Matter for circulation- Sales of car not taxable under DVAT

Recently, Hon'ble Delhi High Court in the matter of Anand Decors & Ors. v. CTT, New Delhi, has pronounced that the cars, even though fall within capital goods, but sale of used cars is not subject to VAT under Delhi VAT Act, by virtue of section 6(3) of ibid.

Brief facts of the case:

The appellants were manufacturing certain commodities & were registered dealers under DVAT Act. They purchased motor vehicles(though non-dealing in the trading of motor vehicles) but didn't avail ITC thereon under DVAT. The revenue authorities considered the subsequent sale of said vehicles(post use thereof) as chargeable to VAT. The Tribunal also upheld the view of department. Thereafter, the appellant moved to High Court. And following observations were made by the Court:

1) Capital goods & capital assets are distinguishable;

2) Motor Vehicles would be a capital good, since the expression used is "directly or indirectly used in manufacturing......" & its purchase thereof would form part of business, but ITC thereon is not available by virtue of section 9(2).

3) Four conditions have be met out for excluding sale of car from the ambit of taxability under DVAT(i.e. exemption u/s 6(3) of ibid):

• There should be a sale of capital goods;
• The said capital goods should have been used by the dealer from the time of purchase till sale;
• The purpose for which the capital goods were used should be for making sale of taxable goods or taxable goods and non-taxable goods. The capital goods should not be exclusively used for making sale of non-taxable goods.
• The dealer should not have taken tax credit in respect of such capital goods under Section 9.

4) In the instant case, all these conditions have been duly fulfilled by the appellant, accordingly, the benefit of exemption from VAT can't be denied.

The said judgement may be accessed from the following link:

Download Judgement

Comments:

This verdict has emerged as a breather to the industry. Undue litigation from departmental side would be halted till the time any overruling verdict by the Apex Court is pronounced.

Such types of litigation prone areas should also be taken up by the Ministry of Finance at the time of framing GST laws.

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DVAT (Mismatch of 2A & 2B)

GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI

DEPARTMENT OF TRADfi:AND TAXES

(POLICY BRANCH)

VYAPAR BHAWAN, I.P.ESTATE, NEWDELHI-110 002

CIRCULAR NO 20 OF 2014-15

No.F.3(480)/PolicyNAT/14/ 571-577                                                                         Dated: 09-12-2014

In partial modification of this department's' Circular NO.18 of 2014-15, the following Asstt. Commissioners (mentioned at CoI.No.4) are hereby authorised as Spl.OHAs for hearing the objections with respect to 2A-2B mismatch of 2012-13 instead of the Assistant Commissioners mentioned at CoJ.No.2 , in addition to the wards allocated in the said circular till further orders :-

Rest of the contents of the above said Circular shall remain the same.

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Dvat: Filing of reconciliation return for the year 2013-14.

GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI DEPARTMENT OF TRADE AND TAXES

(POLICY BRANCH)

VYAPAR BHAWAN, I.P.ESTATE, NEW DELHI-110 002

No.F.7(420)/VAT/Policy/2011/PF/536-542 Dated: 27/11/2014

CIRCULAR NO. 19 of 2014-15

Sub: Filing of reconciliation return for the year 2013-14.

In exercise of the powers conferred under Rule 49A of the Delhi Value
Added Tax Rules, 2005 read with section 9(2) of Central Sales Tax Act, 1956, I,
Sanjeev Khirwar, Commissioner, Value Added Tax, do hereby extend the last date of filing of online return in Form 9 for the year 2013-14, prescribed under Rule 4 of Central Sales Tax (Delhi) Rules, 2005 to 09/01/2015.

The return is to be filed by dealers who have made interstate sale at
concessional rates against statutory forms ‘C’ or stock transferred against ‘F’ forms or sold the goods against ‘H’ forms to dealers (other than Delhi) or claimed deduction from taxable turnover against E-I/EII forms or I/J forms etc.

The dealers who have not made the sale as mentioned above need not
file reconciliation return in Form 9.  

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D-VAT: Due date for filing of online return for 2nd Quarter has been extended to 17/11/2014

GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI

DEPARTMENT OF TRADE AND TAXES

(POLICY BRANCH)

VYAPAR BHAWAN, I.P.ESTATE, NEW DELHI-110 002

No.F.7(420)/VAT/Policy/2011/PF/482-488                          Dated: 10/11/2014

CIRCULAR NO. 16 of 2014-15

Sub: Filing of online return for 2nd quarter of 2014-15 – extension of 
period thereof.

In partial modification to this department’s Circular No.14 of 2014-15 on the 
subject cited above, and in exercise of the powers conferred under Rule 49A of the  Delhi Value Added Tax Rules, 2005, I, Sanjeev Khirwar, Commissioner, Value Added Tax, do hereby extend the last date of filing of online/hard copy of second quarter return for the year 2014-15, in Form DVAT-16 ,DVAT-17 and DVAT-48 along with required annexures/enclosures to 17/11/2014.

