SPECTRUM STUDY CIRCLE (The Acme of Excellence) 1

15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
DELHI VALUE ADDED TAX

1. Dealer [Section 2(j)] – There must be a dealer. VAT is leviable only on a dealer.
“Dealer” means any person who, for the purposes of or consequential to his engagement in or in
connection with or incidental to or in the course of his business, buys or sells goods in Delhi directly or
otherwise, whether for cash or for deferred payments or for commission, remuneration or other valuable
consideration and includes
(i) a factor, commission agent, broker, del credere agent, or any other mercantile agent by whatever
name called, who for the purposes of or consequential to his engagement in or in connection with
or incidental to or in the course of the business, buys or sells or supplies or distributes any goods
on behalf of any principals, whether disclosed or not;
(ii) a non-resident dealer or as the case may be, an agent, residing in the State of a non-resident
dealer, who buys or sells goods in Delhi for the purposes of or consequential to his engagement
in or in connection with or incidental to or in the course of the business;
(iii) a local branch of a firm or company or association of persons, outside Delhi where such firm
company, association of persons is a dealer under any other sub-clause of this definition;
(iv) a club, association, society, trust, or cooperative society, whether incorporated or unincorporated,
which buys good from or sells goods to its members for price, fee or subscription, whether or not
in the course of business;
(v) an auctioneer, who sells or auctions goods whether acting as an agent or otherwise or, who
organizes the sale of goods of conducts the auction of goods whether or not he has the authority
to sell the goods belonging to any principal, whether disclosed or not and whether the offer of the
intending purchaser is accepted by him or by the principal or a nominee of the principal;
(vi) a causal trader;
(vii) any person who, for the purposes of or consequential to his engagement in or in connection with
or incidental to or in the course of his business disposes of any goods as unclaimed or
confiscated, or unserviceable or scrap, surplus, old, obsolete or as discarded material or wasted
products by way of sale;

Explanation: For the purposes of this clause, each of the following persons, bodies and entities who sells
any goods whether in the course of his business, or by auction or otherwise, directly or through an agent for
cash or for deferred payment or for any other valuable consideration shall, notwithstanding anything
contained in clause (d) (relating to meaning of business) or any other prov8sion of this Act, be deemed to be
a dealer, namely –
(i) Customs Department of Government of India administering Customs Act, 1962
(ii) Department of Union Government, State Governments and Union Territory Administrations;
(iii) Local authorities, Panchayats, Municipalities, Development Authorities, Cantonment Boards;
(iv) Public Charitable Trusts;
(v) Railway Administration as defined under the Indian Railways Act, 1989 and Delhi Metro Rail
Corporation Limited.
(vi) Incorporated or Unincorporated societies, clubs or other associations of persons;
(vii) Each autonomous or statutory body or corporation or company or society or any industrial,
commercial, banking, insurance or trading undertaking, corporation, institution or company
whether or not of the Union Government or any of the State Governments or of a local authority;
(viii) Delhi Transport Corporation;
(ix) Shipping and construction companies, air transport companies, airlines and advertising agencies.

The above definition has two parts. In the first part it states what a dealer means and in the second part it
states which person shall be included in the meaning of the dealer.
As per first part “Dealer” means any person who, for the purposes of or consequential to his
engagement in or in connection with or incidental to or in the course of his business, buys or sells goods in
Delhi directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or
other valuable consideration.
 SPECTRUM STUDY CIRCLE (The Acme of Excellence) 2
15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
DELHI VALUE ADDED TAX

The second part include the following person in the meaning of the dealer
1. a factor, commission agent, broker, del credere agent or any other mercantile agent by what
ever named called.
2. a non-resident dealer or his agent;
3. A club, association, society trust or co-operative society;
4. An auctioneer;
5. Casual trader;
6. Any person who disposes any goods as unclaimed or confiscated, or unserviceable or scrap,
surplus, old, obsolete or as discarded material or waste products by way of sale.
It has been further classified that following shall also deemed to be dealer who sells any goods whether in
the course of business or by auction or otherwise whether directly or through an agent.
Banking and insurance companies, if they buy, sell or supply goods; and
DTC, Delhi Metro Rail Corp., Customs Department, Railway Administration, Public Charitable Trusts etc.

