RECENT AMENDMENT IN DELHI VAT ACT AND RULES

Presented by:VINEET BHATIA Advocate

N-144, Greater Kailash-INew Delhi -110048Ph: 46536490, 2924126098-110-81159bhatiav68@rediffmail.combhatiav68@gmail.com

PART - I

RECENT AMENDMENT IN

DELHI VALUE ADDED TAX ACT

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Sun GlassesAmendment in entry no. 115 of the Third Schedule to the DVAT Act, 2004 vide N/N. F3(19)Fin(Rev-I)2013-14/dsVI819.

ENTRY No. 115 (i) w.e.f. 11-05-2005 to 10-06-2013Spectacles, Sunglasses, parts and components thereof, contact lens and lens cleaner.

with effect from 11/06/2013 Spectacles, parts components, thereof, contact lens and lens cleaner but not including sunglasses its part and component.

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The Delhi Government has enacted The Delhi VAT (Amendment) Act, 2013 on 9 Sep, 2013 and has appointed 12 Sep, 2013 as the date on which it comes into force

(Notification No.F.14(5)/LA-2013/cons2law/65 dated 9 Sep, 2013 and Notification No. F.3(14)Fin.(Rev.-I)2013-14/ds VI/703 dated 11 Sep, 2013).

The major thrust of the Amended Act appears to curtail tax evasion and enforce timely and accurate compliance. The prevalent penalties under the Act have been enhanced, to as high as ten times the present rate.

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Business  Premises [Section 2 (e)]

“business premises” includes—(i) the address of a dealer, registered with

the Commissioner;

(ii) any building or place used by a person for the conduct of his business, except for those parts of the building or place used principally as a residence;

(iii) any place from where a dealer carries on business through an agent ( by whatever name called), the place of business of such agent; anda warehouse, godown or such other place where a dealer stores his goods.

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Goods [Section 2 (m)]

“goods” means every kind of moveable property (other than newspapers,actionable claims, stocks, shares and securities) and includes—(i) livestock, all materials, commodities, grass or things attached to or forming part of the earth which are agreed to be severed before sale or under acontract of sale; and(ii) property in goods (whether as goods or in some other form) involved in the execution of a works contract, lease or hire-purchase or those to be used in the fitting out, improvement or repair of movable 1[or immovable] property

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AMENDMENT TO SEC. 11

Section 11 of the DVAT Act has been amended .

IMPLICATIONS Excess Tax Credit cannot be carried forward

to the next year. Entire Tax Credit necessarily has to be

claimed as a refund in the last tax-period. However refund can also be claimed in earlier Tax-Periods.

Excess Tax Payments made inadvertently shall also be treated as credit.

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AMENDMENT TO SEC. 25 The Commissioner has been empowered to prescribe

a surety as a condition of de-sealing the business premises or for release of seized goods/documents etc.

Amendment to Sec. 35 Where a person has made an objection to an

assessment or part of an assessment and has complied with the condition, if any, to entertain such objection in the manner provided in section 74 of this Act, the Commissioner may not enforce the payment of balance amount in dispute under that assessment until the objection is resolved by the Commissioner.Stay on recovery of balance amount from dealers who pay the stay amount during a proceeding under section 74. This has been further elaborated vide circular No. No.F.3(380)/Policy/VAT/2013/802-808 dated 19.9.2013

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AMENDMENT OF SEC. 48

Book of Accounts: To be kept at dealers’ principal place of business as recorded in his certificate of registration either in normal paper format (hard copy) or even in computer system (soft copy).

Provided that the dealer maintaining computerised books of accounts using a software should be able to readily provide soft and/or hard copy of the records at the principal place of business as recorded in his certificate of registration, as and when required by the Commissioner.

