REVENUE AND FINANCE

SALES TAX DEPARTMENT.

SALES TAX.

SALES TAX IS AN INDIRECT TAX. Being an indirect tax, the burden is not much felt by the tax payer and thus the State Government is in a position to collect large sums causing less dissatisfaction among the tax payers.

It has become a very important source of revenue. It occupies a very significant place in the State's Budget. Its importance can be gauged from the extent of amount that is being collected through this source. It has more than compensated the loss of revenue by the introduction of prohibition.

Being an elastic source of revenue, it helps to collect more revenue by levy of tax at different stages of sales and at different rates on different commodities. The rate of tax is proportionately more on articles which are not daily necessities of life and therefore it can be said that indirectly more tax is levied on rich classes. It thus helps to bridge the gap between the income of the poor and that of the rich.

The Sales Tax Act was introduced for the first time in the then State of Bombay, from 1st October 1946. It was levied under that Act only at the last stage of sale and was, therefore, known as a single point tax. This system lasted till 31st October 1952. Under this system any reseller whose turnover of sales exceeded Rs. 30,000 or any processor or importer whose turnover exceeded Rs. 10,000 was made liable to pay the tax. The rate of tax was 0-0-6 per rupee on some selected goods which were normally consumed by persons belonging to higher income groups.

There was a provision for voluntary registration under the Act for some time. Tax on the goods despatched outside the then Bombay. State was levied at a reduced rate.

From 1st November 1952, a new Act was put in force and it came to be known as Multi-point Tax Act. Unlike the single point tax, tax under this Act was levied at every stage of sale excepting stages exempted under the provisions of the Act and the Rules thereunder. This method of tax helped to raise more revenue and also to check evasion to some extent.

The rate of tax under this system was 0-0-3 per rupee except on articles scheduled as tax free and as special goods. The rate of tax varied from 1 per cent, to one anna in a rupee, on special goods.

The limit for registration under the Act was Rs. 30,000 without any distinction between a reseller and importer or processor. However, a limit of Rs. 5,000 was prescribed for the dealers dealing in special goods. This Act remained in force up to 31st March 1954.

Current Sales Tax Act.

From 1st April 1954, a new Act was brought into force and the same continues till to-day. The system of levy of tax under this Act is known as Two Point Tax system. The tax is levied at every stage except when sale is to a dealer holding a licence and/or authorization. It thus has the element of multi-point taxation. This has helped to raise more revenue.

Under this Act, the tax is levied at the first point on the first sales or on the first purchase and at second point on subsequent sale of the same article, except when sold to a licensed dealer, There are three classes of tax, viz., (1) Sales Tax, (2) Purchase Tax and (3) General Sales Tax. Unlike under the system of single point and multi-point tax there is a provision to levy purchase tax under this two-point tax. This has helped to check evasion to a great extent. The Purchase Tax is, however, not a separate tax and is only intended to seal off a loophole for evasion of either of the taxes. In effect, therefore, there is only a two-point tax system, viz., a tax generally levied at the first stage of sale (sales tax) and the tax levied generally at the last stage of sale (general sales tax).

The limit of registration under this new Act is Rs. 25,000 for re-sellers and Rs. 10,000 for processors, manufacturers and importers, etc. (i.e., who obtain goods from places outside the State of Maharashtra).

The rate of tax on different commodities is levied at different rates ranging from 1/4% to 7%, in addition to general sales tax.

Great care is taken to see that at any point of sale, the tax is not collected at more than two points as provided in the Act. To ensure this, there is provision to allow set-off under rule 11 (1) to manufacturers and processors and under rule 11 (2) to resellers. This is a salient feature of this Act. This set-off is allowed to the extent of taxes paid on the purchases of goods such as raw materials, lubricants, subsidiary materials, fuel, machinery and allied goods. These provisions have ensured that the tax as far as possible, would not be recovered more than what is intended in the law.

Licences and Authorisations.

Another distinguishing feature of this Act is of granting licences and authorisations to dealers whose turnover of sales either to registered dealers or to dealers of other States exceeds Rs. 50,000. A dealer holding both these certificates can buy goods without payment of any of the taxes and can send goods outside the State or out of India. This has helped to encourage inter-State sales and export of goods. This has also helped dealers of Maharashtra State to compete successfully with the traders of other States where the rate of tax is less as compared to the rate of tax in Maharashtra.

The dealers who hold licences only and do not hold authorisations can effect purchases free of general sales tax which is levied at second stage. This helps big dealers to buy goods without locking up their capital in payment of general sales tax at the time of purchases. This provision has thus removed difficulty in the way of wholesale trade.

The rate of tax applicable to different commodities is given in Schedule "B" of the Act. Schedule "A" gives the list of commodities on which there is no tax.

Under the present Act, dealers have to send quarterly returns. In these returns, they are expected to give details of their sales as well as of purchases. This helps to compare their sales with purchases at the time of assessment.

Licences and Authorizations.

Till 31st December 1956, dealers were required to file returns as per financial year. But thereafter they are allowed, if they so choose, to file quarterly returns as per their accounting year. This has given a great relief to the business community as otherwise they had to take out details per quarter financial year which involved a lot of troubles. This also will go a long way to expedite the assessments.

