Maharashtra Govt clears VAT confusion

DQC News Bureau Mumbai, Jan 23

The Maharashtra Government has issued a circular in response to
the clarification sought by TAIT on the correct VAT to be applied on certain IT
goods, which got re-categorized in the Central Excise Tariff heading with the
change in the internationally accepted Harmonized System of Nomenclature (HSN).

According to the circular (#VAT-2005/Act/VD-1 issued in Mumbai)
the applicable rate of VAT for the notified IT products stays at four percent
irrespective of the change in the Central Excise Tariff heading (or the HSN
code) for these products.

The circular signed by BC Khatua, Commissioner of Sales Tax,
Maharashtra State, Mumbai, stated, "It is clarified that pending issue of
the new notification, all of the products earlier described in column three of
the State Government Notification dated Oct 17, 2005 will continue to be treated
as information technology products for the purpose of the Entry C-56
irrespective of the change in the Central Excise Tariff heading for these
products. This clarification takes effect from Jan 1, 2007."

It may be recalled that on Jan 1, 2007, the Ministry of Finance
had effected certain changes in Chapters 84 and 85 of the Central Excise Tariff
to align the Central Excise Tariff with certain commitments to the World Customs
Organization. These changes created confusion on the VAT applied by some states
as these states have defined different VAT rates based on the HSN
classification. And as per these changes, certain IT goods, which were
attracting a VAT of four percent, were attracting 12.5 percent VAT.

Accepting the need for a fresh notification on the changes made
by Government of India with effect from the Jan 1, 2007, the circular states
that steps are being taken to issue a new notification. "This is likely to
take some time," it mentioned further.

Commissioner of Sales Tax, through this circular also informed
that this circular cannot be used for legal interpretation of provisions of law,
as it is 'clarificatory' in nature. If any member of the trade has any
doubt, he may refer the matter to this office for further clarification.