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AMENDMENT OF SEC. 58A If the Commissioner, having regard to:-

(a) the nature and complexity of the business of a dealer; or(b) the interest of the revenue; or(c) volume of accounts; or(d) doubts about the correctness of the accounts; or(e) multiplicity of transactions in the accounts; or(f) specialised nature of business activity; or(g) non-production of all records and accounts; or(h) non-filing of audit report under section 49 of this act; or(i) any other reason.

is of the opinion that it is necessary so to do, he may direct the dealer by a notice in writing to get his records including books of accounts, examined and audited by an accountant or a panel of accountants or any other professional or panel of professionals nominated by the Commissioner in this behalf

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NEW PENALTIES UNDER DVAT ACT

Failure to apply for amendment in registration would attract a penalty of INR 500 per day subject to maximum of INR 10,000; [Sec 86(5)]

Failure to apply for cancellation/surrender of registration would attract penalty of INR 1,000 per day subject to maximum of INR 25,000; [Sec 86(6)]

Failure to furnish return or any document to be filed with the return or to meet requirement of any notification would attract penalty of INR 500 per day subject to maximum of INR 50,000; [Sec 86(9)]

Where no specific penalty has been prescribed, a general penalty of INR 10,000 would be attracted. [Sec 86(24)]

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PART II

RECENT AMENDMEN TS IN DELHI VALUE

ADDED TAX RULES

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Works Contract (Rule 3)(1) In the case of turnover arising from the execution of a works

contract,the amount included in taxable turnover is the total consideration paid or payable to the dealer under the contract and exclude –(i) the charges towards labour, services and other like charges; and(ii) the charges towards cost of land, if any, in civil works contracts,subject to the dealer’s maintaining proper records such as invoice, voucher, challan or any other document evidencing payment of above referred charges to the satisfaction of the Commissioner.Explanation. – The term “civil works contracts” for the purpose of this rule shall include construction of building or complexes - residential or commercial, bridges, flyovers, dams, barriers, canals, diversions, other works of similar nature, and the collaboration agreements or joint development agreements or similar other agreements / arrangements between the landowner(s) and the contractor(s) / builder(s) / developers / collaborators / similar other persons by whatever name called for construction of complex or property.

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(1A) In case the civil works contract mentioned in sub-rule (1) are of the nature wherein the agreement executed between the land owner(s) and contractor(s) or similar other agreements/ arrangements is of the nature of collaboration or joint development where the contractor(s) constructs the building/units and consideration for the construction is given by the land owner in the form of share in the land with or without additional money exchange, the value of works contract carried out by the contractor(s) for the land owner shall be highest of the following amounts:(i) Actual value of construction, including profit, transferred by the contractor to the land-owner in accordance with the books of accounts maintained by the contractor.

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(ii) Where proportionate land is transferred by the land-owner to the contractor by executing a separate conveyance / sale deed, the value stated in the deed for the purpose of payment of stamp duty as reduced by consideration paid by the contractor to the land owner through account payee cheque/ draft/ pay order/ electronic transfer, if any.

(iii) On the basis of circle rate of proportionate area of land transferred by the land-owner to the contractor in accordance with the notification under Delhi (Prevention of Under Valuation of Instruments) Rules, 2007 as amended from time to time (hereinafter referred as “circle rates”) prevailing at the time of execution of agreement between them, as reduced by the consideration paid by contractor to the land-owner through account payee cheque/draft/pay order/electronic transfer, if any.

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Provided that where separate circle rates for land and construction have not been notified in respect of certain buildings or properties, then circle rate for land and construction prevailing in that locality for other buildings or properties, in respect of which separate circle rates have been notified, shall be taken for the purpose of determination of value under this sub-rule.

Provided further that the value of works contract under this sub-rule shall not be less than the circle rate of construction applicable on the date on which agreement between the land-owner and the contractor for the construction of property was executed.

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(2) For the purpose of sub-rule (1), the charges towards labour, services and other like charges shall include-(i) labour charges for execution of works.(ii) charges for planning and architects fees.(iii) charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract.(iv) cost of consumables such as water, electricity, fuel, etc. used in the execution of the works contract, the property in which is not transferred in the course of execution of a works contract.(v) cost of establishment of the contractor including cost of marketing, finance expenses and securities deposits to the extent it is relatable to supply of labour and services.(vi) other similar expenses relatable to supply of labour and services.

