Maharashtra Government clears VAT confusion

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.

According to the circular (No. VAT-2005/Act/VD-1 issue 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, states, "It is clarified that pending issue of the new notification, all of the products earlier described in column 3 of the State Government Notification dated 17th October 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 the 1st January 2007."

It may be recalled that on 1st January 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 rate based on the HSN classification. And as per this 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 1st January 2007, the circular states that steps are being taken to issue a new Notification. "This is likely to take some time," it mentions further.

Commissioner of Sales Tax, through this circular also informed that this circular cannot be made use of 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.