CA Kamal Gangaramani B. Com., FCA, DISA(ICAI): COMPOSITION SCHEME FOR RESTAURANTS, HOTELS, CATERERS, ETC., UNDER MVAT Act, 2002.

VAT Composition Scheme for Retailers under MVAT

COMPOSITION SCHEME FOR RESTAURANTS, HOTELS, CATERERS, ETC., UNDER MVAT Act, 2002.

Composition scheme under VAT regime can be said to be a simplified scheme for calculating, charging, collection and payment of sales/vat tax. The basic idea of introducing the scheme is to enable small business men in resale and retails business to carry business without maintaining detailed accounts, enabling easy calculation of tax payable by them. This saves them from rigors of regular scheme under MVAT law.

Section 42(1) of Maharashtra Value Added Tax Act, 2002 (MVAT, 2002) empowers State Government to Notify Composition Scheme for dealers in State of Maharashtra who are engaged in business of resale and retail. State Government has notified Composition Scheme vide notification No. VAT-1505/CR-105/Taxation-1 dated 1st June 2005 and amended form time to time.

Separate scheme have been notified in the above mentioned notification as applicable to:

Restaurants, Eating House, Refreshment Room, Boarding Establishment, Factory Canteen, Clubs, Hotels and Caterers
Bakers
Retailers
Dealers in Second-hand Motor Vehicles

Scheme for Restaurants, Eating House, Refreshment Room, Boarding Establishment, Factory Canteen, Clubs, Hotels and Caterers.

What are class of Sale and Purchase eligible for the Composition Scheme:

aggregate of sales of food and nonalcoholic drinks, not being food, alcoholic and nonalcoholic drinks served for consumption in any restaurant or hotel or any part thereof having gradation of "Four Star " and above or supplied by such restaurant, or hotel,
served for consumption at or in the immediate vicinity of any restaurant, hotel, eating house, refreshment room, boarding establishment, factory canteen or in any club or
supplied by way of counter-sale by such restaurant, hotel, eating house, refreshment room or boarding establishment or club, or
served for consumption at any place other than a restaurant, hotel, eating house, refreshment room boarding establishment factory canteen, or any club by a caterer.

Composition amount (Tax Payable):
The composition amount shall be:

5% from 1-7-2009 (8 % before) of the turnover of sales in the case of a registered dealer and 10 per cent of the turnover of sales in the case of an unregistered dealer.
Where the dealer is also serving alcoholic drinks, the tax payable on sales of alcoholic drinks will not be compounded under this notification but the tax payable on sales by such dealer of food and nonalcoholic drinks will be allowed to be compounded under this notification.

Conditions in which this scheme will be applicable:

The claimant dealer shall not be entitled to claim any set off under the MVATax Rules, 2005, in respect of the purchases corresponding to any goods which are sold or resold or used in packing of goods referred above.
The claimant dealer shall not collect tax including composition amount separately in the bill, cash memo or invoice issued to the customer.
From 1-7-2009, the claimant dealer shall apply in the form-2 in respect of caterers and in the ‘Form-1’ in case of others dealers to Joint Commissioner of Sales Tax (Registration) in case of dealers in Mumbai and in other cases to Joint Commissioner of Sales Tax (VAT Administration).
The Claimant dealer is not eligible to issue ‘Tax Invoice’ in respect of sales of goods referred above.
If the Claimant dealer opts for the composition scheme on or after 1-7-2009 but on or before 30-9-2009 then he shall be eligible to pay tax under the composition scheme w.e.f. 1-7-2009.
if newly registered dealer opts for composition scheme within one month of obtaining registration certificate, then the scheme will be available form date of registration.
if dealer opts for the scheme after 1st April, then the scheme will be available from next financial year.

Form 1