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THE GUJARAT VALUE ADDED TAX (AMENDMENT) Bill, 2008 GUJARAT BILL No. 14 OF 2008 25th March 2008

A BILL Further to amend the Gujarat Value Added Tax Act, 2003: It is hereby enacted in the Fifty-ninth Year of the Republic of India as follows:1. Short title and commencement. (1) This Act may be called the Gujarat Value Added Tax (Amendment) Act, 2008. (2) It shall come into force on the 1st April, 2008. 2. Amendment of section 2 of Guj. 1 of 2005 In the Gujarat Value Added Tax Act, 2003 (Guj. 1 of 2005) (hereinafter referred to as "the principal Act"), in section 2, (1) before clause (1), the following clause shall be inserted, namely:"(1A) "additional tax" means the additional tax leviable and payable under sub-section (1A) of section 7 or sub-section (6) of section 9;" (2) after clause (36), the following clause shall be inserted, namely :(37) "zero rated sale" means a sale of goods by a registered dealer to another registered dealer on which the rate of tax leviable shall be zero but tax credit on the purchase related to that sale is admissible:" 3. Insertion of new section 5A in Guj. 1 of 2005. In the principal Act, after section 5, the following section shall be inserted, namely :"5A. Zero rated sale. The following sale shall be zero rated sale for the purpose of this Act and tax credit on the purchase related to such sale shall be allowed subject to such conditions as may be prescribed:(1) Sale of goods to the Developer or Co-developer of Special Economic Zone as defined in the Gujarat Special Economic Zone Act, 2004 (Guj. 11 of 2004); or (2) sale of goods to a unit carrying on its business in the processing area or in the demarcated area of Special Economic Zone and approved as such by the Approval Committee as defined in the Gujarat Special Economic Zone Act, 2004 (Guj. 11 of 2004): Provided that the sale of goods specified in Schedule III shall not be zero rated sale:

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Provided further that the sale of certain goods or sale of goods by any dealer or class of dealers as may be specified by the State Government by notification in the Official Gazette, shall not be zero rated sale.". 4. Amendment of section 7 of Guj. 1 of 2005. In the principal Act, in section 7, after sub-section (1), the following sub-section shall be inserted, namely: "(1A) Subject to the provisions of this Act, there shall be further levied an additional tax on the turnover of sales of goods liable to be taxed under sub-section (1). at the rate of(i) two and half paise in the rupee on the goods specified in the entries at serial numbers 25, 46B, 48A, 49A, 49B, 51A and 87 in Schedule II; and (ii) one paisa in the rupee on the goods specified in the entries in Schedule II other than the entries mentioned in clause (i) above: Provided that the additional tax shall not be levied on the sale of, (a) goods declared to be of special importance in section 14 of the Central Sales Tax Act, 1956 (74 of 1956); (b) goods specified in entry at serial number 13 in Schedule II; and (c) such goods as the State Government may, by notification in the Official Gazette, specify.". 5. Amendment of section 9 of Guj. 1 of 2005. In the principal Act, in section 9, after sub-section (4), the foltowing sub-sections shall be inserted, namely:"(5) Where a dealer liable to pay tax under this Act purchases taxable goods sale of which is zero rated under section 5A and the goods so purchased by him are (i) consigned or dispatched for branch transfer or to his agent outside the State, (ii)used as raw materials in the manufacture or in the packing of goods so dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State, (iii) used as fuel for the manufacture of goods, (iv) used as raw materials or capital goods in manufacture of goods specified in Schedule I or goods exempt from the whole of the tax by a notification under sub-section (2) of section 5 or in the packing of goods so manufactured, (v) used as fuel or capital goods in generation of electrical energy including capti\(e power, (vi) not connected with his business, (vii) used as fuel in motor vehicles, (viii) used as capital goods in transfer of property in goods (whether as goods or in some other form) involved in execution of works contract, (ix) used for transferring the right to use for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable considerations, or
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(x) used for any other purpose as may be specified by the State Government by notification in the Official Gazette, then such dealer shall be liable to pay purchase tax on the turnover of such purchases at the rate set out against each of such goods specified in Schedule II. (6) Subject to the provisions of this Act, there shall be further levied an additional tax on the turnover of purchases of goods liable to be taxed under sub-section (1), (2), (3), (4) or (5), at the rate of(i) two and half paise in the rupee on the goods specified in the entries at serial numbers 25, 468, 48A, 49A, 498, 51A and 87 in Schedule II, and (ii) one paisa in the rupee on the goods specified in the entries in Schedule II other than the entries mentioned in clause (i) above: Provided that the additional tax shall not be levied on the purchase of, (a) goods declared to be of special importance under section 14 of the Central Sales Tax Act, 1956 (74 of 1956); (74 of 1956) (b)goods specified in entry at ser ell number 13 in Schedule II; and (c) such goods as the State Government may, by notification in the Official Gazette, specify.". 