Who is a registered dealer [Section 2(z)]

“Registered dealer” means a dealer registered under this Act.

Who is required to be registered as a dealer

As per section 18, every dealer is required to apply for registration under this Act if-
(a) the dealer’s turnover in the year preceding the commencement of this Act exceeded the taxable
quantum; or
(b) the dealer’s turnover in the current year exceeds the taxable quantum; or
(c) the dealer is liable to pay tax, or is registered or required to be registered under Central Sales Tax
Act, 1956.

Taxable quantum: The following limit has been prescribed for the dealers who are covered under the VAT
Act.
Dealer who imports for sale any goods into Delhi Nil
Any other Dealer 10,00,000

2. Meaning of business [Section 2(d)] – “Business” includes-

(i) the provision of any services, but excluding the services provided by an employee;
(ii) any trade, commerce or manufacture;
(iii) any adventure or concern in the nature of trade, commerce or manufacture;
(iv) any transaction in connection with, or incidental or ancillary to, such trade, commerce,
manufacture, adventure or concern; and
(v) any occasional transaction in the nature of such service, trade, commerce, manufacture,
adventure or concern whether or not there is volume, frequency, continuity or regularity of
such transaction;
Whether or not such service, trade, commerce, manufacture, adventure or concern is carried or with a motive
to make gain or profit and whether or not any gain or profit accrues from such service, trade, commerce,
manufacture, adventure or concern.

Explanation – For the purpose of this clause-

(i) any transaction of sale or purchase of capital assets pertaining to such service, trade, commerce,
manufacture, adventure or concern shall be deemed to be business;
(ii) purchase of any goods, the price of which is debited to the business and sale of any goods, the
proceeds of which are credited to the business shall be deemed to be business.
 SPECTRUM STUDY CIRCLE (The Acme of Excellence) 3
15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
DELHI VALUE ADDED TAX

3. Meaning of sale [Section 2(zc)]

“Sale” with its grammatical variations and cognate expression means any transfer of property in
goods by one person to another for cash or for deferred payment or for other valuable consideration (not
including a grant or subvention payment made by one government agency or department, whether of the
central government or of any state government, to another) and includes:-
(i) a transfer of goods on hire purchase or other system of payment by installments, but does not
include a mortgage or hypothecation of or a charge or pledge on goods;
(ii) supply of goods by a society (including a co-operative society), club, firm, or any association its
members for cash or for deferred payment or for commission, remuneration or other valuable
consideration, whether or not in the course of business;
(iii) transfer of property in goods by an auctioneer, or sale of goods in the course of any other activity
in the nature of banking, insurance who is in the course of this main activity also sell goods
repossessed or re-claimed.
(iv) transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred
payment or other valuable consideration;
(v) transfer of property in goods (whether as goods or in some other form) involved in the execution
of a works contract;
(vi) transfer of the right to use any goods for any purpose for cash, deferred payments or other
valuable consideration;
(vii) supply of food or any other article for human consumption or any drink (whether or not
intoxicating), where such supply or service is for cash, deferred payment or other valuable
consideration;
(viii) every disposal of goods referred to in sub-clause (ix) of clause (j) of this section.