However, the tax due shall continue to be paid in the usual manner as per the 
provisions of section 3(4) of the Delhi Value Added Tax Act, 2004. The dealers filing the returns through digital signature need not be required to file hard copy of the return/Form DVAT-56.

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Filing of online return for 2nd quarter of 2014-15- extension of period thereof

GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI

DEPARTMENT OF TRADE AND TAXES

(POLICY BRANCH)

VYAPAR BHAWAN, I.P.ESTATE, NEW DELHI-110 002

No.F.7(420)/VAT/Policy/2011/PF/426-432                  Dated: 22/10/14

CIRCULAR NO. 14 of 2014-15

Sub: Filing of online return for 2nd quarter of 2014-15 – extension of period thereof.

In exercise of the powers conferred under Rule 49A of the Delhi Value 
Added Tax Rules,2005, I, Sanjeev Khirwar, Commissioner, Value Added Tax, do 
hereby extend the last date of filing of online/hard copy of second quarter return for the year 2014-15, in Form DVAT-16 ,DVAT-17 and DVAT-48 along with required annexures/enclosures to 10/11/2014.

However, the tax due shall continue to be paid in the usual manner as 
per the provisions of section 3(4) of the Delhi Value Added Tax Act, 2004. The 
dealers filing the returns through digital signature need not be required to file hard copy of the return/Form DVAT-56. 

No.F.7(420)/VAT/Policy/2011/PF/426-432                       Dated: 22/10/14

(Sanjeev Khirwar)
Commissioner,Value Added Tax

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Filing of online return for 2nd quarter of 2013-14 – extension of period thereof.

No.F.7(420)/VAT/Policy/2011/PF/1006-1012                                                              Dated:20/11/2013 

CIRCULAR NO. 26 of 2013-14 

Sub: Filing of online return for 2nd quarter of 2013-14 – extension of period thereof. 

In partial modification to this department’s Circulars No.18, 24 & 25 of 2013-14 on the subject cited above and in exercise of the powers conferred under Rule 49A of the Delhi Value Added Tax Rules,2005, I, Prashant Goyal, Commissioner, Value Added Tax, do hereby extend the last date of online filing of second quarter return for the year 2013-14, in Form DVAT-16 ,DVAT-17 and DVAT-48 along with required annexures, and submission of hard copy along with required enclosures as per schedule given below: 

However, the tax due shall continue to be paid in the usual manner as per the provisions of section 3(4) of the Delhi Value Added Tax Act, 2004. 

(Prashant Goyal) 

Commissioner,VAT 

No.F.7(420)/VAT/Policy/2011/PF /1006-1012 Dated: 20/11/2013 

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Filing of online return for 2nd quarter of 2013-14 – extension of period thereof in respect of DVAT-48.

No.F.7(420)/VAT/Policy/2011/PF/998-1004                             Dated: 14/11/2013 

CIRCULAR NO. 25 of 2013-14

Sub: Filing of online return for 2nd quarter of 2013-14 – extension of  period thereof in respect of DVAT-48.

In partial modification to this department’s Circular No.18 of 2013-14 on the subject cited above and in exercise of the powers conferred under Rule 49A of the Delhi Value Added Tax Rules, 2005, I, Prashant Goyal, Commissioner, Value Added Tax, do hereby extend the last date of online filing of second quarter return for the year 2013-14, in Form DVAT-48, alongwith required enclosures to 20-11-2013.

To Download Official Notification Click Here

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DVAT Notification: Clarifications in respect of filing of the AR-1 report

No.F.3(384)/Policy/VAT/2013/985-996

In continuation to Notification No.F.7(420)/Policy/VAT/2011/1203-1213 dated 11/02/2013 regarding filing of Audit report by dealers having turnover of RS.10 crores or more during 2011-12 or 2012-13 in Form AR-1, I, Prashant Goyal, Commissioner Value Added Tax, in exercise of the powers conferred on me by section 49 .and 70 of Delhi Value Added Tax Act, 2004 (hereinafter referred to as 'Act') read with rule42A of Delhi Value Added Tax Rules, 2005 hereby clarify that -

(i) the dealers who are liable by virtue of having turnover of Rs.10 crores or more but dealing exclusively in commodities listed in First Schedule of the Act need not to file the said audit report. Such dealers shall even be exempted from filing the AR-1 report if the annual turnover of sale from items incidental to the business remains upto RS.5lakh in a year. 

(ii) the dealers who are dealing exclusively in export of goods outside the country shall also be exempted from filing the report. Such dealers shall even be exempted from filing AR-1 report if annual sale turnover from items incidental to the business including DEPB licenses, Scrap etc., remains upto
RS.5lakh in a year. 

