Q. What is Value Added Tax?
A. Value Added Tax is multi-point tax on value addition which is collected at different stages of Sale with provision of 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:-
- The conventional sale i.e. Transfer of property in goods;
- Supply of goods by a society, club, firm, and company to its members;
- Transfer of property in goods involved in execution of works contract;
- Delivery of any goods on hire purchase or any other system of payment by instalments;
- Transfer of right to use any goods, whether or not for a specified period; and
- 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:-
- 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;
- 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;
- 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;
- an agent of a non-resident (where such non-resident is a dealer under any other sub-clause of this definition);
- 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;
- 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;
- 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;
- a casual trader; or
- 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. 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. Prices would go up due to VAT and consumer would suffer?
A. There are three Slabs of VAT i.e. 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. 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 for execution of works contract in NCT of Delhi subject to conditions. 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 for executing other works not liable to be taxed in 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. 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 he had already paid Rs. 45/- so that net tax payable by him will be 50-45=5 and he will pay to the Government Rs. 5/- on the Sale of Rs. 1,000/- (@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?
A. Purchases intended for inter-State Sale is eligible for tax credit.
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 claim Input Tax Credit?
A. Input tax credit is the credit for tax paid on inputs. Dealer has to pay tax after deducting Input tax which he had paid from total tax collected by him.
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 Invoice” is the proof required to claim input tax credit.
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. Is sales tax charged on cost of packing material?
A. Yes. Sales tax also charged on the packing material used for packing the goods.
Q. What are the different forms which are to be maintained by the local registered dealer?
A. There may different types of forms in different states in India. However, in Delhi, we have the following forms:-
- DVAT – 16 (VAT return)
- DVAT – 20 for Tax Payment
- DVAT – 17 for VAT return for Composite Dealer
- DVAT – 30 to maintain the Details of all purchases (local, Central, Import, Transfer)
- DVAT – 31 to maintain the Details of all Sales (local, Central, Export, Transfer) should be kept by all dealers in this form.
Q. What is Form 2A in VAT?
A. Form 2-A is applicable in Delhi State. It is the annexure which is given to sales tax department along with the VAT return. Form 2-A shows all the details of purchases during the return period.
Q. What is Form 2 B in VAT?
A. Form 2-B is applicable in Delhi State. It is the annexure which is given to sales tax department along with the VAT return. Form 2-B shows all the details of Sales during the return period.
Q. What is Central Sales Tax Rate?
A. 2% against ‘C’ Form otherwise the local tax rate shall be charged from the purchaser of other states.
Q. Which type of Statutory Forms are available?
A. C form, F form, H form, E-I form and E-II form are available online.
Q. How to obtain statutory forms?
A. All the statutory forms have to be applied online through the department’s website. Only the registered dealers are allowed to apply for these forms.
Q. What is Form T-2?
A. To minimize physical interaction between dealers and VAT Officials and for efficient
administration of the Act, it is considered necessary that the details of invoices and goods
receipt note in respect of goods purchased or received as stock transfer from outside Delhi be sought from the dealers of Delhi online. Form T-2 prescribed/notified by the Commissioner, Value Added Tax, Department of Trade and Taxes, requires the dealers to furnish details of invoices and goods receipt note in respect of goods purchased or received as stock transfer from outside Delhi. This form has to be submitted online.
Q. Why Form T-2 has been prescribed/notified?
A. Form T-2 is an endeavour to check loss of revenue which is caused to the exchequer by
unscrupulous dealers bringing goods into Delhi and then not recording the said transactions
in their stocks/books of accounts. Market intelligence reveals that such dealers sell such
goods without charging VAT. This results in unfair competition to honest dealers from
Q. Where the goods are brought into Delhi after being rejected by buyer and returned to the supplier for which dealer would not issue ‘C’ Form. How would the data of T-2 be reconciled with requirement of ‘C’ Form?
A. Form T-2 is to be filed for inward movement of goods and not for outward movement. The rejection/goods returned would be explained by the Delhi dealer with the help of relevant documents and accounts. Out of sales made by the Delhi dealer, if some goods are returned/come back into Delhi, the same would be required to be reported in Form T-2. If required, supporting documents may have to be produced.
Q. When should the data be furnished in Form T-2? Whether it should be furnished at the time goods move from other States or when goods are on borders of Delhi or when the goods are received in the godown?
A. The dealers are required to fill Form T-2 any time before the vehicle/goods enter into Delhi.
Q. Are the dealers required to submit Form T-2 even in cases where inter-State purchases or Stock transfer is not to be supported by Form C/F/H since the goods are exempted from Tax in State of dispatch?
A. Yes. In all cases where goods are brought into Delhi, the dealer is required to submit T-2 irrespective of taxability. However, as a concession, for the time being, the department will not insist for T-2 for the exempted goods i.e. those listed in the First Schedule of the DVAT Act.
Q. A dealer of Delhi dealing in tax free/exempted goods (e.g. books) and not registered with the Department of Trade and Taxes but brings taxable goods (like CDs etc.) into Delhi. Is he required to submit Form T-2?
A. Only registered dealers of Delhi are required to submit Form T-2. However, for interstate trading all dealers are required to mandatorily register with the Department.
Q. What will happen if the purchasing dealer does not have exact amount of the goods being brought into Delhi as the requisite information is not available with the buying dealer?
A. Buyer is required to obtain information from the seller about his purchase before the goods enter into Delhi. After receiving the information, he is required to follow the procedure. The submission of Form T-2 is mandatory.
Q. Is it mandatory to disclose the mobile number of foreign dealer from whom the goods have been imported?
A. In case of imports, it is optional to fill the mobile number of the foreign supplier. In such case, the dealer has to provide the email of the foreign supplier.
Q. How to factor transit change of vehicle or driver once the form is filled?
A. In such a case, the dealer has the option to file the revised T 2 form.
Q. What is the objective/purpose of conducting Survey?
A. Surveys are conducted to verify whether all transactions being made by a dealer are being faithfully reported by the dealer and whether due tax is being deposited on all such transactions. Under section 59 of the DVAT Act, 2004, all records, books of accounts and other documents maintained by a dealer, transporter are at all reasonable times open for inspection of the competent authority. Under Section 60(1), all goods kept at the business premises of the dealer, transporter at all reasonable times are open to inspection by the competent authority. Further under section 60(2), where the competent authority upon information in his possession or otherwise has reasonable grounds to believe that any person or dealer is attempting to avoid or evade tax or is concealing his tax liability in any manner, then for the purposes of proper realization of tax dues, the competent authority can enter, search, seize and seal the business premises of the dealer.