explanation has been enlisted below with the corresponding sections of the earlier Act.

Section 2 (Amendment of Section 9)

According to the old act, small retailers who have an annual gross turnover not exceeding

40 Lakhs have an option to pay turnover tax in lieu of VAT.

The same provision continues with an enhancement of the limit from 40 Lakhs to 50 Lakhs, that is, any retailer whose annual gross turnover does not exceed 50 lakhs have an option to pay turnover tax in lieu of VAT.

Section 3 (Amendment of Section 10)

This section deals with the taxable limit where the dealer shall be liable to pay VAT if it exceeds the specified limit which has been enlisted below:

Sl No.	Dealer Who	On/After 1.10.2015	Up to 30.9.2015
	Purchases or receives any goods from outside the State
a	For sale within the State on his own behalf or on behalf of his principal	Nil	Nil
b	Executes any work contract	₹ 50,000	₹ 50,000
c.	Manufactures or produces any goods for sale	₹ 10,00,000	₹ 1,00,000
d	Carries on any business other than those referred to above	₹ 10,00,000	₹ 5,00,000

Also, a sub-section namely 10(4-a) has been inserted which states as follows:

 “Where a dealer, who transfers property in goods (whether as goods or in some other form) involved in the execution of works contract (hereinafter referred to as the contractor) enters into further contract for assigning such works contract, either wholly or in part thereof to other dealer (hereinafter referred to as sub-contractor), directly or otherwise, and the sub-contractor executes such works contract then each or either of them shall be jointly and severally liable to pay tax, and notwithstanding anything contained in this Act, the contractor and the sub-contractor shall pay tax proportionately in the prescribed manner in respect of transfer of property in goods (whether as goods or in some other form) involved in the execution of such works contract.

If the contractor proves, in the prescribed manner, to the satisfaction of the Commissioner that the tax has been paid by the sub-contractor on the turnover of the goods involved in the course of execution of the works contract, the contractor shall not be liable to pay tax on such turnover.

If the sub-contractor proves, in the prescribed manner, to the satisfaction of the Commissioner that the contractor has opted for composition under sub-section (3) of section11 in respect of the works contract being executed by the subcontractor, then

the sub-contractor shall not be liable to pay tax on such turnover.”

Meaning if a dealer involved in the execution of works contract (contractor) outsources such work to another dealer i.e. sub-contracts it (sub contractor) either wholly or partially, directly or otherwise and if the said sub contractor executes the assigned work, then both the contractor and the sub contractor shall be jointly and severally liable to pay VAT proportionately and in the manner prescribed.

Also if the contractor proves to the satisfaction of the commissioner that the sub-contractor has paid the taxes on the turnover of the goods involved in the execution of the works contract, then the contractor shall not be liable to pay tax on the said turnover.

Also if the sub contractor proves to the satisfaction of the commissioner that the contractor has opted for composition scheme in respect of the works contract being executed, then the sub-contractor shall not be liable to pay tax.

Section 4 (Amendment of Section 11)

Sub-section 3 of Section 11 of Odisha Value Added Tax Act is an over-riding section and provides for an option to pay taxes under composition scheme for works contractor.

The said sub-section also widens its scope by including dealers undertaking the construction of flats, dwellings or buildings or premises and transferring them in pursuance of an agreement along with the land or interest underlying the land.

The following table depicts the comparison of the new section with the older one:

Section on or after 1.10.2015	Section up to 30.9.2015
Government to prescribe	Government may be notification provide for a scheme of composition
For a dealer engaged in works contract to avail the composition scheme	For dealers executing works contract including dealers undertaking the construction of flats, dwellings or buildings or premises & transferring them in pursuance of an agreement along with the land or interest underlying the land
Subject to fulfilment of certain conditions	Subject to such conditions and restrictions as may be specified in the said notification including the provision  for option of dealer for such scheme

 

Section 5 (Amendment of Section 16)

This section lays down the criteria fulfilling which a dealer can opt for the scheme of turnover tax in lieu of VAT. One such criteria being the gross turnover shall not exceed forty Lakhs.

The government here has brought an amendment by increasing the said limit to Fifty Lakhs

Section 6 (Amendment of Section 20)

The Department has inserted a new sub-section namely (3-a) to put a cap on the input tax credit claimed. It has restricted the amount of credit to the amount of tax actually paid.

The clause so inserted read as under: -

“Notwithstanding anything contained in this Act, no amount of input tax credit shall be allowed to a registered dealer on any purchase of goods in excess of the amount of such tax actually paid under this Act."