6. Amendment of section 11 of Guj. 1 of 2005. In the principal Act, in section 11,(1) in sub-section (1), in clause (a), in sub-clause (ii), for the words, brackets and figures "sub-section (1) or (2)", the words, brackets and figures "sub-section (1), (2), (5) or (6)" shall be substituted; (2) in sub-section (3), in clause (b) and in the proviso to clause (b), for the words "turnover of purchases", the words "taxable turnover of purchases within the State" shall be substituted; (3) in sub-section (5), the existing paragraph below clause (p) shall be numbered as paragraph (I) and after paragraph (I) as so numbered, the following paragraphs shall be inserted, namely:"(II) Notwithstanding anything contained in clause (d) or (dd) in this subsection and subject to such conditions and in such manner as may be prescribed, a registered dealer shall be allowed to claim tax credit for the taxable goods held in stock on the date of registration which are purchased after 151 April, 2008 and during the period of one year ending on the date of registration. (III) Notwithstanding anything contained in clause (nn) in this sub-section and subject to such conditions and in such manner as may be prescribed, a registered dealer, whose permission to pay lump sum tax under section 14, (a) is no longer valid on account of total turnover exceeding rupees fifty lakhs, or (b) is cancelled on request by such dealer, and becomes liable to pay tax under section 7, shall be allowed to claim tax credit for the taxable goods held in stock which are purchased after 151 April, 2008 and during the period of one year ending on the date of liability to pay tax under section 7.".
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7. Amendment of section 14 of Guj. 1 of 2005. In the principal Act, in section 14,(a) in sub-section (1), in clause (a), in the proviso, (1) in clause (ii), (i) before the words "purchases the goods", the words "has purchased in the previous year or" shall be inserted; (ii) before the words "imports", the words "has imported in the previous year or" shall be inserted; (2) in clause (iii), before the words "receives the goods", the words "has received in the previous year or" shall be inserted; (3) in clause (iv), before the words "engaged in the", the words ''was engaged in the revious year or" shall be inserted; (4) in clause (v), before the words "effects the sales", the words "has effected in the previous year or" shall be inserted; (b) in sub-section (4), for the words, brackets and figures "purchase tax leviable under subsections (1) and (3)", the words, brackets and figures "tax leviable under sub-sections (1), (3) and (6)" shall be substituted. 8. Amendment of section 14B of Guj. 1 of 2005. In the principal Act, in section 148, in sub-section (5), for the words, brackets and figures "sub-sections (1), (3) and (4) of section 9", the words, brackets and figures "sub-sections (1), (3), (4) and (6) of section 9" shall be substituted. 9. Amendment of section 59B of Guj. 1 of 2005. In the principal Act, in section 598, (1) in sub-section (3), in clauses (a) and (b), for the words "equal to two paise in a rupee", the words "at the rate as may be specified by the State Government by notification in the Official Gazette" shall be substituted; (2) sub-section (15) shall be deleted. 10. Amendment of Schedule I to Guj..1 of 2005 In the principal Act, in Schedule I, in the entry at serial No. 23, the sub-entry (ii) shall be deleted. 11. Amendment of Schedule II to Guj. 1 of 2005. In the principal Act, in Schedule II, (1) for the entry at serial No. 58A, the following entry shall be substituted, namely :1 2 3 "58A Machinery (including spare parts, accessories and components thereof) used in manufacture of goods excluding domestic appliances (whether fitted or not with electric
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motor) such as grinder, mixer, grinder-cum-mixer, juicer, blender, water purifier, flour mill, toaster, ;oven, etc. Four paise in the rupee"; (2) in the entry at 'serial No. 87, for. the word and figure "Schedule I", the words and figures "Schedule I or Schedule III" shall be substituted. STATEMENT OF OBJECTIVE AND REASONS To accelerate the process of development of human resources and infrastructural development, additional financial resources are required in the exchequer. Budget speech, made on the 25th February, 2008, proposes to Value Added Tax Act, 2003. Moreover, various repressentations were received by the Government from traders and businessmen to remove the difficulties and hardships caused in the implementation of the said Act. The State Government has, therefore, considered it necessary to amend the said Act so as to give effect to the budget speech of the Finance Minister and to reduce hardships of traders and businessmen. Clause 3 of the Bill seeks to insert a new section 5A so as to provide for zero rated sales of goods to the Developer or Co-developer of Special Economic Zone and to a unit carrying on its businessmen in the processing area or in the demarcated area of Special Economic Zone. Clause 5 of the Bill seeks to insert a new sub-section (5) in section 9 so as to provide for levy of purchase tax on the basis of the use of the goods so purchased: The tax credit of tax paid on. the purchase of goods, sale of which is zero rated, is made admissible by proposed amendment in section 11. Clause 4 of the Bill seeks to insert a new sub-section (1A) in section 7 so as to provide for levy of