(iii) the part-7 A of the report envisages to file details of inter-state sale/stock transfer made against declaration forms during the year. The dealers eligible to file the report shall have the option to tile copy of the information of Block R 10 of the CST return in Form 1 for 2012-13 provided that the information has been filed online prior to filing of the AR 1 report.

(iv) the turnover criteria demands that the dealers whose turnover is RS.10
crores or more during 2011-12 or 2012-13 are liable to file AR 1 for the year
2012-13. However, in case the turnover during 2012-13 was less than or
equal to Rs. 1 crores, such dealers shall be exempt from filing AR 1 report.

2. The AR-1 report will need to be submitted to respective ward incharge by
2nd  December, 2013 for the year 2012-13

to download official notification Click Here

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DVAT: Advisory to CAs on VAT Audit Report AR1 & Special Audit

The Department of Trade & Taxes, Government of NCT of Delhi vide Notification dated 11th February, 2013 under Section 49 of the Delhi Value Added Tax Act, 2004 and Rule 42 A of the VAT Rules, 2005 has made the VAT Audit by Chartered Accountants mandatory for dealers With gross turnover of Rs 10 Crore and above in 2011-12 or in any of the subsequent financial year. The Department has prescribed a comprehensive VAT Audit Report AR1 for this purpose. This provision is being implemented for the first time in the Net of Delhi and is applicable for the financial year 2012-13 and the report has to be submitted by the dealers on or before 15th November, 2013.

Further, the Department has selected several dealers based on risk profiling through the departmental system for conducting Special Audit under Section 58A of the DVAT Act.

The Government has reposed faith on the CA community and we are sure if the Audit/Special audit is faithfullv executed according to the provisions of DVAT Act, Rules, notifications, advance rulings, determination orders and circulars of the Department, the same will help in improving tax compliance on the part of the dealers and ensure due revenue to the exchequer. Further, a faithfully drafted AR-l Report and/ or Special Audit Report, as applicable, would help dealers by pre-empting the need for Undertaking Departmental Audit or Enforcement proceedings.

The Department has high expectation from the CA community and the CAs are
advised to carry out the VAT Audit and Special Audit with strict reference to the relevant legal provisions, and complete the work timely. The panel for Special Audit will be reviewed each year based on the quality and the timeliness of the reports. This will ensure that in future too the Government can continue reliance on CAs for the purpose of VAT Audit and Special Audit. The findings of VAl Audit / Special Audit would be subject to peer review
and comparison with system based risk profiling of the Department would be undertaken. Adherence to quality standards by CAs while conducting VAT Audit / Special Audit would help us avoid any reference to the disciplinary committee of the lnstitute of Chartered Accountants of India where the report is found wanting in material particulars or where there is deliberate suppression of facts.

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Amendments in the Composition Scheme for Works Contract Dealers under Delhi VAT

Vide Notification No. 3(5)/Fin.(Rev-I)/2013-14/dsvi/801 dated 30.09.2013 with effect from 01.10.2013

HIGHLIGHTS

[by Rakesh Garg, FCA, Author and Consultant]

1.        The composition scheme, notified vide No. 3(13)/Fin.(rev-1)/2012-13/dsvi/180 dated 28.2.2013 (effective from 1.4.2013), issued u/s 16(12) of the DVAT Act for works contract dealers has been modified vide present notification.

2.        The dealers are allowed to withdraw from composition scheme only from the beginning of the financial year. However, in view of the amendments by the present notification, they may -

§  withdraw from the composition scheme, if already opted, by filing an application till 31.10.2013; or

§  opt for the composition scheme from 01.10.2013; or

§  switch over from Scheme “A” to Scheme “B”, or vice-a-versa, w.e.f. 01.10.2013. It may be recalled that there are two Schemes for the works contractors : (i) Scheme “A”, having lower rate of tax, only for those dealers who are executing works contracts in Delhi; and (ii) Scheme “B”, having higher rate of tax, where the contractors can make central purchases/transfers against declaration forms and import from other countries.

3.        The Composition dealer shall be eligible to opt for only one of the Scheme, i.e. Scheme “A” or Scheme “B”, for all categories of works contracts to be executed by him in the financial year.

4.        Limit for purchases from unregistered dealers has been increased to 5% (earlier 2%) of total purchase turnover during the year, or Rs.50 lacs (earlier limit of Rs.25 lacs), whichever is lower.

5.        In case, a composition dealer fails to comply with the stipulated conditions of the Scheme: Earlier - entire amount deposited was to be forfeited; Now - forfeiture would be restricted to the extent of 50%.

6.        The contractor, who was paying tax under the normal scheme, is required to pay tax on the entire opening stock held on the date of option for the composition scheme. This amendment will enable the contractor (opting for this Scheme w.e.f. 01.10.2013 or any subsequent financial year) to adjust his “carry forward amount as per DVAT-16” against “the amount payable as per SS-01”; and to carry forward (or claim refund) the remaining amount, if any, in the subsequent tax periods.