The amendment may warrant to such cases where the input tax credit can only be availed if the amount claimed is actually being paid in the invoice which is a base document for taking input tax credit.

Meaning there by, the dealer needs to assure from the party from whom the goods have been purchased as to the VAT mentioned in the invoice is actually being paid. Alternatively as a preventive measure the dealer need to check the online credit reflection in his login

before claiming any Input tax credit to safe guard his position under law.

Section 7 (Amendment of Section 25)

Section 25 sub-section (2) has been substituted by another sub-section which states:

If the registering authority, on verification of application for registration, is satisfied that the requirements of the provisions of this Act and the rules have been complied with, he shall register the applicant and grant him a certificate of registration in the prescribed form, which shall specify the class or classes of goods dealt in or manufactured by him and such registration certificate shall be assigned a number in the manner as may be prescribed.

The Act earlier required as a part of the registration process to conduct an inquiry before issuing the registration certificate. However with the electronic registration in place with an online application and document verification, such enquiry is no longer required.

Section 8 (Amendment of Section 27)

Section 27 has been substituted as follows:

“The registering authority may, for proper realization of tax payable under this Act and for enforcement of lawful conduct of any dealer from time to time, demand from a registered dealer, a reasonable security, or additional security, as the case may be, to be paid in the prescribed manner and if the security so demanded is not paid within such time as may be specified in the order demanding such security, he may, notwithstanding anything contained in this Act, cancel the certificate of registration granted to him.

Provided that, no such cancellation shall be made unless the dealer has been given a reasonable opportunity of being heard”.

Hence, the registering authority shall have the powers to demand for reasonable or additional security from the dealer for proper utilization of tax payable. In case, the said amount is not deposited by the dealer within the said time and manner then the registering authority shall have the power to cancel the registration after providing a reasonable opportunity of being heard.

Section 9 (Amendment of Section 30)

The section dealing with the suspension of the registration certificate has been omitted.

Section 10 (Amendment of Section 31)

With the abolition of section 30, a few changes were required to be made which are summarized as follows:

Clause (d) of sub-section 1 of section 31 is substituted as-in the event of death of the proprietor, the registration shall stand cancelled automatically irrespective of the availability of the successor at the time of death.

Clause (h) under sub-section 1 of section 31 has been inserted stating that the issuing authority can cancel the registration certificate on the basis of "good or sufficient reasons".

Sub-section 2 of section 31 expresses the point of time which renders the certificate of registration inoperative. This amendment is made by insertion of clause (c) to section 31(2) applicable to section 31(1) (g). Further clause (d) to section 31(2) applicable to section 31(1) (h).

Sub-section (3) shall be substituted as follows:

a registered dealer whose certificate is liable to be cancelled under clauses (a), (b), (c), (e), (f) and (g) shall apply for its cancellation in such manner and within such prescribed time.

Also Section (3-a) has been inserted where in the issuing authority is required to inquire into the matter before cancelling the registration certificate. He is also required to provide a reasonable opportunity of being heard before such cancellation.

Section 11 (Amendment of Section 32)

The sub-section (1) shall be substituted as follows: (a) Where the registered dealer:

Sells or disposes of his business or any part thereof

• Or discontinues his business,
• Or changes the name, style, or nature of business,
• Or makes any addition or deletion in the class of goods dealt in or manufactured,
• Or changes his place of business (other than principal place of business) or warehouse,
• Or opens a new place of business; or

(b) Effects any other change in the constitution or principal place of business, (c ) Changes the ownership of the business or its basic status,

Then he shall duly inform the registering authority within the prescribed time.

Sub-section (2) has been substituted as follows:

• In case of clause (a) the amendment shall be done electronically on the basis of application.
• In respect of clause (b) the registering authority may amend the registration certificate or reject the application for such amendment.
• In respect of clause (c) the registering authority may issue a fresh registration certificate or reject the application for such amendment.

However before any application is rejected the registration authority is required to give a reasonable opportunity of being heard.

Sub-section (7) of the said section is the penalty section.

If the dealer fails to make an application of the amendment within the prescribed time, he shall have to pay a penalty of ₹ 100 each day of default subject to a maximum of ₹ 10,000.

Section 12 (Amendment of Section 33)

Sub-section (5) of section 33 of the principal Act, gives the dealer an option to voluntarily revise his return in case of any taxes being due after the filing of returns. However, no such option is available in case notice for audit has been issued and received by the dealer.