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(vii) profits earned by the contractor to the extent it is relatable to supply of labour and services subject to furnishing of a profit and loss account of the works sites.PROVIDED that where amount of charges towards labour, services and other like charges are not ascertainable from the books of accounts of the dealer, the amount of such charges shall be calculated at the percentages i. e. specified in the table

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Insertion of new rule (Rule 44A)A retail invoice issued under sub-section (4) of Section 50 of the Act by a dealer, who has elected to pay tax under section 16 of the Act (including schemes notified there under), besides, containing particulars specified in sub-section (5) of the said section, shall also contain the words ‘Composition Dealer (Not eligible to charge VAT on Bill Amount)’ at the top of the invoice.”

Amendment of sub-rule 2 of Rule 22A person required to pay security under sub-section 4 of section 60 for de-sealing or release of any premises including the office, shop, godown, box, locker, safe, almirah or other receptacle, shall furnish security of a sum equal to one per cent of the maximum of GTO of last three years or a sum equal to five lakh rupees, whichever is higher.”.

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Insertion of new sub-rule  2A of Rule 23 The security required to be furnished by a

person under sub-section 4 of section 60, shall be, at least 50% in the form of security specified at sl. no.1 of the ‘Table – Forms of Security’ below and balance may be in any of the forms of security specified in the said table.

Insertion of new Rule 67APower to prescribe Acknowledgement The Commissioner may prescribe an Acknowledgment for applications/returns filed by the dealer online, in lieu of hard copy of such applications/returns.

Amendment in Forms DVAT-16, DVAT-17, DVAT 30, DVAT-30A, DVAT-31, DVAT-31A, and DVAT-48.

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PART III

DELHI VAT COMPOSITION SCHEME 2013

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Delhi VAT Authorities have notified certain amendments to the Composition Scheme notified vide Notification No. 3(5)/Fin.(Rev-I)/2013-14/dsvi/801 dated 30-09-2013.

The composition dealer opting the scheme can now make purchase or procure goods (other than the exempted goods) from an unregistered dealer in Delhi to an extent of 5% of his total turnover during the year or 50lakhs, whichever is lower.

Only an amount to the extent of 50% of the tax paid under the scheme shall be forfeited in case of dealers opted this scheme, but later found not eligible for the scheme.

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Only one Scheme can be opted for all categories of works contracts i.e. either Scheme A or Scheme B

To opt or to continue to opt the composition scheme from third quarter of 2013-14, a fresh application in Form WC 01 is to be made. However, no time limit has been prescribed for this.

Dealers who have already opted the composition scheme notified on 28-02-2013, will have the option to withdraw it from third quarter by making an application in Form WC-02 on or before 31-10-2013 (effective from 01-10-2013).

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Regular dealers, opting the scheme, shall pay tax on opening stock, if any held by them and make its declaration in Form SS 01. However, now they shall be eligible for the tax credit available at the end of second quarter of 2013-14. If the amount is higher than the tax payable, then refund or carry forward of such amount to subsequent periods shall be allowed.

Dealer paying tax in one scheme (say X or Y), may opt other scheme for remaining last two quarters of the year 2013-14

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Any changes in the scheme opted in subsequent years can be made within 30 days from the 1st day of the year for which change is to be effected.

Where a dealer opts to change from Scheme Composition or Amnesty , he shall be required to pay tax (at the rate specified in section 4) on the opening stock held by him on 1st October or on the 1st day of the year for which such change is to be effected.

Where the composition tax rate opted by main contractor is lower than that of sub-contractor, the contractor shall be liable to deduct TDS at the differential rate between the two in respect of the turnover (executed between them), e.g. if differential rate is 1% and work executed by sub-contractor for contractor is Rs.500000/- then TDS payable by the contractor would be 5000/-.

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Now the sub-contractor shall be eligible to deduct only the amount of tax from his total tax liability, that too, the amount lower of the two rates being of composition opted, i.e. if for a contractual value of Rs.400000/- the main contractor opted 2% and sub-contractor opted 3%, then in that case sub-contract can adjust tax amount to an extent of 2% only.