And the words “sell”, “buy” and “purchase” wherever appearing with all their grammatical variations &
cognate expressions, shall be construed accordingly.
Thus, the DVAT Act brings in its ambit tax on transactions pertaining to transfer of property in
goods involved in the execution of works contract and transfer of right to use goods and therefore, erstwhile
Delhi Sales Tax on Works Contract Act, 1999 and Delhi Sales Tax on Right to Use Goods Act, 2002 along
with the Delhi Sales Tax Act, 1975 have been merged into the Delhi VAT Act, 2004.
Now, The term “sale”: in DVAT Act convers the following transaction in its ambit:
1. Transfer of property in goods by one person to another;
2. Transfer of good on hire purchase or other system of installments;
3. Supply of goods by a society (including a co-operative society), club, firm or any association
to its members;
4. Transfer of property by auctioneer, banks and insurance companies;
5. Transfer, otherwise than in pursuance of a contract, of property in any goods;
6. Transfer of property in goods (whether as goods or in some other from involved in the
execution of works contract;
7. Transfer of right to use goods i.e. leasing
8. Supply, by way of or as part of any service or in any other manner, of goods, being food or
any other article for human consumption; and
9. Every disposal of goods as unclaimed or confiscated, or unserviceable or scrap, surplus, old
obsolete or as discarded material or waste products.

4. Meaning of turnover [Section 29zm)]

“Turnover” means the aggregate of the amounts of sale price received or receivable by the person in
any tax period, reduced by any tax for which the person is liable under section 3 of this Act.
However, the tax has to paid by the dealer on the taxable turnover instead of the turnover. Taxable
turnover of the dealer is computed as per section 5.
 SPECTRUM STUDY CIRCLE (The Acme of Excellence) 4
15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
DELHI VALUE ADDED TAX

5. Meaning of goods [Section 2(m)]

“Goods” means every kind of movable 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 a contract 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 property.

6. Meaning of net tax [Section 2(s)]

“Net tax” means the amount calculated for a tax period under section 11 of this Act

7. Meaning of tax period [Section 2 (zi)]

“Tax period” means the period prescribed in the rules made under this Act.

Computation of input tax credit in respect of the purchase of goods for the tax period.
Input tax credit shall be computed as per section 9 and thereafter adjustment of tax credit shall be made as
per section 10.
1. Purchase on which input tax credit is allowed [Section 9]
A dealer who is registered or is required to registered under this Act shall be entitled to tax credit in
respect of the turnover of purchases occurring during tax period in the course of his activities as a dealer
provided such goods purchased are to be used directly or indirectly by the dealer for making:
(a) sales which are liable to be taxed under section 3 i.e. taxable sale within Delhi.
(b) sales which are not liable to tax under DVAT Act as per section 7 (such sales involved exports
from Delhi to other States or Union Territories.
The above credit shall however be allowed on the production of tax invoices at the time of filing
return.
No input credit shall be allowed on goods purchased from other states or from a foreign country.

Certain points of consideration for computing input tax credit

While computing input credit, the following points need consideration:

(A) No input tax credit allowed in certain cases: As per section 9(2), no input tax credit shall be allowed on
purchase of goods:-
(i) from a person who is not a registered dealer (the unregistered dealer cannot charge any tax on
its sale);
(ii) from a casual dealer (this dealer can only issue retail invoices and the input tax credit is
allowed on the basis of tax invoices);
(iii) which are non-creditable. Schedule VII gives the list of non-creditable goods i.e. goods on
which input tax credit shall not be allowed;
(iv) which are to be incorporated into the structure of building owned or occupied by the person
himself;
(v) from a dealer who had elected to pay tax under section 16 i.e. composition scheme (this
dealer can also only issue retail invoices).
(vi) Which are used exclusively for the manufacture, processing or packing of goods specified in
the First Schedule i.e. commodities on the sale of which no tax is payable (exempted goods).
(vii) Which are consumables or capital goods, where the dealer is exclusively engaged in job work
or labour work and is not engaged in the business of manufacturing of goods for sale by him
and incidental to the business of job work or labour work, obtains any waste or scrap goods
which are sold by him.
 SPECTRUM STUDY CIRCLE (The Acme of Excellence) 5
15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
DELHI VALUE ADDED TAX

(B) Input tax credit for purchases made from related persons: Where the dealer has purchased goods from
the related person, then the amount of tax credit shall be reduces as per section 17.