With the introduction of the Central Sales Tax, 1956, it became necessary to provide for the taxation of goods re-sold within the various areas of the State by dealers who were registered under the Central Sales Tax Act, but not under the local sales tax laws. Such an amendment was made in the enactments applicable to the five regions. Simultaneously with the introduction of decimal coinage, the enactments were suitably amended.

On 13th December 1957, textiles, sugar and tobacco and its products ceased to be liable to sales tax by virtue of the Bombay Sales Tax Laws (Special Exemptions) Act, 1957 and became subject only to the levy of additional excise duty imposed under the central enactment called the Additional Duties (Goods of Special Importance) Act, 1957. This exemption did not, however, affect stocks of these commodities which were held in the then Bombay State on the midnight of 12th December 1957 and, therefore, the Special Exemptions Act, provided for the continuance of the levy of Sales Tax in respect of such stocks alone, for a further period which actually expired on 30th June 1958.

Goods not taxed.

No tax is levied on goods specified in Schedule (A) containing 42 entries. These entries categorically contain the following classes of goods:-

(i) Goods required mostly by agriculturists for cultivation, e.g., agricultural implements worked or operated exclusively by human or animal agency of the following kinds: chaff-cutters, clod-crushers, harrows, iron and leather mhots, iron ploughs and plough points, pick-axes, rahats, shovels, sickles, spades and wooden seed drills (entry 1); cattle, sheep and goats (5); cattle-feeds including; fodder and other concentrates but excluding cotton seed (6);. fertilizers(17); and manures including oil cakes (32);

(ii) Necessaries of the poorer sections of the community, e.g., betel leaves (2); bread (3); butter-milk and curds (4); cereals and pulses in all forms (7); [Except when sold in sealed containers.] chillies, chilly powder, tamarind and turmeric, whole or powdered, (9) [Except when sold in sealed containers.]; eggs (15); firewood and charcoal (18); fish (19) [Except when sold in sealed containers.]; flour including atta, maida, sufi and bran, (20) [Except when sold in sealed containers.]; flowers (21); food and non-alcoholic drinks consumed at a hotel, restaurant, refreshment room, eating house or other place where such food and drinks are served (except when the cost of rood and drink served at one time by one person exceeds one rupee) (22); fresh fruits (23); fresh vegetables and edible turners (25); gur (26); kerosene (28); kum-kum (30); mangahutra with black glass beads, sold at a rate not exceeding Rs. 5, each (31); meat (33) [Except when sold in sealed containers.]; milk, whole or separated (34); salt (37); slates and slate sticks and crayons, foot-rules, exercise and drawing books and lead pencils, and mathematical and drawing instrument boxes used by primary and secondary school students (38); text-books, books for supplementary reading and school atlases sanctioned by the State Government, Director of Education for the State of Maharashtra, the Educational Inspectors of Divisions or the Secondary School Certificate Examination Board or approved by the Maharashtra Municipal Schools Committee (41); and water, other than aerated and mineral waters (42);

(iii) Implements or raw materials of cottage industries, e.g., charkha and other implements used in the production of handspun yarn or handwoven cloth as may be specified by the State Government by notification in the official gazette. Commission agents will not generally pay any of the taxes, and in cases where they have to pay, provision exists for arranging refund of these taxes to them. In cases where dealers carry on processing or manufacture of goods for sale, it has been provided in the rules that the sales tax paid on the purchases of goods used as raw materials, processing materials, fuel, lubricants containers, packing material, shall set off from the sales tax payable, sale of the manufactured or processed goods.

Goods subject only to one class of tax.

Schedule B lists 79 specific entries and entry 80 " all goods other than those specified from time to time in Schedule A and in the preceding entries ". The first 8 of these entries composed of certain raw materials of industry, viz., raw cotton (whether ginned or unginned) (1); cotton seeds (2); artificial silk yarn (3); hides and skins (4); oil-seeds (5); raw silk and silk yarn (6); raw wool, wool tops and woollen yarn (other than knitting yarn) (7); and staple fibre and staple fibre yarn (8); and entries 9 to 18, which specify those goods out of the goods declared essential by Parliament [under the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952], which are not specified in Schedule A to the Act, are subject only to the general sales tax and not to the sales tax. On the other hand, entries 19 to 22, viz., betel nuts (19); text-books and periodical journals except such text-books and journals as are declared tax-free under entries 36 and 41 of Schedule A, and other than account books, diaries, calendars, and books containing space exceeding eight pages for being written up (not being exercise books) (20); coal (21); and safety matches (excluding matches used as fire-works) (22), are subject only to the sales tax and not to the general sales tax.

General Sales Tax.

The rate of the general sales tax is only one-fourth per cent., in the case of bullion and specie (23), and one per cent., in the case of entries 1 and 2, i.e., raw cotton and cotton seeds, and only three pies in the rupee in the case of entries 3 to 8 and entry 24 [articles made of gold and silver (of fineness not less than 75 per cent.) not containing any precious stones, synthetic or artificial precious stones, or pearls, real, artificial or cultured]. In all other cases it is six pies in the rupee.

