DELHI VAT Composition Scheme and FAQs

Ankit Gupta

Composition scheme is the scheme to facilitate small dealers (whose turnover in one year does not exceeds Rs.50 Lac) to pay D-VAT at flat rate of 1% without claiming Input Tax Credits in respect of VAT paid on local purchases made from registered dealers.

1.Who Can apply for Composition Scheme?

Any dealer whose interstate Sales does not exceeds Rs.50,00,000 in a financial year.

2. Who cannot apply for Composition Scheme?

Following are not eligible to opt for Composition Scheme :

Dealer procuring goods from outside Delhi
Dealer whose turnover exceeds Rs.50,00,000
Dealer who sold goods outside Delhi
Dealer who fulfil any other conditions as notified by Commissioner

3.What is the rate of DVAT applicable on dealer opted Composition Scheme?

Every dealer who is registered under Composition Scheme of D-VAT Act is required to make payment of VAT at flat rate of 1% without claiming benefit of Input Taxes paid on Purchases made from Registered Dealer.

Please Note that w.e.f 18.03.2016 Small Restaurants, Hotels, Caterers and Sweet Shops can also opt Composition scheme of registration but they are required to pay DVAT at flat rate of 5% without claiming benefit of Input Taxes paid on Purchases made from Registered Dealer.

4. What are the features of Delhi VAT composition scheme of Registration?

Dealer cannot compute his Net Tax Liability as per section 11 of DVAT Act.
Dealer cannot issue Tax invoices.
Dealer cannot claim benefit of Input Taxes paid on purchases made from registered dealers.
Dealer is not allowed to collect any tax from Purchasers.
If the Turnover of the dealer exceeds Rs.50,00,000 at any time during the Financial Year then the Composition scheme will be automatically converted into Normal Scheme.
A dealer who has defaulted to furnish the returns for two consecutive tax periods by the prescribed due dates shall, with effect from the first day of the next tax period, be liable to pay tax under Normal Scheme.
Dealer can continue to retain the original copies of all tax invoices and all retail invoices for all his purchases and copies of all retail invoices issued by him in respect of his sales as required under section 48 of the Act.

5. Is it possible to change “From Composition Scheme to Normal Scheme “or “From Normal Scheme to Composition Scheme”?

Yes, Dealer may voluntarily change its scheme both in the beginning as well as during the financial Year.

6. What is the difference between Normal Scheme & Composition Scheme of Registration under DVAT Act?

	NORMAL SCHEME	COMPOSITION SCHEME
Rate of Charging VAT	1% or 5% or 12.5%	1%
VAT is payable on sale of Exempted goods	No	Yes
Benefits of Input Tax Available	Yes	No
Tax	Can issue	Cannot Issue
Return Form	Very Complex	Easy
Annexures	Required to be filed alongwith Return	Not Required to filed alongwith Return
Restriction on Central Sales	Never	Yes