REVENUE ADMINISTRATION

SALES TAX DEPARTMENT

Sales Tax, the most important source of revenue to the State, was first introduced in the former State of Madhya Pradesh (Central Provinces and Berar) with effect from 1st June, 1947, by the Central Provinces and Berar Act (XXI of 1947). The Act underwent various amendments by the Legislature important amongst which were those effected by the Amendment Acts, dated 8th October, 1948, 11th April, 1949 and 1st December, 1953. The Act was repealed on 1st January, 1960, by the Bombay Sales Tax Act (LXXVI of 1959). Up to 30th November, 1953, the Act provided for levy of tax only on the sales of goods excluding those mentioned in Schedule II appended to the Act. By the Amendment Act (XX of 1953), however, provision was made to tax the purchase price of the goods purchased, on the strength of declarations prescribed under Central Provinces and Berar Sales Tax Rules [26(3) of 1947] and utilized for purposes other than those specified in the declaration i.e., if resold, out of the former State of Madhya Pradesh or used unauthoritatively in the manufacture of goods.

Dealers liable to pay tax.

Under sub-Section (5) of Section 4 of the Act, dealers whose turnover of sales exceeded Rs. 25,000 (even though it be of tax free goods) in a year were liable for registration and consequently liable to pay tax in accordance with other provisions of the Act. The limit of such turnover for importers and manufacturers was Rs. 5,000 and Rs. 10,000, respectively; and the limit of turnover for societies registered under the Co-operative Societies Act (1912) dealing exclusively in goods produced or manufactured by such society or its members without the aid of hired labour was also at Rs. 25,000.

Unlike the Bombay Sales Tax Act (1953), the Central Provinces and Berar Sales Tax Act (1947), provided levy of tax only at the point of sale, i.e., it was a single point tax. The provisions of section 4(6) of the Act which came into force with effect from December 1, 1953, do not actually amount to purchase tax but are only intended to seal off a loop-hole for evasion of sales tax on goods purchased on the strength of declarations.

No tax was levied on goods specified in Schedule II which consists of 43 entries. Goods specified in part I of Schedule I, were taxable at one anna in a rupee up to 7th April, 1957. This rate was changed to 7 paise after the introduction of decimal coinage system. The goods specified in Part II of Schedule I, were taxable at 3 pies in a rupee upto 7th April, 1957 and at 2 paise from 8th April, 1957 onwards. All other goods not covered by any of the entries of Schedule 1 or II were taxable at 6 pies in a rupee upto 7th April, 1957 and at 3 paise from 8th April, 1957 onwards.

The scheme of the Act (1947) is such that no tax is imposed on the sale of goods made in the course of inter-state trade and commerce. Further, tax on a particular transaction was to be paid only once. Generally, the wholesalers or manufacturers were not required to pay tax, unless they sell their goods to unregistered dealers or customers direct. The goods required directly for use in the manufacture of articles for sale could also be purchased free of tax by manufacturers and by giving declaration in the prescribed form to the seller.

Administrative Organisation.

The Sales Tax Officer exercises the powers delegated to him by the Commissioner of Sales Tax under the rules for the general administration of the Act (1947). He registers dealers who are liable to payment of tax under the Act and receives periodical returns from them which show their gross turnover, taxable turnover and the tax payable by them. After the close of the year followed by dealers, an assessment case of all the returns for that year is prepared and the dealer is assessed by the Sales Tax Officer or the Assistant Sales Tax Officer as the case may be.

Up to June, 1958, the Assistant Commissioners of Sales Tax used to exercise the powers of assessment in case of dealers whose gross and taxable turnover exceeded Rs. 20 lakhs and Rs. 4 lakhs, respectively. In July, 1958, powers of assessment of dealers whose gross turnover exceeded Rs. one lakh in the preceding year were delegated to the Sales Tax Officers relieving the Assistant Commissioners of assessment work. The Assistant Sales Tax Officers assessed dealers having gross turnover below Rs. one lakh. The Sales Tax Officer is also responsible for detection of cases involving evasion of tax. In short, the Sales Tax Officer is the head of the office and is primarily responsible for the general administration of the circle.

Immediately above the Sales Tax Officer, is the Assistant Commissioner of Sales Tax, and he is the first appellate authority. Any order passed by the Sales Tax Officer is appealable and the appeals lie with the Assistant Commissioner. The Assistant Commissioner was also incharge of the administration of the Act in the circles in his jurisdiction. He used to guide the Sales Tax Officer in complicated matters. Against the appellate order passed by the Assistant Commissioner, second appeal could lie before the Deputy Commissioner of Sales Tax. Against the second appellate order, the dealer could either prefer revision before the Board of Revenue or the Commissioner of Sales Tax. In the latter case, however, the decision of the Commissioner is final, whereas the order of the Board of Revenue is subject to a reference on points of law before the High Court.

Current Sales Tax Act.

The Bombay Sales Tax Act, 1959, came into force on 1st January, 1960, and is applicable to the entire State of Maharashtra. The Central Provinces and Berar Sales Tax Act, 1947, stands repealed with effect from January 1, 1960.

The Bombay Sales Tax Act, 1959, embodies the various recommendations of the Sales Tax Enquiry Committee and repeals and replaces the various Sales Tax Laws in force in the State.

In the initial stages a dealer who held goods purchased before 1st January, 1960, from a registered dealer in the old Bombay State area was, on the resale of the goods, 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, was not available to him. Similarly, exemption granted under the earlier laws to certain classes of goods generally or conditionally did, in some cases, not accrue 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 more than 12 per cent, of alcohol by volume (but other than those declared by Government to be not capable of causing intoxication) are now taxed under the Bombay Sales Tax Act, 1959 at the rate of 30 paise in a rupee at the first stage only. Similarly, country liquor and foreign liquor brought into or manufactured in India including spirits, wines and fermented liquors are taxed at the rate of 45 paise [This rate was reduced subsequently.] in a rupee.

Schedule A of the Bombay Sales Tax Act, 1959, lists the exempted goods subject in some cases to conditions, and Schedules B and E list 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) other classes of goods taxable at only the first stage of sale (Schedule C); (iv) 9 classes, taxable only at the last sale (Schedule D); 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 Taxes.

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 (six 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 loop-hole for evasion.

Classes of dealers.

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

(1) The registered dealer.—The registered dealer is licensed dealer and has to obtain registration, if he is liable to pay tax; failure to do so is regarded as an offence.

(2) The licensed dealer.—Every registered dealer whose annual sales to other registered dealers exceed Rs. 50,000 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 thus becomes the wholesaler or semi-wholesaler.

(3) The authorised dealer.—Every registered dealer whose sales in inter-State or export trade exceed Rs. 30,000 worth of goods annually or who sells that much quantity to another authorised dealer who resells them in inter-State trade or export 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 trade either by himself or another authorised dealer to whom he sells them.

(4) 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 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.

(5) The Permit holder.—A registered dealer whose commission agency purchases on behalf of principal 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 circumstance for his principals.

Under the new Act the turnover limit making registration compulsory 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 precaution 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.

Statistics of collection.

The following statement gives the amount of sales tax collected from 1950 to 1964-65.

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