VAT

y 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

Who is Covered under the DVAT System

y Dealers with total annual turnover exceeding Rs 5 lakh

are required to register. However, dealers with annual turnover less than Rs 5 lakh may voluntarily get themselves registered and the Dealers who make inter sate sale or Purchase. y After getting registered the dealer has to file and submit a return within 28 days from the end of the Tax Period. y If the Dealers deal entirely in exempt goods, they are not required to apply for registration under DVAT.

Calculation of Taxes
y Net Tax Payable is the difference between your Output Tax and Tax Credits

you are allowed to claim in a given tax period. It could be a positive or a negative amount. The negative amount represents tax credits in excess of output tax for a given period. you can apply the excess credits against your CST liability, and claim a refund for any remaining balance. Alternatively, the excess credits can be carried forward to the next period.

y Example

A dealer ABC in Delhi purchases goods in Delhi for which he pays Rs 2000 as input tax. He makes a sale in Delhi for which the tax is Rs 900. He also makes an inter-state sale to another dealer situated outside Delhi for which the CST is Rs 3000. His net DVAT liability for the period is a negative amount of Rs 1100. He can apply this negative amount against his CST liability. He will be required to pay Rs 1900 (CST of Rs 3000 reduced by excess DVAT credits of Rs 1100) to the government.

CAPITAL GOODS
y Capital goods means plant, machinery and equipment

used, directly or indirectly, in the process of trade or manufacturing or for execution of works contract in Delhi; y Sale of Capital Goods exempt from Tax :- Where a dealer sells capital goods which he has used since the time of purchase exclusively for purposes other than making non-taxed sale of goods, and has not claimed a tax credit in respect of such capital goods under section 9, the sale of such capital goods shall be exempt from tax

y Tax Credit on Purchase of Capital Goods :Notwithstanding anything contained to the contrary in sub-sections (1) and (3) and subject to sub-section (2), tax credit in respect of capital goods shall be allowed as follows: y 1. 1/3rd of the input tax on such capital goods arising in the tax period, in the same tax period ; y 2. balance 2/3rd of such input tax, in equal proportions in two immediately successive financial years ; Unless these Goods are Non Creditable Goods. No Tax Credit is allowed on purchase of capital goods which are used exclusively for the purpose of making sale of exempted goods.

Capital Goods vs. Capital Assets

y It is important to note that exemption on sale is available to only those Capital Goods as defined by DVAT Act and not to all Capital Goods. Therefore, goods such as office furniture or office vehicle, which are not used in the process of trade or manufacture and do not fall under definition of capital goods will not qualify for exemption. y DVAT has not defined Capital Assets. y Capital Assets is a wider term and covers all those Capital Goods which are used for the purpose of business, and therefore, will include furniture, motor Vehicle etc.

INPUT TAX CREDIT

y Tax credit shall be allowed on purchases arises in the course of his

activities as a dealer and the goods are to be used by him directly or indirectly for the purpose of making a taxable sales which are liable to tax or sales which are not liable to tax (Non Taxed Sales) i.e. inter state sales and export out of Delhi. y No tax credit shall be allowed 1. on purchases from an unregistered Dealers 2. on purchase of non creditable goods 3. on purchase of goods which are to be incorporated into the structure of a building owned or occupied by the person i.e. for the performance of a Work Contract. 4. on purchase from dealers who opted for composition scheme 5. on purchase from a casual trader 6. on purchases which are used exclusively for making exempted goods.

7. any purchase of consumables or of capital goods where the dealer is

exclusively engaged in doing job work or labour work and is not engaged in the business of manufacturing of goods for sale by him and incidental to the business of job work or labour work, obtains any waste or scrap goods which are sold by him. Where a dealer has purchased goods and the goods are to be used partly for the purpose of making the taxable sales and partly for other purposes, the amount of the tax credit shall be reduced proportionately.

Types of Sales Taxable Exempt Non Taxed

Output Tax Payable Yes No no

Input Tax credit allowed Yes No Yes

Composition Scheme
y Notwithstanding anything contained to the contrary in this Act, every dealer whose y a. turnover in the year preceding the commencement of this Act; or y b. turnover in the current year, does not exceed fifty lakh rupees or such other amount as may be specified by the Government by notification in the official Gazette, shall have an option to pay tax under this section: PROVIDED that this section shall not apply to dealers who make inter state sales or purchases at any time during the year in which he opts to pay tax under this section or if he is registered under the Central Sales Tax Act, 1956

Rate of tax for composition Dealer

y 1% of the TURNOVER of the Dealer. y

y y y y y

A dealer who elects to pay tax under this section shall not purchase goods from a person who is not registered under this Act: PROVIDED that this restriction shall not apply for the purchase of goods from an un-registered dealer dealing exclusively in goods mentioned in the First Schedule i.e. exempted goods. not compute his net tax under section 11 of this Act; not be allowed to claim credit under section 9, section 14 and section 15 of this Act; not be entitled to issue tax invoice; not be allowed to collect any amount by way of tax under this Act; and continue to retain tax invoices and retail invoices for all of his purchases as required under section 48 of this Act.

Work Contract
y n case of TURNOVER arising from the execution of the works

contract, the amount representing the TAXABLE TURNOVER shall be the value at the time of transfer of property in goods (whether as goods or in some other form) involved in the execution of work contract and shall EXCLUDE1. the charges towards labour, services and other like charges; and 2. the charges towards cost of land, if any, in civil works contracts;subject to the dealers maintaining proper records such as invoice, voucher, challan or any other document evidencing payment of referred charges to the satisfaction of the Commissioner. y In the case of works contract of civil nature, the tax shall be payable by the contractor during the tax period in which the property in goods is transferred

Forms prescribed under CST

Form A B C Description Application for registration Certificate of Registration Declaration by purchasing registered dealer to obtain goods at concessional rate Certificates for sale in transit Frequency Once Once To be obtained for every quarter and submitted on quarterly basis To be obtained for every quarter and submitted on quarterly basis Monthly, but to be submitted to authorities quarterly When required Upto the time of assessment by first assessing authority.

E-I/E-II

Form by branch/consignment agent for goods received on stock transfer Indemnity bond when C form lost Certificate of Export

G H