This article has been written to give you clarity on the implication of DVAT (2nd Amendment) Bill, 2015 which was introduced in the Delhi Legislative Assembly on 29th day of June 2015 and after discussion on the floor of the house was passed on 30th day of June 2015 with voice vote. One more reason to write this article was to put a break on rumors that Delhi Govt. has increased rate of VAT on petrol from 20% to 30%. All the amendments as given in this bill along with some key changes proposed in the Budget shall be discussed clause by clause.
Amendment of Section 4:
Sections 4 of the DVAT Act, 2004 talks about the rate of VAT on various commodities purchased and sold in the state of Delhi which varies from 1% to 20%. Some essential commodities has been made tax free while others are taxable at 1%, 5%, 12.50% and 20%. In this Amendment bill Govt. has proposed to raise the upper limit of VAT on some commodities given in IVth schedule such as Petroleum products, Aerated Drinks and some other from 20% to 30%. Before this amendment becomes applicable there is a flat rate of tax of 20% on all the commodities given in IVth Schedule but after above amendment there may be rate of VAT of 30% on some commodities and 20% for rest of commodities. Once the amendment is notified, If Delhi Govt. wants to discourage consumption of liquor ( only taken as an example) as given in IVth schedule then it is empowered to hike such rate from 20% to 30%.
Amendment of Section 8 and Section 10:
Section 8 in the DVAT Act talks about adjustment in output tax by a selling Dealer and section 10 prescribes reduction of input tax by purchasing Dealers in certain circumstances. The amendment bill has proposed to change clause C of sub section 1 of section 8 which was giving a free hand to the selling Dealers to reduce their output tax after change in previous agreed sale consideration due to offer of a discount or any other reason. Now the amendment bill has proposed to disallow adjustment in output tax due to offer of an incentive or discount through a credit note after issuance of TAX INVOICE to a REGISTERD DEALER. As explained in the statement of objects and reasons by the Finance Minister monitoring of such adjustments was a tedious job and has no overall impact on revenues of Department. After the amendment got notified Selling Dealers can not reduce their output tax by the above said reasons of credit not on account of discounts and incentives and purchasing dealers can continue to book this input and are not required to reverse the same.
Earlier the Sellers were reducing their output tax by the amount of tax on account of credit note but the purchasing Dealers were not reversing their input tax and it became very difficult for Department to track such non compliances on a very large scale. After giving proper thought and analysis section 8 and 10 has been proposed to be amended and explanations has been added in both the sections clear the intention of law amended.
Amendment in Section 22 and Section 89:
One of the welcome change by AAP Govt. as this section was causing difficulty to the dealers who want to cancel their registration. Before this amendment if you want to cancel your registration you can file the Form DVAT-09 online but you had to submit hard copy of the same along with registration certificates of DVAT and CST mandatorily. Dealers and consultants were facing difficulty to file application for cancellation of registration because after the security was waived in 2012 huge numbers of dealers were registered and Department could not dispatch their registration certificate till date. When we asked them about the status of certificates some of them were not printed and if printed it is stuck in dispatch department. Now the helpless dealers were forced to retain the TIN without fault of them. As per explanation given by Finance Minister Cancellation process shall be smoothen and will become online without requirement to submit registration certificate.
Section 89 has also been amended to omit the provisions which prescribed imprisonment of a dealer if they fail to submit registration certificate at the time of filing application for cancellation of registration.
Amendment of Section 38:
Section 38 sub section 5 is proposed to be amended to increase the time limit of 15 days to 45 days for seeking security from the dealers claiming refund if security is required during proceeding of refunds claims. Time limit has been increased to give some additional time to officers to obtain security from dealers claiming refund in order to safeguard the revenue.
Amendment to Section 51:
Section 51 has been amended to make the earlier amendments in Section 8 and 10 effective and to achieve the desired objectives by law. Section 51 prescribes circumstances for issuance of credit note and debit note.
Amendment in section 86:
Rigorous penalties for non filing of amendment application, non filing of return and non filing of information as prescribed in section 70 of DVAT Act, 2004 has been relaxed in the proposed law.
- Penalty for non filing/ delay in filing of form DVAT-07 (For change in nature of Business) has been proposed to be reduced from Rs. 500 per day to Rs. 200 per day.
- Penalty for non filing of application for cancellation of registration has been proposed to be reduced from existing Rs. 1000 per day to Rs. 200 per day. Maximum penalty has not been changed i.e. kept at twenty five thousand rupees.
- Penalty for non filing of return under Chapter V or to furnish information as prescribed in section 70 has been reduced from Rs. 500 per day to Rs. 200.
- The non issuance of invoices as given in section 50 of the act has been penalized and penalty is Rs. 5000 or 20% of the tax deficiency whichever is greater.
Changes proposed through Financial Bill:
While presenting budget of Delhi on 25-06-2015 the Finance Minister has proposed to reduce the VAT rates of following commodities;
- Rate of VAT on wood and timber has been proposed to be reduced from 12.50% to 5% as the wood and timber works as an input for furniture industry.
- Rate of VAT on all kinds of wax has been proposed to fix at 5% which is presently taxable at various rates under DVAT Act.
- Rate of VAT on cutlery items has been proposed to be reduced from 12.50% to 5% by suitably amending VAT schedules.
At the last it is most significant to say that these all proposals shall be become law when the bill received assent of Lt. Governor of Delhi and notified in official Gazette. Later in the day on 14th day of July 2015 information has been received that the bill has received assent of Lt. Governor Najeeb Jung. As of now we all are waiting for the notification from Department to know the date of implementation of all the above changes.
By Vinod Kaushik, ACA
Reach me at: firstname.lastname@example.org, +91-9953236278
Disclaimer: Views given in the article are personal and based on the law as on date .Before taking any action on the basis of this article kindly cross check the relevant section and rules.