The words "or as a result of such audit", has been omitted.

Another clarifying section, section 9 has been inserted where it is specifies that, in case of return filled electronically, signature by the dealer or authorized person is not required.

Section 13 (Amendment of Section 39)

Sub-section (5) of section 33 of the principal Act has been substituted to:

If a registered dealer furnishes the return in respect of any tax period, it shall be deemed to be self-assessed.

Section 14 (Amendment of Section 41)

The Act earlier required that once the tax audit of the dealer, the authorized officer shall submit an 'Audit Visit Report' within seven days of its completion to the assessing authority along with all its statements, documents and evidences of evasion of tax.

After this amendment,

On the completion of the tax audit, the authorized officer shall determine the tax liability and shall also serve a notice along with the 'Audit Visit report'.

If the dealer agrees to all the findings in the 'Audit Visit Report' and pays in full the net tax liability as calculated by the officer along with an additional 25% of the amount as penalty within 30 days of the date of service of the notice, there shall be no assessment on account of such audit.

If the dealer does not comply and fails to make the payment the authorized officer shall submit the 'Audit Visit Report' to the assessing authority along with the statements recorded and documents obtained evidencing suppression of purchases or sales, or both, erroneous claims of deductions including input tax credit and evasion of tax, if any, relevant for the purpose of investigation, assessment or such other purposes.

Section 15 (Amendment of Section 42)

Section 42 (1) is being amended with the inclusion of section 43 along with section 39 and section 40 and hence now it is possible to conduct an audit assessment where turnover escaping assessment is already done unlike earlier where assessment was possible only in case of self assessment or provisional assessment.

Section 42 (5) has been amended where penalty prescribed as twice has been brought down to an amount equal to that of the tax payable.

Section 42 (6) talks about time period for completion of audit assessment which was prescribed as six months and commissioner may extend it to further period of six months. However after the 2015 amendment the same period can be extended to further six months. Hence after amendment the maximum period for the assessment to be completed is 18 months which was earlier only 12 months.

Further sub-section 7 has been omitted which required the assessment to be completed within a period of one year from the date of receipt of the audit report.

Section 16

By way of section 16, a new section is inserted namely Assessment in Certain cases in lieu of Audit

This section shall over-ride sections 41 and 42, where in the commissioner may by notification select large tax payers or dealers with large turnover or the dealers who have been granted provisional refund under section 58, for assessment in lieu of tax audit and audit assessment.

After notifying, the assessing authority may serve on such dealer a notice, requiring him to appear on a date and place specified therein and produce or cause to be produced such books of account, documents relying on which the assessing authority, may proceed to assess the said dealer.

The dealer shall have a maximum of thirty days to produce the relevant books of accounts and documents.

If the dealer fails to produce the books of accounts and documents, the assessing authority shall proceed to complete the assessment to the best of his judgment on the basis of the material available and after conducting such enquiry as may be necessary.

If the dealer produces the books of accounts and documents, the assessing authority shall after examining the material so produced and after conducting an enquiry as required assess the tax due.

Penalty of twenty five percent on the tax amount to be imposed irrespective of any other penalty imposed in respect of any other assessment completed earlier.

An assessment under this section shall be completed within a period of six months from the date of service of the notice on the dealer. However the Commissioner may, on the merit of a case allow such further time not exceeding six months for completion of the assessment proceeding.

Section 17 (Amendment of section 43)

The assessing authority, after the amendment of this section can proceed to assess the turnover of the dealer based on the information available even if the dealer has not been earlier assessed under section 39, 40, 42 and 44.

Also, section 43 (2) has been amended to bring down the penalty to a maximum of an amount equal to the amount of tax.

A new sub-section (4) has been inserted which requires the completion of turnover escaping assessment within six months from the date of service of notice and commissioner may extend it to further six months. Further, under special circumstances and with good and sufficient reasons, the commissioner may allow a further period of six months. Hence the maximum period for the assessment to be completed is 18 months.

Section 18 (Amendment of Section 50)

Section 50 stands for payment and recovery of tax, sub-section (4) enumerates the details of cases where the amount so demanded, under various provisions are to be collected under section 50. As the new section 42A for assessment has been inserted in the amendment act 2015, suitable amendments were made to incorporate the section 42A paripasu to the existing provisions for the uniformity of law.

Section 19 (Amendment of Section 54)

Section 54 of the OVAT Act, stands for deduction of tax at source from the payment of works contract.

