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What types of incentive schemes currently exist?
There are broadly two types of incentive schemes. The first category is an exemption scheme where a dealer is exempt from the payment of tax on sales as well as on purchases of raw materials purchased against prescribed form, for a fixed period or/and up to a monetary limit. The second category is a deferment where a dealer is allowed to postpone the payment of tax on sales and purchase tax payable on raw materials purchased against prescribed form, for a fixed period or/and up to a monetary limit
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Do I continue to avail the benefit of exemption from tax?
Yes. Sales by the eligible unit would be exempt from tax. However, VAT would be payable on the value added by subsequent sellers.
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Do I continue to get the benefit of purchases of raw materials at nil rate against Form BC or N-15EC?
No. Instead, an amount equal to the allowable set-off would be refunded. Form N-15EC and Form BC are abolished
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How should I claim refund or set-off on raw materials
The amount of refund due should be declared on your VAT return and followed by a refund application
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How do I account for VAT if I have an exemption incentive
You have to complete a VAT return Form 209 and file it quarterly (See leaflet MVAT107) Where you have been charged VAT on the purchase of raw materials you can claim a refund of the amount equal to the set-off admissible on the VAT return. Where you have been charged VAT on other business purchases you can claim this as a set-off, which can be adjusted against the VAT payable, if any
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Do I issue tax invoices for sales to my VAT registered customers if I have an exemption incentive?
Yes. Tax invoice to contain certificate in the prescribed form and amount of tax should be shown as ‘nil’
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How should I account for VAT if I am a customer of a dealer with an exemption incentive
Since you have not been charged VAT, there is no VAT for you to claim set-off on. You should charge your customer VAT on your profit margin (value addition) and issue a tax invoice showing VAT on this amount only.
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What amount do I deduct from my eligibility amount if I have an exemption incentive
Amount to be deducted from the exemption incentive is as follows: Particulars - Amount to deducted from the monetary limit of incentives Turnover of sales under the MVAT Act of the goods specified in the Eligibility Certificate - A sum equal to the amount of VAT, which would have been payable Turnover of inter-state sales of the goods specified in the Eligibility Certificate - A sum equal to 4% of the turnover of sales, If the goods are generally liable to CST at a rate lower than 4%, a sum equal to such lower rate, A sum equal to 1% in the case of a Mega Project Note : Inter-State sales not supported by Form C are not eligible for exemption
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How do I account for VAT if I have a deferment incentive?
You should collect VAT on sales of goods. Payment of VAT collected is to be deferred for the agreed number of years or up to a monetary amount
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Do I issue tax invoices for sales to my VAT registered customers if I have a deferment incentive
Yes. You issue tax invoices for the full amount of tax due, collect it from your customers, and defer the payment of tax so collected until the prescribed limit.
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How should I account for VAT if I am a customer of a dealer with a deferment incentive?
You pay the VAT charged to you and claim set-off under the normal provisions
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What amount do I deduct from my eligibility amount if I have a deferment incentive
The amount of VAT payable on sale of the goods specified in the Eligibility Certificate is to be deducted from the eligibility amount
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What are the VAT implications when I start to repay the VAT deferred under my incentive
This is a financial transaction and there are no implications for VAT