additional tax on sales of goods. Similarly, clause 5 of the Bill seeks to insert a new subsection (6) in section 9 to provide for levy of additional tax on purchase of goods. sub-clause (2) of clause 6 of the Bill seeks to clarify the words "turnover of purchases." The amended clause now clearly states that reduction of tax credit at the rate of four per cent. will be made on the taxable turnover of purchases within the'State. Sub-clause (2) of clause 6 seeks to allow tax credit for the purchases made prior to the date of registration and of the goods purchased during the period when the permission granted under section 14 has remained valid to avoid double tax burden on the dealers. Clause 7 seeks to amend proviso under sub-section (1 )(a) of section 14. Now, the permission to pay lump sum tax shall not be available to the dealer who has, in the previous year,(i) purchased goods in the course of inter-state trade or commerce or imported goods from a place out of the territory of India, (ii) received the goods from his branch situateo ~'Itside the State or from consigning agent outside the State; (iii) engaged in the activity of the manufacture; (iv) effected sales or purchases through the commission agent. Sub-clause (1) of clause 9 seeks to' amend section 59B. The State Government is empowered to decide the rate of tax deducted at source. Sub-clause (2) of clause 9 of the Bill seeks to delete sub-section (15) of section 59 B so as to allow tax deduction at source where payment is to be made by the State Governmerit on specified sale of works contract. Clause 10 of the Bill seeks to delete sub-entry (ii) of entry 23 of Schedule I. The firewood of any kind still remains tax free under the, said entry.
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Sub-clause (1) of clause 11 of the Bill seeks to substitute the entry at serial NO.58A in Schedule II so as to remove the confusion that which type of machinery is covered under the said entry. Entry 87 in Schedule II is residuary entry and it covers all the goods other than those specified in Schedule I and the entries 1 to 86 mentioned in Schedule II. The separate rates of tax for certain goods are specifically mentioned for the goods mentioned in Schedule III. It is, therefore, necessary, for removal of doubt, to make mention of Schedule III also in entry at serial No,87 in Schedule II. Sub-clause (2) of clause 11 of the Bill provides accordingly. This Bill seeks to amend the said Act to achieve the aforesaid objects. VAJUBHAI VALA MEMORANDUM REGARDING DELEGATED LEGISLATION This Bill involves delegation of legislative powers in the following respects:Clause 3. - (i) Section 5A proposed, to be inserted by this clause empowers the State Government to prescribe by rules, the conditions subject to which, a tax credit on the purchase related to Zero rated sale shall be allowed; (ii) the second proviso to section 5A empowers the State Government to specify by notification in the Official Gazette, sale of certain goods or sale of goods by any dealer or class of dealers shall not be zero rated sale. Clause 4. - Clause (c) of proviso to sub-section (1A) proposed to be inserted in section 7 by this clause empowers the State Government to specify by notification in the Official Gazette, such goods on which additional tax on sale of goods shall not be levied. Clause 5. - (i) Clause (x) of sub-section (5) proposed to be inserted in section 9 by this clause empowers the State Governmetn to specify by notification in the Official Gazette, any other purpose for which the goods or capital goods so purchased by the dealer are used then such dealer shall be liable to pay purchase tax on the turnover of such purchases; (ii) clause (c) of proviso to sub-section (6) proposed to be inserted in section 9 by this clause empowers the State Goverment to specify, by notification in the Official Gazette, such goods on which additional tax on the purchas.e of goods shall not be levied. Clause 6.- (i) Para (ii) proposed to be inserted in sub-section (5) of section 11 by this clause empowers the State Government to prescribe by rules, the conditions subject to which and the manner in which a registered dealer shall be allowed to claim tax credit for the taxable goods held in stock on the date of registration which are purchased after 1 st April, 2008 and during the period of one year ending the date of registration; (ii) para (iii) in sub-section (5) proposed to be inserted in sub-section (5) of section 11 by this clause empowers the State Government to prescribe by rules, the conditions subject to which and the manner in which a registered dealer, whose permission to pay lump sum tax under section 14 of the said Act, is not remained valid for the reasons stated therein, shall be allowed to claim tax credit for the taxable goods held in stock which are purchased after 1 st April, 2008 and during the period of one year ending on the date of liability to pay tax under section 7. Clause 9.- Sub-section (3) of section 59B proposed to be amended by this clause empowers the State Government to specify, by notification in the Official Gazette, the rate at whch the tax shall be deducted from specified sale price at the time of payment by a person responsible for paying specified sale price to a contractor or sub-contractor.

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The delegation of legislative powers as aforesaid is necessary and is of a normal character. Dated the 14th March, 2008. VAJUBHAI VALA

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