A much awaited issue stands cleared under the amendment that the principal contractor need not deduct any tax from the payment to the subcontractor. The provision enumerates the following points which are of immense importance and in the line of modernisation and e-mechanism:

Where a dealer executing works contract, enters into further contract with sub-contractor to execute such work, he shall not deduct any further amount towards tax in respect of the said work.

Tax deducted at source by the deducting authority shall be transferred proportionately to the subcontractor by the principal contractor in such manner as may be prescribed. This limb talks about credit transfer mechanism which can really help the unnecessary rerun mechanism and can save resources of the Department and also poor assesses.

Vide sub-section (1-a), where the Commissioner is satisfied on his own information that the deducting authority requires enrolment, he may enrol the deducting authority in such form as may be prescribed and assign him with an identity code.

E-payment of TDS has been introduced with which the manual payment method has been rendered void.

A new proviso has been inserted in clause (a) of sub-section (5) wherein if a dealer executing works contract, enters into further contract with sub-contractor to execute such work, the sub-contractor shall not require a certificate of no deduction in respect of the said works contract.

Section 20 (Amendment of Section 57)

A new sub-section (2-a) under in section 57 is inserted, where in it is provided that, the Commissioner shall, in such manner and within such time, as may be prescribed, refund to a dealer, any amount of tax, deducted at source in respect of such dealer, in excess of the amount due from him under this Act.

Section 21 (Amendment of Section 58)

Sub-section (1) of section 58 has been substituted as follows:

1. If a registered dealer has filed a return or a revised return for grant of refund on account of sales referred to in clauses (b), ( c)or (d) of section 18 and if he has not adjusted the amount due in accordance to section 33 in any of his returns, then he shall make an application to the assessing authority for refund in such manner and form as may be prescribed.
2. The registered dealer may apply for grant of refund relating to a quarter after six months of filing the return or revised return for such quarter.
3. To establish the correctness of the claim, the assessing authority may call for such additional information as he may think necessary.
4. The assessing authority shall grand a provisional refund of 90% of the claim on the basis of verification within a period of ninety days from the date of application of such refund.

However, if there is any delay in completing the verification due to non co-operation of the dealer or due to any other reason attributable to the dealer then such period shall not be taken into consideration while calculating the period of ninety days. Further he shall not be entitled to any interest (if admissible under section 59) on such period.

Also, if the dealer causes delay without any valid reason, the authority can reject the refund application after giving the dealer an opportunity of being heard.

All cases of refund, for which provisional refunds have already been granted under clause (d), shall be assessed under sub-section (1) of Section 42-A within a period of twelve months from the end of the year containing tax periods relating to the returns for which refund has been granted.

On assessment if it is found that the dealer has been granted excess refund as provisional refund, then the claim for excess refund shall be disallowed and the dealer shall be liable to pay an interest at the rate of 2% per month on such excess amount from the date of grant of provisional refund till the date of issue of assessment order.

Refund can be claimed only if the application for such refund has been made within twelve months from the end of the year containing the period to which the return relates.

Section 22 (Amendment of Section 59)

In pursuance of insertion of section 42A, in the principal Act, in section 59, in clause (a) of subsection (1), after the figure "42", the figure "42-A" shall be inserted.

Section 23 (Amendment of Section 65)

The closing stock statement that was required to be furnished by the dealer who are liable to pay tax under section 11 but are not required to file audit report has been dispensed with and hence such compliance is no longer required.

Sub-section (2), talks about the penalty provisions if the application for amendment is not filed within the due time prescribed, the dealer may have to pay a penalty of ₹ 100 per day of default. However with the amendment in the said section the penalty shall be limited to a maximum amount of ₹ 10,000. The substituted provision will be applicable from 1st of October 2015

Section 24 (Amendment of Section 77)

In pursuance of insertion of section 42A, in the principal Act, in sub-section (1) of section 77, the figure "42-A" shall be inserted after the figure "42".

Substituted sub-section (7) requires the Appellate authority to pass the appellate order within a period of 3 years. No such time limit had been prescribed earlier.

The other provisions of the said section are:

In disposing of an appeal, the appellate authority may, within a period of three years from the date of admission of such appeal or as the case may be, in pending cases within a period of three years from the date of commencement of the Odisha Value Added Tax (Amendment) Act, 2015, after giving the appellant a reasonable opportunity of being heard and after causing such enquiry as he may deem necessary-

(a) Confirm, reduce or annul the assessment of tax, or the imposition of interest or levy of penalty, if any; or

(b) Enhance the assessment including any part thereof whether or not such part is the subject matter in the appeal; or

(c) Set-aside the assessment and direct the assessing authority to make a fresh assessment after such further enquiry as may be directed.