(C) Input tax credit in case of consignment/branch transfer [Section 9(6)]: Where the following conditions
are satisfied, the input tax credit shall be reduced by the prescribed percentage:
(a) A dealer has purchased goods (other than capital goods) for which tax credit arises; and
(b) The goods or goods manufactured out of such goods are to be exported from Delhi by way of
transfer to a –
(i) Non-resident consignment agent;
(ii) Non-resident branch of the dealer;
(c) The transfer is not by way of sale made in Delhi.

(D) Input tax credit where goods are used partly for sale and partly for other purposes [Section 9(4) and
(5)]: Where a dealer has purchased goods and the goods are to be used partly for the purpose of making the
sales referred to in sub-section (1) of this section and partly for other purposes, the amount of the tax credit
shall be reduced proportionately.
The method used by a dealer to determine the extent to which the good are used in the manner
specified above, shall be fair and reasonable in the circumstances.
However, the Commissioner may –
(a) after giving reasons in writing reject the method adopted by the dealer and calculated the amount of
tax credit; and
(b) prescribe methods for calculating the amount of tax credit or the amount of any adjustment or
reduction of a tax credit in certain instances.

Adjustment to be made from the input tax credit [Section 10]

The following adjustments are required to be made from the input tax credit of the tax period
computed as per section 9 above. There adjustment are as a result of certain changes which have taken place
after the input tax credit for the earlier tax period has been availed by the dealer:
(1) Where any credit note or debit note has been issued to the dealer for purchase made in any earlier tax
period.
(2) Where goods purchased in any earlier tax period have been rejected or returned in the current tax
period.
(3) Where goods purchased were although for eligible activity but are subsequently used in any tax
period, fully or partly, for purposes other than the eligible activities or vice versa.
(4) Where goods purchased in any earlier tax period and subsequently exported to a branch of the
registered dealer or to a consignment agent.
(5) Where goods purchased by the dealer on which tax credit has been claimed have been subsequently
incorporated into the structure of a building owned or occupied by the person.
In the above cases, adjustments shall be done in the input tax credit of that tax period in which such event
takes place.
As discussed above, input credit shall be allowed on production of tax invoices. It shall not be
allowed on the basis of retail invoices.
Further, no input credit is allowed on goods purchased from a dealer who is covered under
composition scheme.

Mandatory registration [Section 18(1)]

Every dealer is required to apply for registration under the DVAT if –
(a) his turnover is year 2004-05 exceeded the taxable quantum; or
(b) his turnover in the current year exceeds the taxable quantum; or
(c) he is liable to pay tax, or is registered or required to be registered under Central Sales Tax Act,
1956:
 SPECTRUM STUDY CIRCLE (The Acme of Excellence) 6
15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
DELHI VALUE ADDED TAX

However, a dealer, dealing exclusively in goods mentioned in the First Schedule (i.e. exempted goods), shall
not be required to register under the DVAT Act.
In case of dealers involved in execution of works contracts, the taxable quantum shall be calculated
with reference to the total contract amount received.

Taxable quantum [Section 18(2)]

Taxable quantum of a dealer in the following situation shall be as under:

Sl. No. Situation Taxable quantum

1. A dealer who imports for sale any goods in Delhi Nil
2. A person who is a casual dealer Nil
3. Any other dealer 10,00,000
However, as per section 18(3), the taxable quantum of a dealer shall not include turnover from-
(a) Sales of capital assets;
(b) Sales made in the course of winding up the dealer’s activities; and
(c) Sales made as part of the permanent diminution of the dealer’s activities.

Voluntary registration [Section 18(4)]

Any person who is not required to get mandatory registration, can apply for voluntary registration if-
• he is a dealer; or
• intends to undertake activities that would make him a dealer.

