ca rajat talati, mumbai1 seminar on new mvat audit report – form 704 6.12.2008 organised by mulund...
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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]
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CA Rajat Talati, Mumbai 2
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
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CA Rajat Talati, Mumbai 3
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
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CA Rajat Talati, Mumbai 4
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
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CA Rajat Talati, Mumbai 5
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
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CA Rajat Talati, Mumbai 6
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
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CA Rajat Talati, Mumbai 7
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”
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CA Rajat Talati, Mumbai 8
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
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CA Rajat Talati, Mumbai 9
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
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CA Rajat Talati, Mumbai 10
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?
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CA Rajat Talati, Mumbai 11
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.
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CA Rajat Talati, Mumbai 12
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.
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CA Rajat Talati, Mumbai 13
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
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CA Rajat Talati, Mumbai 14
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
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CA Rajat Talati, Mumbai 15
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
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CA Rajat Talati, Mumbai 16
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.
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CA Rajat Talati, Mumbai 17
Part 3/ Sch I- Normal VAT Dealer
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
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CA Rajat Talati, Mumbai 18
Part 3/ Sch I- Normal VAT Dealer
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.
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CA Rajat Talati, Mumbai 19
Part 3/ Sch I- Normal VAT Dealer
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.
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CA Rajat Talati, Mumbai 20
Part 3/ Sch I- Normal VAT Dealer
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
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CA Rajat Talati, Mumbai 21
Part 3/ Sch I- Normal VAT Dealer
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.
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CA Rajat Talati, Mumbai 22
Part 3/ Sch I- Normal VAT Dealer
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.
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CA Rajat Talati, Mumbai 23
Part 3/ Sch I- Normal VAT Dealer
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)
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CA Rajat Talati, Mumbai 24
Part 3/ Sch I- Normal VAT Dealer
Rent for immovable property Interest/ Dividend Income Commission Income, if included in GTO
of sales 1l Balance Turnover
Taxable Net Sales T.O.
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CA Rajat Talati, Mumbai 25
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%
….%
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CA Rajat Talati, Mumbai 26
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.
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CA Rajat Talati, Mumbai 27
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).
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CA Rajat Talati, Mumbai 28
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
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CA Rajat Talati, Mumbai 29
3. Computation of Turnover of Purchase including Branch Transfer
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
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CA Rajat Talati, Mumbai 30
3. Computation of Turnover of Purchase including Branch Transfer
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)
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CA Rajat Talati, Mumbai 31
3. Computation of Turnover of Purchase including Branch Transfer
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?
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CA Rajat Talati, Mumbai 32
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.
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CA Rajat Talati, Mumbai 33
Annexure I to Schedule 1 Computation of Setoff :-
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
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CA Rajat Talati, Mumbai 34
Annexure I to Schedule 1 Computation of Setoff :-
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
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CA Rajat Talati, Mumbai 35
Annexure I to Schedule 1 Computation of Setoff :-
5. Details of Allowable Setoff i.e. Total of 3 – Total of 4
As per Return As per Audit Difference
Total Setoff Rs.
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CA Rajat Talati, Mumbai 36
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
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CA Rajat Talati, Mumbai 37
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.
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CA Rajat Talati, Mumbai 38
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.
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CA Rajat Talati, Mumbai 39
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
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CA Rajat Talati, Mumbai 40
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)
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CA Rajat Talati, Mumbai 41
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)
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CA Rajat Talati, Mumbai 42
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
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CA Rajat Talati, Mumbai 43
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
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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.
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CA Rajat Talati, Mumbai 45
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.
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CA Rajat Talati, Mumbai 46
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
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CA Rajat Talati, Mumbai 47
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.
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CA Rajat Talati, Mumbai 48
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)
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QUERIES?
THANK YOU ALL