            For example, on the date of option, a dealer is liable to pay tax of Rs. One lakh on his stock on 1.10.2013. He has carry forward amount of tax of Rs. Three lakhs on 30.09.2013. He may adjust his liability of Rs. One lakh from his carry forward amount as per DVAT-16; and remaining Rs. Two lakhs may be claimed as refund, or carry forward to the subsequent tax periods.

7.        If a dealer shifts from scheme “B” to “A”, he shall pay tax on his entire stock on the date of option at the rate specified in section 4 of the Act. It may be noted that such dealer is required to pay tax even on goods purchased within Delhi on which he has not claimed any input tax credit at the time of purchase (since at that time also, he was under the composition scheme).

8.        Cases where main-contractor (MC) and sub-contractor (SC), both are under the composition scheme:

Earlier, SC could deduct amount of turnover based upon CC-01 issued by MC.

Now, SC shall be eligible to deduct the amount of tax :- To be computed on the amount paid to him by MC as mentioned in CC-01, at lower of the two rates of composition : one opted for by MC, and second by SC. In short, SC could claim deduction, at the most, for the amount of tax paid by MC on such turnover (instead of entire turnover stated in CC-01).

For example, MC has issued Form CC-01 for Rs.1,00,000/- to his SC. The MC has opted for composition scheme @3%, whereas SC has opted for composition scheme of 6%. In such a case, SC shall be eligible to claim exem-ption of Rs.3,000/- [1,00,000/- *3% (lesser rate of tax)] from his liability of Rs.6,000/- (6% of Rs.1,00,000/).

The Reason: Where MC and SC are paying tax at the same rate, there would be no impact.  But, where SC is paying tax, at a higher rate of tax than MC; say, SC @6% and MC @3% : -  If SC is allowed deduction of turnover stated in CC-01, then SC would get benefit of 6% of the turnover, whereas MC has paid only @3%. To remove this anomaly, this amendment has been carried.   

Further, MC shall be required to deduct VAT-TDS at the differential rate, i.e. 3% (6% - 3%) on Rs.1,00,000/- (earlier, in such cases, no tax was required to be deducted by MC).

9.        Other provisions of the Notification dated 28.2.2013 would remain same.          

x---------x----------x

This article has been shared by CA Rakesh Garg. He can be reached at ssarca.rgarg@gmail.com

Disclaimer:

This Paper contains personal views of the author and has been prepared for academic use only. However, for authentic legal interpretation, please refer to aforestated Notification dated 30.09.2013. Errors or omission may kindly be brought to the notice of the author.

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DVAT: Salient/Additional Features of Revised Composition Scheme for Work Contract Dealers

(Notification No. 3(5)/Fin.(Rev-I)/2013-14/dsvi/801 dated 30.9.13)

1. Normally a works contractor can opt for the composition scheme till April 30 of a  financial year but in 2013-14, he can again do so for third and fourth quarter by filing  Form WC-01 till October 31, 2013. The Composition dealer shall be eligible to opt for only one of the scheme i.e. Scheme “A” or Scheme “B” for all categories of works contracts to be executed by him in that financial year. 

2. The earlier composition scheme No.3(13)/Fin.(rev-1)/2012-13/dsvi/180 dated 28.02.2013 ceases w.e.f. 30.9.13. The dealer who can normally withdraw from composition scheme by filing form WC-02 till April 30 of the financial year can for the third and fourth quarter of 2013-14 withdraw by filing an application till October 31, 2013. Alternatively, the dealer can switch over to the new composition scheme notified on 30.9.13 by filing Form WC 01 upto 31.10.13.

3. Limit for purchase from unregistered dealers has been increased from 2% to 5% of total purchase turnover during the year, or ₹ 50 lacs (existing limit of ₹ 25 lacs), whichever is lower.

4. In case a composition dealer fails to comply with the stipulated conditions, as per the 28.2.13 Scheme, the entire amount deposited was to be forfeited - now the forfeiture is limited to the extent of 50%. 

5. The dealer opting for composition shall be allowed to adjust the tax credit available to his credit against the liability on account of tax not suffered on opening stock in hand at the time of opting for composition scheme and in case even after said adjustment the dealer still has credit balance he shall be allowed to claim refund or carry forward the same to subsequent tax periods. In brief, the dealer shall be entitled to adjust the amount payable as 
per SS-01 with the said tax amount at his credit in DVAT-16. 

6. The dealer changing from scheme “B” to scheme “A’’, shall be required to pay tax at the rate specified in section 4 of the Act, on the entire opening stock of goods held by him. 

