PROCEDURE TO BE FOLLOWED FOR DELHI VALUE ADDED TAX
Following are some of the provisions in brief which may require immediate attention, on account of enforcement of DVAT w.e.f. 1.4.05 in Delhi.
1. Date of commencement
DVAT 2004 as amended by DVAT 2005 and DVAT Rules 2005 come into force w.e.f. 1st April.,2005. It repeals Delhi Sales Tax Act 1975, Delhi Sales Tax on Works Contract Act, 1999, Delhi Sales Tax on Transfer to Right to use Goods Act 2002 and Delhi Tax on Entry of Motors Vehicles into Local Areas Act 1994.
2. Liability to Tax
a) Every dealer who is registered under this Act or who is required to be registered under this Act shall be liable to pay tax on ‘taxable turnover’ at the rate specified in Sec. 4, i.e.
1) Goods specified in First Schedule Exempt from tax
2) Goods specified in Second Schedule @ 1%
3) Goods specified in Third Schedule @ 4%
4) Goods specified in Fourth Schedule @ 20%
5) Goods other than specified above @ 12.5%
i.e., general rate
b) ‘Taxable Quantum’ or threshold limit prescribed for making a dealer liable to pay tax & for registration is :
1) For a dealer who imports goods for sale in Delhi Nil
2) For a dealer who exports goods out of Delhi Nil
3) For others Rs.10 Lakhs
c) Sales in the course of Interstate & Trade & Commerce shall continue to be liable to tax under the C.S.T. Act as at present and all the forms such as ‘C’, ‘D’, ‘E’, ‘F’ & ‘H’ forms shall continue to be applicable because C.S.T. Act is not yet phased out.
a) Every dealer who is already registered under the Delhi Sales TaxAct, Works Contract Act or Right to use Goods Act, shall be automatically registered under the DVAT Act, and he is not required to seek fresh registration under DVAT.
b) Every dealer whose turnover exceeds the ‘taxable quantum’ during any year shall be liable for registration from the day his turnover so exceeds.
c) Any dealer who is not compulsorily required to be registered as above can seek voluntary registration if he intends to undertake activities as a dealer.
a) Any dealer whose turnover exceeds Rs. 10 lakhs but does not exceed Rs. 50 lakhs, can opt for registration under ‘Composition Scheme’. However, this scheme is not applicable if he is registered under Central Sales Tax Act. Also he shall not be entitled to make purchases from outside Delhi in the course of Interstate trade. Also he shall not make any purchases from a dealer who is not registered under DVAT Act.
b) Such dealers shall be liable to pay tax on their turnover @ 1% only (may be amended to 0.25%).
c) Such dealer shall not issue any ‘tax invoice’ and shall not charge VAT in the invoice but shall issue only ‘retail invoices’.
d) Any existing dealer under the S.T. Act, if his turnover in preceding year was below Rs. 50 lakhs can exercise option to be assessed under ‘Composition Scheme’. For this purpose he shall submit application in DVAT 2 before 30th April, 2005 & shall pay tax on his opening stock which has not suffered sales tax at the DVAT Rates.
e) In casea dealer seeks registration after commencement of the DVAT, and estimates his turnover to be below 50 lakhs, he can also opt for composition scheme.
f) He shall preserve his ‘tax invoices’ and ‘retail invoices’ obtained by him for making his purchases under DVAT for 7 years.
5. Transitional Provisions
All the existing dealers who shall get automatically registered under DVAT are required to submit:
a) A statement of opening stock of raw materials, trading stock & packing materials on which First Point tax has been paid under Sales Tax Act. Such statement shall be in DVAT 18. The dealer shall be entitled to ‘Input Tax Credit’ equal to amount of first point tax paid on purchases provided he has evidence i.e., bills evidencing payment of such tax. If the purchase bill shows ‘tax paid purchases’ the credit of tax shall be equivalent to 75% of such tax. This statement i.e., DVAT 18 shall be furnished within 4 months i.e., upto 31.7.05 with no extension. If tax credit is more than Rs. 1 lakh, it shall be certified by a Chartered Accountant.
b) No input tax credit is available on the finished products made out of raw materials purchased out of tax paid raw materials.
c) Also input tax credit is allowable on such opening stock as was held in Delhi on 1.4.2005.
d) A statement in DVAT 18A, for the opening stock as on 1.4.05 of goods on which no tax has been paid under Delhi Sales Tax Act has to be submitted along with first Return under DVAT Act.
6. Computation of Tax
a) Under the VAT tax is payable at multipoint on sales by every successive dealer on the value addition tax, i.e., ‘output tax’ is computed on every taxable sale at the prescribed rate. Set off is allowed of the tax paid on creditable purchases made by a dealer and the difference between the two is ‘net tax’ payable by a dealer. Therefore, ‘net tax payable’ is output tax minus input tax. If the balance is a negative balance, it is adjustable towards C.S.T. payable & if there is still a negative balance, it is carried forward to next tax period.
‘Output tax’ is payable on the ‘taxable turnover’ of a dealer at the prescribed rates. ‘Input tax’ is paid by him on creditable purchases. Net tax payable is therefore O-I.
b) It may be noted that ‘input tax credit’ is available for purchases made for effecting taxable sales in Delhi as well as non-taxable sales, i.e., I.S. sales & exports Input tax credit is not available on purchases from a unregistered dealer & from a dealer who has opted for composition scheme. It is also not available for non creditable goods of Schedule Seven and on purchases from casual dealers.
c) The dealer is entitled to adjustment in the output tax on account of adjustment on account of return of goods variation/alteration in the sale price by agreement, discount and bad debt etc.
d) Similarly adjustment to input tax credit is allowable on account of various eventualities such as rejection of goods, return of goods, change in user of goods, transfer of goods to branch or consignment etc.
e) Adjustment to output & input tax credit is to be made in the ‘tax period’ in which the eventuality arises and not in the original returns.
f) On the goods transferred to Branches/ consignment agents outside Delhi, input tax credit is to be reduced upto 4% of DVAT on the purchases.
g) C.S.T. paid on purchases is not vatable under DVAT.