(d) A new sub-section (7-a) has been introduced to put a cap on the time limit on the cases that have been set aside for conducting a fresh assessment. Such assessments shall be completed within 2 years from the date of order causing such assessment.

Discussions to this article

[Srikanthan S]

Dear Sir,

The Amendment to Sec.30 of the original Act puts the onus on the buyer of the goods within the State to ensure that his seller remits the tax to the Govt. Many State Governments are amending the Act to this effect. Starting with Mahalakshmi case in Maharashtra, many assessing officers disallow the ITC claimed by the Dealers on the ground that the seller did not remit the tax to the Govt. Madras High Court was in favour of the Dealers in such cases; however, recently the TN Govt also has amended the Act to enable this.

Amended Sec.19 - Input Tax Credit

1. there shall be input tax credit of the amount of tax paid under this Act, by the registered dealer to the seller on his purchases of taxable goods specified in the first Schedule.

   Provided that the registered dealer, who claims input tax credit, shall establish that the tax due on purchase of goods has actually been paid in the manner prescribed by the registered dealer who sold such goods and that the goods have actually been delivered.

   Provided further that the tax deferred under Sec.32 shall be deemed to have been paid under this Act for the purpose of this sub-section.

Many a time, the unsuspecting buyer is penalized for no fault of his. This will come as a rude shock to the Buyer when his own assessment takes place may be after 4-5 years. He may be liable to pay interest and penalty also as prescribed under the relevant State law.

In the case of M/s Milan Plywood Suppliers v State of Karnataka (judgment dt.10.7.2014),= 2014 (7) TMI 1095 - KARNATAKA HIGH COURT the Karnataka High Court has held:

5. The assessee has claimed deduction of input tax on the basis of three invoices showing purchase of goods from three dealers. Admittedly, these dealers have not remitted the tax recovered from the assessee. Their whereabouts are not known. As rightly pointed out by the Tribunal, mere existence of invoices is no proof that under the said invoices, materials are purchased and tax is paid. The Assessing Authority was not justified in drawing the inference that the said three dealers are bogus merely on this fact. He should have made an enquiry to find out the genuineness of the transaction as set out by the Tribunal. It is only after such enquiry if the Assessing Authority is satisfied that the transaction in question is genuine one, the assessee has paid the money, he has received the goods and necessary entries are made in the books of accounts of the assessee, then merely because of the dealer has not remitted the tax would not enable the Assessing Authority to deny the benefit to the assessee. As the said exercise had not been done, after setting aside the order, the Tribunal was justified in directing the Assessing Authority to undertake that exercise as suggested by the Tribunal. In the facts and circumstances of this case, we are satisfied that the approach of the Tribunal is just and proper and is in accordance with law. In that view of the matter, we do not see any merit in this revision petition. Accordingly, these petitions are dismissed.

This was in an STRP filed by the Dealer to quash an order by which the matter was sent back to the assessing officer.

How can the buyer be penalized for a fraud in the earlier transaction in the supply chain for which he was no party to. The State Governments should enable an on-line reconciliation of the Sales v Purchase between any two TINs on a monthly basis. Andhra Pradesh seems to have enabled this kind of reconciliation. Once the Seller uploads the data, the Buyer's data has to match; if not, the Buyer will not be able to submit his Return.

Readers' views are solicited.

[Srikanthan S]

Please also see: S.K.Sales Agencies - [2015] 86 VST 202 (Karn).

Held, that it was for the respondent-authorities, before passing the order, to call upon the dealer to submit the documents and consider those documents produced, given an opportunity of hearing to the petitioner and thereafter pass appropriate orders in accordance with law. It was also for the authorities to call upon the dealers from whom he had purchased the goods to ascertain whether they had collected tax at the time of purchase of goods. The Court directed the dealer to appear before the authorities on a specific date who might be given due opportunity to cross-examine the selling dealers to ascertain whether there was suppression at their level.

[CA.Tarun Agarwalla]

Dear Sir

i agree with the views. however the law so drafted .

in case of Odisha the input credit is available for view on the web site, however the same is not on real time basis and the post revision of return by the seller may not be ruled out.