7. Cases where the contractor and sub-contractor both are under composition scheme:
The sub-contractor shall be eligible to deduct the amount of tax which shall be computed on the amount paid to him, by the Contractor, as mentioned in CC-01, at the lower of the two rates of composition – one opted for by the contractor and second by the sub-contractor. For example, contractor has opted for 3% scheme whereas his subcontractor has opted for 6% scheme then said sub-contractor shall calculate his total liability @ 6% and shall be eligible for exemption of tax amount calculated @3% and the balance amount is to be paid by the said sub-contractor. In such cases the contractor is 
exempted from deducting TDS from payments made to such sub-contractors in respect of the turnover covered by the certificate CC-01. 

8. In case where the rate of the composition tax of the contractor is lower(3%) than that of  the sub-contractor(6%), the contractor shall be liable to deduct TDS at the differential rate of composition tax between the two (6%-3% =3%), from payments made to such  sub-contractors in respect of the turnover covered by their respective Form CC-01. 

9. Other provisions are same as that of the 28.2.13 Composition Scheme.


Disclaimer: This is a simplified version of salient/ additional features in the new composition scheme. For authentic legal interpretation, please refer to the Notification No.3(5)/Fin.(Rev-I)/2013-14/dsvi/801 dated 30.9.13.

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DVAT: Banks are Directed To receive dues only through the portal of Department of Trade and Taxes.

Banks are Directed To receive dues only through the portal of Department of Trade and Taxes.

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Dvat: Due date of Filing of online return for 2nd quarter of 2013-14 Extended

Dvat: Due date of Filing of online return for 2nd quarter of 2013-14 Extended on 1st October 2013. 

To Download the Official notification click here

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FAQ on Delhi VAT Amnesty Scheme (comprising voluntary disclosure and disputes settlement introduced with effect from 20.09.2013

Q1. What is DCS under the Delhi VAT?

DCS is a “Scheme” notified under the Delhi Value Added Tax Act, 2004 (DVAT Act), which draws powers from newly inserted section 107 under the Act with effect from 12.9.2013. Notification is annexed in Appendix A. The section 107 reads as, ‐

“107. Amnesty Scheme(s) ‐ Notwithstanding anything to the contrary contained in this Act and Rules thereto, the Government may by notification in the official Gazette, notify amnesty scheme(s) covering payment of tax, interest, penalty or any other dues under the ‘Act’, which relate to any period ending before 1st day of April, 2013, and subject to such conditions and restrictions as may be specified therein, covering period of limitation, rates of tax, tax interest, penalty or any other dues payable by a class of dealers or classes of dealers or all dealers.”

Purpose of this Scheme is two fold:

(i) To achieve the self compliances by the dealer: Dealer (including trader, manufacturer, works contractor, builder, leasing company, etc.) or any other person, such as contractee, (hereinafter referred as “declarant”), who has not paid due taxes under the DVAT Act or under the Central Sales Tax Act, 1956 (CST Act, in short) as specified in the respective Statute, may pay tax under DCS. Further, the time of default is immaterial for the purpose of this Scheme; and

(ii) To resolve disputes: Where dispute in relation to tax, interest and penalty is pending before any higher forum, such as the Objection Hearing Authority, the DVAT Tribunal, the Delhi High Court or the Supreme Court, the declarant may resolve his dispute under this Scheme by paying tax and interest stated in the assessment order. He will get immunity from payment of interest from the date of order till the date of declaration, and penalty in relation to such tax. The dispute might pertain to the DVAT Act, CST Act, or the erstwhile repealed Acts, that is, the Delhi Sales Tax Act, 1975 or the Delhi Sales Tax on Works Contract Act, 1999 or the Delhi Sales Tax on Right to Use Goods Act, 2002 or the Delhi Tax on Entry of Motor Vehicles into Local Areas Act, 1994.

General Scheme of the DCS:

(i) Where assessment order/notice of assessment has not been issued, the

declarant shall pay only tax; and he will get immunity from interest, penalty and prosecution, and

(ii) Where the order/notice has been issued by the Department, the declarant shall pay tax and interest as stated in such order/notice. He will get immunity from payment of interest from the date of notice till the date of declaration, penalty and prosecution under the Act.

Q2. Who can declare tax dues under DCS?

As per Clause 2(1)(d) of the DCS, following persons may declare their tax dues:‐

(i) Dealers not registered under the Delhi VAT Act and/or CST Act;

(ii) Dealers registered under the Delhi VAT Act and/or CST Act and assessment of tax in respect of tax dues has not been made;

(iii) Dealers registered under the Delhi VAT Act and/or CST Act and assessment of tax in respect of tax dues, with or without penalty, has been made;

(iv) Persons, who were liable to deduct tax at source under section 36A of the Act, but failed to deduct TDS as specified.

(v) Dealers, who were registered under the erstwhile Delhi Sales Tax Act, 1975 or the Delhi Sales Tax on Works Contract Act, 1999 or the Delhi Sales Tax on Right to Use Goods Act, 2002 or the Delhi Tax on Entry of Motor Vehicles into Local areas Act, 1994, and their disputes/objections/appeals for the period up to 31.3.2005 are pending before any higher forum.