7. Invoices, Accounts and Records
a) Tax Invoice: Every registered dealer under the VAT making a sale shall issue a tax invoice depicting the VAT charged separately. Tax invoice can not be issued by a dealer who opts for composition or who is making Interstate sales or a person specified in the Fifth schedule. Tax invoice shall be issued in duplicate, the original shall be issued to purchasing dealer and the duplicate shall be retained by the selling dealer. On the basis of such tax invoice, the purchaser shall be able to obtain input tax credit. The tax invoice should be titled as ‘Tax Invoice’ at the top and should contain name and address of the selling registered dealer and his TIN No. It should also contain name and address of the purchasing dealer and his registration no., if any. It should also contain description of goods, quantity, value and amount of tax charged. It should be signed by the selling dealer or his agent. Tax invoice should have pre-printed serial no. and it should also indicate name of the printer and the 1st and last serial number of the ‘tax invoice’. It has also been provided that invoices issued under Central Excise Act shall be deemed to be tax invoice.
b) Retail invoice is to be issued for all sales above 25/- where ‘tax invoice’ is not issued. It has to be issued for Interstate Sales. The retail invoice shall also be marked as ‘Retail Invoice’ at a prominent place. It shall state name, address and TIN of the selling dealer. In case of Interstate sales name and address and registration number of the purchasing dealer and the statutory form against which sale is made, description, quantity, value of the goods and individual serialized number and also signature of the dealer.
c) Credit and debit notes are to be issued when the price of sale is reduced or nature of sale is varied or goods are returned etc. after issue of tax invoice. Adjustment of tax has to be made on the basis of such debit and credit notes.
d) The dealer shall also maintain sufficient records so that his DVAT liability can be assessed. He shall also keep copies of such invoices issued and received and of the challans evidencing payment of tax etc. Besides other regular account books he shall maintain monthly account, specifying total output tax, total input tax, net tax payable and carried forward etc. He shall also maintain purchase records in the DVAT 30, sale records in DVAT 31, records of Interstate sale and Inter State transfer of goods, detail of input tax calculation, stock records showing receipts and deliveries and manufacturing records, annual accounts, cash book, ledger etc. However, a dealer opting for composition shall maintain detail of goods purchased and sold by him and also cash book, day book, ledger, purchase vouchers etc. All the records shall be retained for a period of 7 years.
a) DVAT returns in form DVAT 16 is to be filed within 28 days from the end of the ‘tax period’ along with proof of payment in DVAT 20. The return period is one month for the dealer having turnover of 5 Crores or above and quarterly or monthly for others at their option. The return under C.S.T. Act shall be filed for the above period i.e. monthly or quarterly according to the tax period adopted for DVAT purposes.
b) Besides return filed under CST Act, an annual Reconciliation Statement shall also be submitted by 31st December along with statutory declaration forms such as ‘C’, ‘D’, ‘E’, ‘F’ form etc. Reconciliation will be made and if there is any tax due for which forms are not received, tax shall be payable along with the reconciliation statement.
c) Revised return can also be filed if an error is detected by the dealer which has resulted in payment of less tax. Revised return has to be filed in Form DVAT 16 along with explanatory note and with payment of tax deficiency and interest. Return can be furnished within the period of 4 years. For dealers opting for composition scheme the revised return has to be furnished in DVAT 17. It must be noted that such revised return can be filed if there is lesser payment of tax. However, if the mistake results in excess payment of tax, return can not be revised but the dealer can file an objection under Section 74.
9. Assessment and Audit
a) Under DVAT your return i.e. DVAT 16 if furnished within time and is correct and complete it has to be accepted by the department as ‘self assessment’.
b) If a dealer does not file proper return, it is submitted late or is incomplete or does not comply with the requirement of law, the department will make default assessment, compute net tax due and will send a notice in DVAT 24 determining tax payable.
c) Whereas under DVAT there is an assessment for every ‘tax period’ assessment under Central Sales Tax will be made on annual basis on filing the annual reconciliation statement by 31st December every year. Though the return under C.S.T. has to be filed and tax has to be paid monthly or quarterly, the assessment will be made annually as stated above on submitting the annual reconciliation statement and statutory forms and the balance tax due is to be paid.
d) Refunds, if any, which the dealer will be entitled on the basis of his return, shall be issued to them electronically to their bank accounts within one month, unless they are withheld for specified reasons. Also in such cases before issued refund, the department may ask for necessary security.
ii) On a selective basis, the return will be scrutinized and a notice may be issued by the department in DVAT 37 for ‘Audit’.
iii) Besides the above audit, the department has also power to order a special audit by the Accountant or experts. Such audit is to be completed within 180 days of issuance of directions and the fees determined by the department, will be borne by the dealer.
iv) The dealer whose turnover is above Rs. 40 lacs shall also be liable to submit Audit Report obtained by them under Sec. 44AB of the Income Tax Act.
10. The above are provisions which are likely to be noted by the dealers immediately on enforcement of DVAT. There are other provisions such as filing of objections, appeals to the Tribunal, determination of disputed questions, penalties and appeals to High Court and provisions for check post and for documents to be submitted for exporting goods outside Delhi and for importing goods into Delhi which are not being discussed in this paper and shall be dealt subsequently.