REVENUE ADMINISTRATION

SALES TAX DEPARTMENT

Introduction

Sales tax, an indirect tax, occupies an important place in the state budget. Its importance can only be gauged from the total revenue yield from this tax which has more or less compensated for the loss of revenue resulting from the introduction of prohibition.

Sales tax was first introduced in the erstwhile state of Hyderabad under Luxury Sales Tax Act (III of 1357 Fasli) 1946, authorising the levy of sales tax on luxury articles. Subsequently with effect from 1st May 1950, levy of General Sales Tax was imposed on the sale of goods in the ex-Hyderabad State by Act No. "XIV of 1950 replacing the Luxury Sales Tax Act, III of 1357 Fasli, which in course of time underwent various amendments made by the Legislature. Even after the reorganisation of the States in November 1956, the Hyderabad General Saks Tax Act, 1950. continued to be in force in the Marathwada Region up to December 31, 1959. From January 1, 1960, the unified Act i.e. the Bombay Sales Tax Act, 1959, has been introduced repealing the Hyderabad General Sales Tax Act, 1950. The assessments for the period up to December 31, 1959, were, however, made under the provisions of the Hyderabad General Sales Tax Act, 1950.

Bombay Sales Tax Act

The Bombay Sales Tax Act, 1959. which came into force on the 1st of January 1960, is applicable to the entire State of Maharashtra. The new Act embodies the various recommendations of the Sales Tax Enquiry Committee and has repealed and replaced the various Sales Tax Laws in force in the five sales tax regions of the state.

In the initial stages, a dealer who holds goods purchased before 1st January 1960, from a registered dealer in the old Bombay State area will, on the resale of the goods, be liable to pay tax under the new Act subject to certain modifications and the benefit of Section 8 (a) of the Bombay Sales Tax Act, 1953 will not be available to him. Similarly, exemption granted under the earlier laws to certain classes of goods generally or conditionally will, in some cases, not be accrued under the new law.

The Bombay Sales of Intoxicants Taxation Act has now been repealed and provisions for the taxing of spirituous medical preparations containing alcohol more than 12 per cent by volume (but other than those declared by government to be not capable of causing intoxication) will now be taxed under the Bombay Sales Tax Act, 1959, at the rate of 30 paise per rupee at the first stage only. Similarly, country liquor and foreign liquor brought in India including spirits, wines and fermented liquors will be taxed at the rate of 45 paise per rupee.

Schedule 'A' of the Bombay Sales Tax Act, 1959, lists the exempted goods subject in some cases to conditions and Schedules B to E, the taxable goods. Taxable goods are broadly divided into five classes: (i) goods declared as important to inter-State trade, taxable only at the first stage (Schedule B, Part I); (ii) goods declared as important to inter-State trade, taxable only on the last sale (Schedule B, Part II); (iii) to other classes of goods taxable at only the first stage of sale (Schedule C); (iv) 9 classes taxable only at the last sale (Schedule D3); and (v) 21 classes specified and all other goods not specified elsewhere in any Schedule, taxable at the first stage and on the last sale and, again, to a very small incidence, at the retail stage.

Classes of Tax

The tax at the first stage is called the 'Sales Tax' and that on the last sale is called the 'General Sales Tax'. The tax at the retail stage is the 'Retail Sales Tax'. Sales tax and the general sales tax as the names imply, are payable on sales. However, when a registered dealer purchases goods from an unregistered dealer or from Government, he pays purchase tax. When he pays purchase tax, the dealer does not pay the sales tax or the general sales tax on the resale of goods as the case may be. The registered dealer does not become liable to purchase tax if he resells the goods without alteration within three months (6 months in the case of cotton) and in that case on such resale he pays in the routine way, sales tax or general sales tax or both, as may be due. The purchase tax is not a separate tax and is only intended to seal off a loophole for evasion.

Classes of dealers

The new Act creates five classes of dealers, viz.:—

(1) The registered dealer: Every dealer liable to pay tax must obtain a registration: failure to do so is regarded as an offence.

(2) The licensed dealer: Every registered dealer who makes sales annually of more than Rs. 50,000 worth to other registered dealers may obtain a licence, on the strength of which he can make purchases, free of general sales tax for resale inside the state. The licensed dealer will thus generally be the wholesaler or semi-wholesaler.

(3) The authorised dealer: Every registered dealer whose sales in inter-state or export trade are more than Rs. 30,000 worth of goods annually or who sells that quantity to another authorised dealer who resells them in inter-state-trade or ex port may obtain an authorisation against which he can purchase goods free of all taxes (or at a reduced rate in certain circumstances) for inter-state or export resale either by him self or smother authorised dealer to whom he sells them.

(4) The recognised dealer: Any registered dealer whose annual turnover of sales exceeds Rs. 25,000 of taxable goods manufactured by him may obtain a recognition against which he may make tax-free purchases of goods for use directly in manufacturing taxable goods for sale, save, generally speaking, for goods on which the tax is at the rate of two per cent, or less and machinery.

(5) The permit holder: A registered dealer whose commission agency purchases on behalf of principals disclosed in his books exceed Rs. 30,000 per year, may obtain a permit, on the strength of which he may make purchases tax-free or at a reduced rate, in certain circumstances for his principals.

Under the new Act, the turnover limit attracting registration is Rs. 10,000 for a manufacturer and Rs. 30,000 for every other dealer. Dealers who are not liable to registration because their turnover has not exceeded the limits specified under the Act but are registered under the Central Sales Tax Act, 1956, will be liable to pay tax under the Bombay Sales Tax Act under conditions specified in the Act.

Every care is taken to see that the tax as far as possible, would not be recovered more than what is intended in the law. This is done by the set-offs allowed under the law.

Under the Hyderabad General Sales Tax Act, sales tax officer was the assessing authority in respect of the dealers whose turnover for the period of assessment reached or exceeded Rs. 30,000. After the enforcement of the Bombay Sales Tax Act, 1959, he is the assessing and licensing authority for all the registered dealers irrespective of their turnover. Prior to this, the assistant sales tax officers who were the registering authorities were also the assessing and licensing authorities in respect of the dealers whose turnover was below Rs. 30,000.

The sales tax officer receives periodical returns from the dealers who are registered under the Sales Tax Act, showing their gross turnover during the period and tax payable by them. He checks the returns, passes orders of assessments and takes steps for the recovery of the tax assessed. He has also to detect cases of evasion of the tax. As the head of the office, he is primarily responsible for its general administration.

The officer next above the sales tax officer is the assistant commissioner of sales tax, with his headquarters at Aurangabad. The sales tax officers seek clarification and advice from him in matters relating to the administration of the Act. Appeals from the orders of the sales tax officers lie to the assistant commissioner and revisions to the commissioner of sales tax, stationed at Bombay. So also revisions against the orders of the assistant commissioner lie with the commissioner or the Appellate Tribunal constituted for that purpose.

Statistics of Collection

The following table gives the amount of sales tax collected in the Bhir district, the collection charges, and the proportion of collection charges to the amount collected for the period from 1955-56 to 1960-61:—