Impact of Budget Proposals on Delhi Value Added Tax Presented On 25-06-2015

CA Vinod Kaushik

Introduction:

Before I begin this article it is worth to quote from the budget speech of Mr. Manish Sisodia Finance Minister that “I have tried to strike a careful balance between the requirements to mobilize more resources to fulfill the commitments made by this Government and to ensure that tax proposals do not have an adverse bearing on the common man (Aam Aadmi)”.

Really this budget in my opinion is different from the previous budgets because as a tradition the past Finance Ministers used to increase the rate of tax on certain goods without giving a proper thought and analysis of the increase. This budget has brought good news for the dealers that there will not be increase in tax rate of any article under Delhi VAT. Now we shall analyse in detail each aspect of the Budget proposals which has impact on the existing VAT law and also the logic behind all such proposals.

Summary of Changes:

No upward change in tax rates:

There is no upward change in rate of taxes under Delhi VAT as Hon’ble Finance Minister said that “I am not proposing any enhancement in tax rates. We believe that tax collection will improve with effective and efficient tax administration. This Government is committed to simplifying the VAT structure to make it easier for the trader community to comply with the DVAT Rules and Regulations”.

VAT rate on wood and timber has been reduced from existing 12.50% to 05%

The VAT rate on wood and timber has been reduced from existing 12.50% to 05% a great relief for the furniture industry. Most of the industry inputs are taxable @ 5% under Delhi VAT and the same has been given under entry 84 of IIIrd schedule of DVAT Act, 2004. Now the wood and timber also work as inputs for furniture industry and the same has been proposed to be included in industrial inputs and taxable @ 5%. It is worth to go into the history of these particular items as the same was originally kept under entry no. 169 of IIIrd schedule of DVAT Act and was taxable @ 5% as “Wood, timber, ply-board and laiminated board”. In 2010 the above entry was omitted and Wood, timber, ply-board and laiminated board were made taxable @ 12.50%. Now again the AAP Govt. has restored the wood and timber under IIIrd schedule and made taxable @ 5%.

CAUTION: In my opinion the Govt. has proposed to reduce rate of tax on wood and timber from 12.50% to 5% but the ply-board and laiminated board are still taxable @ 12.50%. The exact entry of timber and wood become clear once the Govt. moves the amendment bill in the Assembly.

VAT rate on all kinds of waxes to be 5%

Presently, wax of different types is taxable @5%, 12.5% and 20% under various entries of Delhi Value Added Tax schedules. It has been proposed to tax wax of all kinds @ 5% by suitably amending the existing entries. Different entries which used to deal with waxes are reproduced as under:

Entry No. 1 of IVth Schedule: Wax (except Petroleum wax used for manufacture of candles)-20%

Entry No. 84 of IIIrd Schedule: Vegetable waxes (other than triglycerides), beeswax, other insect waxes and spermaceti, whether or not refined or colored; degras; residues resulting from the treatment of fatty substances or animal or vegetable waxes-5%

Entry No. 133(b) of IIIrd Schedule: Artificial waxes and prepared waxes-5%

Entry No. 120 of IIIrd Schedule: Paraffin wax of all grades/standards other than food grade standards including standard wax and slack wax.

Now all types and varieties of waxes are proposed to be taxable @ 5% to remove the ambiguity in the trade and industry.

Rate of Tax on cutlery items has been reduced to 5%

Utensils of all types including pressure cookers/pans except utensils made of precious metals are currently taxable @ 5%. However, cutlery items are taxable @ 12.5%. Since these items belong to the same family, it is proposed to reduce rate of tax on all utensils and cutlery items made of metals (including pressure cookers/pans) to 5% except those made of precious metals. The rate of tax on cutlery items has gone through various changes in past and also clarified by Commissioner Delhi VAT in various determinations. By the proposed amendment the entry no. 06 of IIIrd schedule shall be “All utensils and cutlery items (including pressure cookers/pans) except those made of precious metals”.

CAUTION: Till 31-03-2010 cutlery of plastic was mentioned in entry no. 165 of IIIrd schedule and was made taxable @ 5%. With effect from 01-04-2010 the above said entry was deleted and plastic cutlery was made taxable @ 12.50%. Now as per proposed change all types of cutlery are made taxable @ 5% under entry no. 06 hence dispute on rate of tax cannot be ruled out and needs a clarification from Authorities. The tax authorities may insist to tax plastic cutlery items @ 12.50% in absence of clarification on the same.

Changes proposed in other Indirect taxes by Budget 2015-16

• A congestion fee on Heavy Goods Diesel Vehicles has been imposed ranging from Rs. 100 to 1500 per entry. This fee shall not be applicable on Public Transport and taxies entering Delhi.
• To streamline the liquor trade and eradicate corruption, this Government is shifting the point of levy of Excise Duty from Transport Permit level to Import Permit level.
• To bring additional revenue, the Government proposes to increase the retail vend fee of Corporations from 2.5 Lakh per annum to Rs. 4.00 Lakh per annum and also fee of other licenses.
• Government has proposed to enhance the Luxury Tax from 10% to 15% for all applicable establishments.
• An Entertainment Tax of 40/- is proposed to be levied on Cable TV/DTH Services. The Entertainment Tax on Cinema Halls isproposed to be enhanced from 20% to 40%.
• The Betting /Totalizator tax is proposed to be increased from 10% to 20% and there is no changein rates of State excise as the same was done in last year.

Now I will conclude my article with the hope that GST the most awaited legislation to eradicate the multiple state taxes will be passed in Rajya Sabha in upcoming monsoon session. The Loksabha has passed GST legislation and as per request from Opposition parties the same has been sent to select committee of Parliament.

(Author can be reached  at cavinodkumar67@gmail.com, +91-9953236278)

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