CA Vinod Kaushik

CA Vinod Kaushik

Introduction: While presenting regular budget of Delhi for the year 2015-16 the Govt. has projected to get Rs. 34661 crores from taxes in which Rs. 24000 crores has been proposed to be collected from Value added taxes only. In order to achieve the above target the Govt. machinery especially the VAT department has to do more efforts and put a cap on tax evasion. Recently the VAT department has issued a circular (Circular no. 20 of 2015-16) dated 19-08-2015 depicting its plan to crack down the practices adopted by certain class of dealers (Bogus Dealers) to defeat the provisions of VAT laws. In this article an attempt has been made to clarify the impact of above circular if converted into law on business environment of city at a time when security on registration has been discontinued a long time ago.

What was the need to ask additional security?

After the mechanism of mismatch has been implemented through form 2A and 2B a substantial tax evasion has been detected by department. Now a day’s system based demands have been generated if sales shown by selling dealer in form 2B does not match with purchases in form 2A filed by buying dealer. Even after such a tough system been in enforce certain class of dealers are involved in practices to defeat the provisions of law and cause damage to exchequer. In order to detect and control the loss caused to buying dealers and exchequers it was necessary to ask a security from dealers whose turnover jumps substantially (Rs. 10 crores) in a short period.

Impact of additional security on business environment:

There is confusion in certain class of dealers about additional security to be submitted whose turnover exceeds Rs. 10 crores. In order to explain the intention of exchequer following class of dealers are required to deposit additional security:

  • A dealer registered with the department in last 3 years i.e. from 01-4-2012 to 31-03-2015 and whose turnover has crossed Rs. 10 crores in any of the financial year. The turnover for above purpose shall not include export sales and exempt sales under first schedule of the DVAT Act.
  • The dealers have deposited tax less than 0.1% of such qualified turnover in the respective financial years. The payment of tax should not be less than 0.1% in any of the financial year.

The existing dealers whose turnover is in excess of Rs. 10 crores and making payment of taxes equal to 0.1% or more are not required to submit additional security even though they are registered in last 3 years. A genuine dealer in no case will make payment of taxes less than 0.1% of their turnover. Dealers registered for years i.e. before 01-04-2012 and making turnover more than 10 crores are out of ambit of this circular and not required to deposit additional security.

Preparations to crack down bogus dealers:

Practically any business house crossing turnover of Rs. 10 crores in such a short period will make payment of taxes to exchequer substantially and also more than 0.1% of their turnover. The dealers who are not paying any taxes and making huge turnover, it seems somewhere there is some agreement between parties to defeat the law and cause damage to exchequer. In order to prevent complete loss to exchequer the department has planned to introduce additional security of 0.1% of turnover in any of the financial year.

Concluding Remarks:

Somewhere the ruling Govt. has attempted to promote “Ease of doing business” in the city by making registration process paperless, instant registration no. and provisional certificate and many more steps. In order to prevent the loss to buying dealers and Govt. it was necessary to bring some tough rules to curb this kind of practice in the city. This step if implemented will curb the practice of “fly by night dealers” and improve the business environment.

(Author can be reached  at [email protected], +91-9953236278)

Disclaimer: Views expressed are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.

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June 2021