Page 253 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Indirect Tax Laws

Notes indeed be useful to cull out a fixed proportion of large and medium sized dealers for regular
assessments on a regular basis. In Maharashtra and Rajasthan, the dealer whose turnover exceeds
40 lakhs in any year is required to get his accounts audited in respect of such year.

Penal Provisions

Since VAT is purely a State subject, States will have incorporated penal provisions as per their
requirements. However, these are in general more stringent than those in the earlier sales tax
laws. Since, the State taxation laws have allowed certain additional benefits in the form of input
tax credit, which was not available earlier, they have introduced more stringent penal provisions
to discourage evasion of taxes.

Tax Rates under VAT

Under the VAT system, there are only two basic VAT rates of 4% and 12.5% plus a specific
category of tax-exempted goods and a special VAT rate of 1 % for gold and silver ornaments, etc.
Thus the multiplicity of rates in the sales-tax system has been done away with under the VAT
system.

Exempted Category

Under exempted category, there are about 50 commodities comprising of natural and unprocessed
products in unorganised sector, items which are legally barred from taxation and items which
have social implications. Included in this exempted category is a set of maximum of 10
commodities flexibly chosen by individual States from a list of goods (finalised by the
Empowered Committee) which are of local social importance for the individual States without
having any inter-State implication. The rest of the commodities in the list will be common for
all the States.

4% VAT Category

Under 4% VAT rate category, there are largest number of goods, common for all the States,
comprising of items of basic necessities such as medicines and drugs, all agricultural and industrial
inputs, capital goods and declared goods. The schedule of commodities are attached to the VAT
Acts of the States.

12.5% Category

The remaining commodities, common for all the States, fall under the general VAT rate
of 12.5%.

1% Category

The special rate of 1% is meant for precious stones, bullion, gold and silver ornaments, etc.

Non-VAT goods

Petrol, diesel, ATF, other motor spirit, liquor and lottery tickets are kept outside VAT. The States
may or may not bring these commodities under VAT laws. However, it is agreed that all these
commodities will be subjected to 20% floor rate of tax.

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