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Frequently Asked Questions on DVAT

Q.	What is Value Added Tax (VAT)?
A.	VAT is a multi-point tax on value addition which is collected at different stages of sale with a provision for set-off for tax paid at the previous stage/tax paid on inputs.
Q.	What is meant by 'Sale' under Delhi VAT Law?
A.	Sale includes:- 1. The conventional sale i.e. Transfer of property in goods; 2. Supply of goods by a society, club, firm, and company to its members; 3. Transfer of property in goods involved in execution of works contract; 4. Delivery of any goods on hire purchase or any other system of payment by instalments; 5. Transfer of right to use any goods, whether or not for a specified period; and 6. Supply of good or other articles by the restaurants, hotels etc., by way of or as a part of service.
Q.	Who is a dealer?
A.	'Dealer' means any person who carries on business in Delhi and includes- 1. any person who, for the purposes of or in connection with or incidental to or in the course of his business buys, sells, goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration; 2. any department of the Central Government or a State Government, a local authority, Panchayat, Municipality, Development Authority, Cantonment Board and each autonomous or statutory body or an industrial, commercial, banking, insurance or trading undertaking whether or not of the Central Government or any of the State Governments or of a local authority, if it buys, sells, supplies or distributes goods, in the course of specified activities which may be prescribed from time to time; 3. a factor, commission agent, broker, del credere agent, or any other mercantile agent by whatever name called, who carries on the business of buying, selling , supplying or distributing goods on behalf of any principal, whether disclosed or not; 4. an agent of a non-resident (where such non-resident is a dealer under any other sub-clause of this definition); 5. a local branch of a firm or company or association of persons, outside Delhi where such firm, company, association of persons is a dealer under any other sub-clause of this definition; 6. a club, association, society, trust, or cooperative society, whether incorporated or unincorporated, which buys goods from or sells goods to its members for price, fee or subscription, whether or not in the course of business; 7. an auctioneer, who sells or auctions goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal; 8. a casual trader; or 9. any person who, for the purposes of or in connection with or incidental to or in the course of his business disposes of any goods as unclaimed or confiscated, or unserviceable or scrap, surplus, old, obsolete or as discarded material or waste products by way of sale;
Q.	Will multi point tax lead to cascading?
A.	VAT eliminates cascading by providing for set off for taxes paid on inputs and only taxing value addition, tax on sales would be shown separately while issuing tax invoice or calculating tax liability.
Q.	What will happen to the Central Sales Tax Act?
A.	CST Act would remain as it is. No VAT on inter-State Sales, shall be levied and the Central Statutory Forms, i.e, Form C,D,F, H etc., shall also continue. It was proposed that the tax rate for sale against C form shall be gradually reduced from 4% to 0% but at present it is stagment at 2% since 1-6-2008.
Q.	Are there any Statutory Forms under the VAT?
A.	There are no statutory forms in VAT, it is an invoice based system wherein input credit is allowed at the strength of tax invoice.
Q.	VAT would increase the cost of compliance.
A.	Cost of compliance would come down due to self-assessment, dealers would not have to approach the Department for statutory forms or for assessment.
Q.	VAT requires extensive computerization, which traders cannot afford.
A.	The document and papers that the dealers are maintaining under the present regime would suffice, in fact documentation needs should decrease due to self assessment and elimination of forms. Department has taken initiative by mailing issuance of Central Statutory forms on-line for financial year 2011-12. Online issuance of forms, digitiziation of documents has been started.
Q.	VAT would spoil the distributive character of Delhi.
A.	Lowering CST rate, input credit and credit for capital goods would reduce the cost of business and improve the margin of traders. Since Exports and Imports under VAT is zero-rated, VAT should give impetus to the distributive character.
Q.	Cost of doing business would go up as dealers will have to pay tax on their purchases.
A.	If we assume that the average length of time required for settling of amounts receivable and payable is the same as the length of time for remitting tax and processing any refund, no additional cost is imposed on trade or industry.
Q.	Prices would go up due to VAT and consumer would suffer.
A.	There are four slabs of VAT i.e 11%, 5%, 12.5%, 20% many life saving, agriculture and other claim related to poor, farmers, patients are tax free. Further, input credit and credit allowed for purchase of capital goods should reduce the effective selling price.
Q.	VAT is anti poor.
A.	Items that are consumed by the poor are exempt. Besides the scheme of higher threshold and compounding for dealers having turnover upto Rs. 50 lakhs after paying notion tax of 1% on the turnover would take care of all such dealers from whom poor source their requirement.
Q.	Will input tax credit be available on capital goods used in the execution of works contract?
A.	Yes input tax credit will be available on capital goods purchased after 1.4.2005 .However, in case a dealer, after availing tax credit, transfers the assets/Capital goods, on which he had availed tax credit, out of NCT of Delhi ,the credits so allowed shall be reversed, tax shall have to be paid on such transfer of capital goods/assets. The tax so payable shall be equivalent to unutilized portion of tax credit allowed by the Department less tax payable at usual rates on such transfer or sale.
Q.	Is there any restriction on leasing out machines purchased for own use? If no, what will be it's tax implications under VAT?
A.	There is no restriction on leasing out machines bought for own use but being deemed sale VAT is to be paid on consideration received.

