Sale of goods below purchase price requires reduction of proportionate tax credit under Delhi VAT. Now the Government has made changes in Delhi VAT Rules, 2005 in respect of proportionate reduction of tax credit. It has also made certain other changes in Delhi VAT Rules, 2005. Key changes are highlighted as under:
1) Reduction in tax credit due to price variation: Under the extant provisions of Section 10(5) of Delhi VAT Act (‘the Act’) sale of goods below its purchase price requires reduction of proportionate tax credit. Now, such proportionate reduction in tax credit is not required where discount or incentive has been received through a credit note issued by the selling dealer after issuance of tax invoice.
2) Reduction of tax credit on account of stock transfer: Tax credit is required to be reduced on goods which are sent outside State by way of Inter-State stock transfer. Earlier different rates were prescribed for reduction of tax credit. Now Government has prescribed one formula to determine reduction of tax credit on all goods (except that of Second Schedule). Now tax credit shall be reduced by [(2/R)*100] percent, where R is the rate of tax applicable as per Section 4 the Act. For goods falling under Second Schedule, tax credit shall be reduced by 100 percent.
3) Cancellation of registration: Now dealer is not required to surrender original certificate of registration while applying for cancellation of his registration. He is not even required to deliver such certificate to the Commissioner after cancellation of his registration.
4) Variation in tax amount via Credit/Debit notes: Dealer is required to show amount of variation in tax amount on credit and debit notes. Now it has to be shown wherever an adjustment to tax credit is required to be made as per the provisions of sub-sections (1) and (2) of section 8.