Penalty waived for late MVAT audit reports by builders, developers

Waiver is also for builders who are using rule 58 of MVAT rules

The Maharashtra government has decided to waive off the penalty for delay in filing of MVAT audit report by builders and developers using rule 58 of MVAT rules.
 
According to officials, this waiver will be given only for a delay of one month from the due date of January 15, 2014. MVAT is the audit done in compliance of rules and procedures of Maharashtra value added tax rules.
 
Officials also added that this waiver is only for those builders and developers, who are using rule 58 of MVAT rules, which is pending amendment.
 

The Supreme Court in its decision on imposition of value added tax on builders and developers in Maharashtra had directed the state government to amend rule 58 1-A. MVAT rule 58 (1-A) provides for deduction of expenses on labour and service charges for the execution of the work related to the goods that have already been transferred.  

 
In 2006, the Maharashtra government had imposed 5% VAT on apartments following an order of the Supreme Court in the case of K Raheja versus the government of Karnataka.  Thereby, on all constructions, where agreement was signed between 2006-2010, VAT of 5% was to be imposed. The matter then was referred to Bombay high court, which upheld the decision of the Maharashtra state government, upon which the grieved sought relief of the Supreme Court.
 
In the interim, the state government worked out an option for the builders and developers to switch to a mode of composite tax payment of 1% VAT. This also applied to those builders and developers who had moved the Court for relief. However, some opted for rule 58 and preferred to wait for the court decision.

Recently, the Supreme Court upheld the decision of the state government to impose 5% VAT and directed amendment to rule 581-A. According to the SC order, if the suitable amendment is not done and intimated to the SC, then it will be ultra vires or declared null and void.

The tax revenue arrears pending to be recovered following the SC decision amounts to around Rs 5,000-6,000 crore, as per official sources.  
 
While the state revenue department has already submitted its proposal for amendment to the state legislature, the Act is yet to be amended to incorporate the changes.

In the interim, for facilitating those builders and developers who are still using rule 58 1-A to file their audit reports, the penalty for late filing up to one month has been waived. The penalty is pegged at one-tenth of the total sales.