Sales Tax.

The sales tax, however, is graded from one-fourth per cent., in the case of bullion and specie (23) and articles made of gold and silver, etc. (24) to three pies in the rupee in the case of entries 19 to 22 and entry 80. On several items, which may be said to form middle-class requirements, the rate is six pies in the rupee and on several other entries, which may be classed as " luxuries," it is twelve pies in the rupee. A sales tax of fifteen pies in the rupee is imposed on goods mentioned in entry 79-A " textile fabrics of any kind including son's, dhotis, sheets, chaddars, blankets and other similar articles [except (i) cloth woven on handlooms, (ii) coarse and medium cotton cloth woven in mills or on powerlooms, and (iii) tracing cloth] sold at a rate not less than Rs. 3 per yard."

Administrative Organisation.

An independent Sales Tax Office existed for the whole of the Ratnagiri district with headquarters at Ratnagiri, from May 1953; but eventually it was closed down in October 1955 and the district has been split up into three divisions and the allotment is made as under, amongst the neighbouring district offices for the purpose of the administration of the Sales Tax Act:-

(i) The following areas are attached to the Sales Tax Officer, Kolhapur:-

Talukas.- (1) Ratnagiri, (2) Sangameshwar, (3) Lanje-mahal, (4) Rajapur, (5) Kankavli mahal, (6) Deogad, (7) Malvan, (8) Vengurla mahal, (9) Kudal mahal and (10) Sawantwadi.

(ii) The following areas are attached to the Sales Tax Officer, Satara:-

Talukas.-(1) Chiplun, (2) Khed, (3) Guhagar and (4) Dapoli.

(iii) The only taluka of Mandangad has been allotted to the Sales Tax Officer, Thana, as it is adjacent to his jurisdiction and is easily accessible.

The headquarters of the above three divisions are at the respective district headquarter places, viz., (1) Kolhapur, (2) Satara and (3) Thana, each under a Sales Tax Officer. A staff of five Inspectors is working under each of the three Sales Tax Officers. One Sales Tax Officer is in charge of the whole of Ratnagiri district and a portion of Kolhapur City only for the purpose of assessment work and the administration of the Sales Tax Act. Statement 'A' shows the total number of dealers in Ratnagiri district.

The Sales Tax Officer exercises the powers delegated to him under the Bombay Sales Tax Act and Rules for the general administration of the Act in his charge. He registers and licenses dealers, who are liable to pay tax on their sales and is invested with the power of assessing them. He receives periodical returns from dealers who are registered, showing their gross turnover during the period and the tax payable by them. He checks the returns with the Assistance of the Sales Tax Inspectors working under him, passes orders of assessment and takes steps for the recovery of tax assessed. He has also to detect cases of evasion of tax. He is the head of his office and is primarily responsible for the general administration of the sales tax law.

The Officer next above the Sales Tax Officer is the Assistant Commissioner of Sales Tax (Administration), of the circle, which includes Ratnagiri district. He is stationed at Poona. The Sales Tax Officer seeks clarification and advice from him in certain matters relating to the administration of the Act. He has also to submit to the Assistant Commissioner all cases which he is not competent to deal with. Appeals against the orders passed by the Sales Tax Officer lie with the Appellate Assistant Commissioner of the Circle-a separate post created for the purpose-and from the Appellate Assistant Commissioner to the Additional Commissioner of Sales Tax, Central Division, stationed at Bombay and from the Additional Commissioner to the Sales Tax Tribunal. The Commissioner of Sales Tax, Maharashtra State, Bombay, is the Head of the Department.

Statistics of Collections.

The following table gives for the years noted, the amount of sales tax collected in Ratnagiri District since the introduction of the Sales Tax Act in 1946.

The annual expenditure incurred on establishment approximately works out at 3 per cent, of the sales tax receipts.

SOURCES.

Ratnagiri district is considered to be one of the backward districts with no large-scale industries. The main occupation of the people is agriculture, the produce being mainly rice, nagli and wari which is the staple food of the people. The grain produce is hardly sufficient for four to five months of the year and the district has to depend on the imports from outside areas. A greater portion of population has to migrate for their livelihood to big cities like Bombay, Poona and Ahmadabad. Small-scale industries are however, in existence, comprising of ten bidi factories, three kaju factories, one factory each of ice, soap and silica.

Mangoes of Alphonso variety are produced in large quantity in Ratnagiri district. A mango-pulp factory is recently started for supplying mango-pulp in closed tins for sale. Two iron-mines have also been started. The district imports mangalore tiles on a large scale and also dandeli wood from Kanara district. This yields a fairly big amount of sales tax revenue.

STATEMENT A.

Statement showing the number of dealers under Bombay Sales Tax Act, Central Sales Tax Act, Bombay Sales of Intoxicants Taxation Act, and Bombay Sales of Motor Spirit Taxation Act for Ratnagiri district.

STATEMENT B.

Statement showing the information in respect of the Collection. Charges and their proportion to the Sales Tax Collection in respect of Ratnagiri district.

STATEMENT B-contd.

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