DVAT Mechanism and Calculation of Tax Liability
Manufacturer, Wholesaler or retail dealer charges tax on
sales. However the dealers are allowed to claim credit for the
tax already paid on purchase of materials sold or material
inputs, and is required to pay only the net amount of tax to the
government. This credit offset mechanism ensures that the tax
des not accumulate as goods pass from the manufacturer to the
wholesaler or retailer.
Net tax payable by a dealer can be calculated between total tax
charged on its sales (out put tax) during a given period and the
tax paid on its purchases (input Tax) during the period. If the
out put tax for the period exceeds input tax, the difference
amount of tax is payable to the government. If the input tax
exceeds output tax, the dealer is entitled to a refund of the
excess, or to carry forward the excess to be offset against tax
payable in future period.
Under Delhi Value Added Tax (DVAT) Mechanism, the tax rolls
forward at each intermediate transaction to the point of final
sale to the consumer. When the goods reaches the consumers, the
total tax paid by all intermediate dealers equals the tax on the
final sale price of the goods.
Standard Rates of DVAT
The standard rate of Delhi Value Added Tax is 12.50%.
Other rates are 1%, 5% and 20% apply to certain specified goods
such as gold and silver articles, coarse grains, garments and
petroleum.
Turnover Limit to Register with DVAT and Registration
requirement
If the dealer is not already registered, obligation to register
and pay tax starts on the day when turnover exceeds Rs. 20 lakhs
or the dealer make an interstate sale or purchase. Other dealers
who are interested to register with DVAT can also register
voluntarily before reaching the turnover limit.
Time limit to apply for registration with Delhi Value Added
Tax (DVAT)
The dealer needs to apply for registration of VAT within 30
days, once the turnover crosses the thresholds.
Penalties for various defaults under Delhi Value Added Tax (DVAT) Act
Section 86(12) Where a tax deficiency arises: Penalty u/s 86(12)
Section 86(15) Prepares records and accounts i.e. false misleading or deceptive
Section 86(20) Statement to the commissioner: False, misleading, deceptive, omits statements
Section 86(22) A casual failed to furnish return or other document with return in the due date