2. Imposition of Tax
Q.	How do I calculate my tax liability?
A.	Calculating tax liability under VAT is very simple. If a dealer is selling any item of 5% tax and he sells goods worth Rs. 1,000/-. Amount of tax payable will be Rs. 50/- But same goods he had purchased for Rs. 900/- and at that time of purchase he had already paid Rs. 45/- so the net tax payable by him will be 50-45= 5 and he will pay to the Government only Rs. 5 on the sale of Rs. 1000/- (@ 5% tax rate). The tax payable by him is tax rate multiplied by value addition, in the instant case (1000-900) X 0.05.
Q.	Whether it is possible to avail credit for taxes paid on input if goods are sold interstate or are exported?
A.	Purchases intended for inter-State Sale as well as exports are eligible for tax credit.
Q.	If the input is used partly for making taxable goods and partly for exempted goods, whether input tax credit will be available?
A.	Where goods have been partly used for making the taxable sales (or inter-State sales) and partly for making exempt goods, the amount of the tax credit shall be reduced proportionately. To illustrate, X purchased machinery for Rs. 1,00,000/- plus tax of Rs. 12,500/- for manufacture of taxable as well as exempted goods. At that time, he estimated that the machinery would produce 80% taxable goods. In such case, his input tax credit will be restricted only to 80% of Rs. 12,500/- i.e., Rs. 10,000/-.*******
Q.	What is input Tax?
A.	Input tax means tax on goods purchased by a dealer in the course of his business. The eligible purchases would include any goods purchased by a dealer for re-sale or for use in the manufacture or processing or packing or storing of other goods or any other use in business including capital goods excluding exceptions prescribed in seventh schedule of the Act.
Q.	When can one claim input Tax Credit?
A.	Input tax credit is the credit for tax paid on inputs(ITC). Dealer has to pay tax after deducting Input tax which he had paid from total tax collected by him (Output Tax).
Q.	What proof is required to claim input tax credit?
A.	Input tax credit can be claimed only on purchases made from Registered Dealers in Delhi. The original "Tax Invoice" is the proof required to claim input tax credit
Q.	How is input tax credit to be claimed? Is there any requirement of a "one to one" correlation between input tax and output tax?
A.	There is no need for a "one to one" correlation between input tax credit and output tax. Quite a large number of small businesses are under the misconception that input tax has to be adjusted against output tax on a bill to bill basis. The operation of the input tax mechanism is very simple. The dealer will be eligible to take credit of eligible input tax in a tax period as specified on the entire purchases. The dealer would charge VAT at the prescribed rate of tax as is being done in the present system of levy of sales tax. The VAT or Output Tax payable is compiled on a monthly basis as is done now. The dealer can adjust the input tax eligible on the entire purchase in the tax period against the output tax payable irrespective whether the entire goods purchased is sold or not. For example, if the input tax credit in a particular month is Rs. 1,000/-, the output tax payable is Rs. 500/-, the excess input tax of Rs. 500/- can be carried forward to the next tax period. Assuming no further input tax credit in the following month and that the output tax payable is Rs. 700/- the dealer will pay Rs. 200/- alongwith the monthly return.
Q.	Will input tax credit be available on all purchases for the business?
A.	Generally, input tax credit will be eligible on all goods purchased for resale, raw material and packing materials for use in the manufacture of goods and even capital goods. Only goods purchased from VAT registered dealers in the State will be eligible for input tax credit. Input tax credit will not be available on Inter State purchases. The purchases on which you cannot claim a credit for your input tax are: 1. All automobiles including commercial vehicles, and two and three wheelers and spares parts for repairs and maintenance and tyres and tubes thereof; 2. Fuels in the form of petrol, diesel, kerosene, LPG, CNG, PNG and coal; 3. Conventional clothing and footwear, clothing fabrics. 4. Food for human consumption. 5. Beverages for human consumption. 6. Goods designed, and used predominantly for, the provision of entertainment including television receivers, video cassette players, radios, stereo systems, audio cassette player, CD players, DVD player, computer game consoles and computer games, cameras of any kind. 7. Air conditioners, air conditioning plants or units other than those used for manufacturing purposes; air coolers, fans and air circulators. 8. Tobacco in any form and tobacco products. 9. Office equipments, furniture, carpets, stationary items, advertisement and publicity materials, sanitation equipments, fixtures including electrical fixtures and fittings, generators and electrical installation. 10. Elevators (lifts); 11. Computers other than those used for the purpose in normal business. 12. All kinds of cranes, earthmovers, JCB, excavators, road rollers, concrete mixing machines and other similar machineries. 13. Goods for personal consumption or for gifts. 14. Goods purchased and accounted for in business but utilized for the facility to the employees and 15. Goods used for construction of or incorporation in civil structures and immovable goods or properties not constituting part of the works contracts.