Penalty for not fulfilling the conditions of voluntary registration

As per section 86(8) if a person who has been voluntarily registered under section 18(4) and has
either –
(i) failed to undertake activities which would make the person a dealer within the period specified in
his application; or
(ii) failed to comply with any of the restrictions or conditions
Procedure for registration [Section 19(1) read with rule 11 and 12]
(1) An application for registration shall be made in From No. DVAT 04.
(2) Every application under the Act for registration as a dealer shall be furnished within a period of
30 days from the date of his becoming liable to pay tax.
(3) It should contain the information and particulars required in the relevant Form i.e. DVAT-04.
(4) It should be signed and verified by the person or authority mentioned in section 29 and in the
manner specified in the relevant Form.
(5) It should be accompanied by all documents mentioned in the Form.
(6) It should be accompanied by proof of payment of the fee of Rs. 500 in form of Court Fee Stamp
affixed on the application.
(7) It should be accompanied by security in Form DVAT 12 for the prescribed amount.
Amendment of certificate of registration [Section 21]
The certification of registration can be amended on the request of the dealer or by the commission
suo moto.
(A) Amendment on the request of the dealer [Section 21(1)]: A registered of dealer shall inform the
Commissioner in the prescribed manner within one month of the following changes where he-
(1) (i) Sells or otherwise disposes of his business, or
(ii) Sells or disposals any part of his business or any place of business, or
(iii) effects any change in the ownership of the business, or
(iv) comes to know of any other changed in the ownership of the business
(2) (i) discontinues his business; or
(ii) changes his place of business or warehouse, or
(iii) opens a new places of business, or
(iv) closes the business for a period of more than one month.
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15/22 IInd Floor Ashok Nagar, New Delhi-110018. Ph.: 25499279, 65711031(O), 9810865706(M)
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(3) changes the name, style, constitution or nature of his business; or
(4) (i) enters into partnership or other association in regard to his business; or
(ii) adds the persons having interest in business;
(iii) deletes persons having interest in business
(iv) changes the persons having interest in business
and if any such registered dealer dies, his legal representative shall, in like manner inform the said authority.
(B) Amendment by the Commissioner suo moto [Section 21(2)]: Where the amendment of certificate of
registration has not been applied by the dealer but the Commissioner but otherwise received such
information he may make such amendment himself.

Cancellation of Registration Certificate [Section 22]

A certificate of registration of dealer may be cancelled by the Commissioner suo moto or on the
basis of application of the dealer.

(A) Cancellation by Commissioner [Section 22(1)]: The Commissioner may cancel the certificate of
registration in the following cases on his own motion:
1. a dealer who is required to furnish the security under the provision of this Act has failed to
furnish or maintain such security;
2. a dealer has ceased to carry on any activity which would entitle him to be registered as a dealer;
3. an incorporated body closed down its business;
4. the owner of a proprietorship business dies leaving no successor;
5. in the case of a firm or association of person, it is dissolved;
6. dealer is ceased to be liable to pay tax;
7. a dealer knowingly furnishes a misleading return;
8. a dealer has committed any offence or contravened by provision of this Act;
9. the commissioner, after conducting proper enquiries, is of the view, that it is necessary to do so.
The Commissioner may, after services of a notice and after providing the dealer an opportunity of
being heard, cancel the registration of the dealer.
Obligation of dealer when registration certificate is cancelled by the Commissioner: Every registered
dealer, whose registration is cancelled by the Commissioner, shall surrender his certificate of
registration within seven days from the date he received the communication with regard to his
cancellation of registration.

(B) Cancellation at the request of the dealer [Section 22(2)]: An application for cancellation of
registration as a dealer shall be made in Form DVAT-09 within 30 days of the occurrence of any of the
following events:
1. When a dealer ceases to carry on any activity which would entitle him to be registered as a dealer.
2. Where an incorporated body is closed down its business.
3. Where the owner of proprietorship business dies leaving no successor.
4. When a firm or an association of person is dissolved.
5. Where a dealer has ceased to be liable to pay tax under the Act.

The dealer who applies for cancellation of his registration shall surrender with his application, original
certificate of registration and all certified copies thereof.

The application shall specify the date from which the dealer desires the cancellation of registration to
take effect. Provided that unless the commissioner by notice in writing served on the dealer notifies another
date from which registration shall be cancelled, the dealer’s registration shall crease on the date specified by
the dealer.