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PART IV

DELHI VAT AMNESTY

SCHEME 2013DELHI TAX COMPLIANCE ACHIEVEMENT SCHEME, 2013

(DCS)

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DCS is a “Scheme” notified under the Delhi Value Added Tax Act, 2004 (DVAT Act) vide Notification No. ……………… dated 20-09-2013.

Improve Self ComplianceWhere assessment order has NOT been issued, the declarant (including trader, manufacturer, contractor, builder, leasing company, etc.) shall pay only declared tax (for the period up to 31.03.2013).

Benefits under Amnesty scheme (i) Waiver of interest and penalty.(ii) Immunity from prosecution.

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Immunity not available under Amnesty scheme (i) Interest stated in the assessment order

(ii) Interest and penalty not related to declared tax(iii) Penalty which has no relation to tax deficiency. For example, where penalty has been imposed for late filing of Returns or other documents or for non maintenance of stock records, etc, such cases would not be covered within the scope of DCS.

Period covered(i) Period up to 31.03.2013(ii) Additional benefit to unregistered dealers for the period 01.04.2013 onward till the date of

registration

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Taxes cover under this scheme Central Sales TaxDelhi Value Added TaxDelhi Sales Tax on Work ContractDelhi Sales Tax on Right to useEntry Tax

BeneficialriesNon registered dealer.Dealer who have not filed returns.Dealer who have not paid due taxes.Contractors.Dealer whose unsettled matters are lying with any Authority / Tribunal / High Court / Supreme Court.Person who are liable to deduct tax at source.

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Procedure

Registration

Declaration & Installment 1

Acknowledgement

Balance due Installment 2

Full & final payment

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How to Calculate Taxes Due

For the period 1st April 2005 to 31st March 2013For the period

prior to 1st April 2005

Where no Notice of

assessment issued

Where Notice of

assessment issued

Works ContractWhere

Assessment Ordee issued

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EligibilityTax dues up to 31.3.2103 has not been paid by 31.08.2013

Last date to exercise31.01.2014

FALSE DECLARATIONWhere the Commissioner has reasons to believe that the declaration was false in material particular, he may serve notice on the declarant, within one year from the date of declaration, in respect of such declaration. He may require the declarant to show cause why he should not be required to pay the tax dues unpaid or short paid as per provisions of the Scheme. If the Commissioner is satisfied that the declaration made by the declarant was substantially false, then benefit of this Scheme shall not be available to the declarant. Such declarant may be proceeded u/s 89(2) of the Act for furnishing of false declaration.

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Adjustment of Input Tax Credit Input tax credit cannot be adjusted against payment of tax dues under DCS. Accordingly, entire tax dues under the Scheme shall be paid in cash through the normal e-payment method.

Adjustment of carry forward amount Dealer shall not be entitled to adjust his carry forward amount as per the Returns, if any.

Failure to pay tax dues after making declarationWhere the declarant fails to pay the tax dues, either fully or in part, as declared by him such dues along with interest thereon shall be recoverable under the provisions of the Act.

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No refund of tax paid under this SchemeAny amount paid in pursuance of a declaration made under sub - clause (1) of clause 4 shall not be refundable under any circumstances.

As per Clause 5 (5) of the Scheme The information gathered vide a declaration under the scheme shall be kept confidential and shall not be used except under the Scheme and the same shall not be shared with any other person/ government department/ agency. 36

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THANK YOU

Disclaimer

This presentation has been prepared for internal use of ICAI and its members. The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. The presentation is made with utmost professional caution but in no manner guarantees the content for use by any person. It is suggested to go through original statute / notification / circular / pronouncements before relying on the matter given. The presentation is meant for general guidance and no responsibility for loss arising to any person acting or refraining from acting as a result of any material contained in this presentation will be accepted by us. Professional advice recommended to be sought before any action or refrainment.

VINEET BHATIA Advocate

N-144, Greater Kailash-INew Delhi -110048Ph: 46536490, 2924126098-110-81159bhatiav68@gmail.com