Q.	Can input tax credit be availed on use of petroleum products?
A.	No. Tax on petroleum products cannot be availed as input credit. The input tax credit on petroleum products is covered by Seventh Schedule. It provides that in the following circumstances the input tax credit on Petroleum products and natural gas be taken as NIL. 1. When used as fuel 2. When exported out of state otherwise then by way of sale The second condition is more appropriate for trader dealers. In case they decide to stock transfer petroleum products out of state without sale, input tax on these products, if already availed on these products will have to be considered NIL.
Q.	What is the applicable rate of tax on Packing materials as Outputs?
A.	Packing material or containers are always sold with some goods packed or contained it. No separate rate of tax is applicable on sale of such packing material/container. The rate of tax applicable to the goods packed in such packing material will be the rate of tax applicable on this packed material. Where such goods are exempted from tax, the sale of packing material/container will also be exempt from tax. Example: spark plugs packed in plastic bags are taxed@ 12.5%. Thus rate of tax applicable on sale of this plastic bag is 12.5%. In case of these spark plugs are purchased by some other dealer e.g. automaker company, the applicable rate is 5%, thus applicable rate of tax on plastic bags in which such plugs are packed will be only 5%.
Q.	Can input credit on packing material be availed on use of petroleum products?
A.	The eligibility of input tax credit on packing material also depends on the item packed therein. Incase items packed therein are dealt in the circumstances that input tax credit is not eligible therein, input tax credit will not be available on such packing material as well.
Q.	Is there any restriction of availing of input tax depending on the manner of disposal of goods say as free gifts or on stock transfer?
A.	Yes. Input tax credit will be available on output tax payable on sales within the State and on Inter State Sale. Restricted input tax credit is available on stock transfer/consignment dispatches to outside the State.
Q.	Will input tax credit be available on Inter State Purchases?
A.	Input tax credit will not be available on Inter State purchases, Delhi Govt. cannot be expected to give credit for the tax paid in another state.
Q.	Will input tax credit be available for the entire tax paid on eligible purchases.
A.	Input tax credit will be available on the entire VAT paid on purchases. (except interstate purchases).
Q.	What proof is required to claim input tax credit?
A.	Input tax credit can be claimed only on purchases from VAT Registered Dealers. The original tax invoices is the proof required to claim input tax credit. The invoices must be preserved carefully to be produced in audit proceedings.
Q.	Are all dealers eligible to claim input tax credit?
A.	All VAT registered dealers can claim Input Tax Credit on the eligible purchases. However, those opting for compounding scheme, where-by all dealers whose GTO is upto 50 lakhs can pay 1% tax on their GTO and are not eligible to claim input tax credit.
Q.	What is the procedure for adjusting input tax paid against the output tax payable?
A.	In the return filed for the Tax Period there will be a column for input tax credit, which will have to be filled in. The tax invoices in support of the claim of input tax credit will have to be preserved and may have to be shown, if so desired by the Department.
Q.	How can dealer adjust the input tax against output tax when he makes taxable and exempt supplies? Will the input tax credit relating to exempt supplies lapse?
A.	If the purchases are used partly for making taxable supplies, input tax credit shall be allowed proportionate to the extent they are used for that purposes. However, no input tax credit is allowed for the portion of purchases that was used for making exempt goods.
Q.	What amount will be available as input tax credit in case machinery is used for manufacture of taxable goods and also manufacture of exempted goods?
A.	The input tax credit will be available on proportionate basis.
Q.	Is Commissioning of plant a condition for availing the input tax credit?
A.	No there is no condition of commissioning of machine for making the input tax credit which is available on plant and machinery on its purchase.
Q.	Do I have to sell all the goods that I have purchased to avail input tax credit for the taxes paid on all my purchases?
A.	Taxes paid on all your purchases can be set off against your liability of tax on sales made by you and any excess can either be carried forward or you can claim refund.
Q.	Will input tax credit be available on components used in fabricating the machine in house?
A.	Yes, there is no bar on availing input tax credit on components and other parts used in fabricating machine in house, provided this machine is not used solely for the manufacture of exempted goods.
Q.	Is there any tax liability on scrapping any capital asset on which input tax credit has been availed? What will be the tax implication on sale of such scraped machines?
A.	Tax would be levied on the sale of such machines. However, the tax liability is subject to set of against any credit that may be available in your account.

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