DVAT Compliance Scheme

Discussion on Delhi Tax Compliance Achievement Scheme, 2013

DVAT department has launched an Amnesty Scheme ( Delhi Tax Complaince Achievement Scheme,2013 hereafter it will called DTCAS) on 20.09.2013 vide Notification No.F.3(16)/Fin.(Rev-I)/2013-14/dsVI/786 dated 20.09.2013. It is almost like Service Tax Amnesty Scheme launched by CBEC recently. Let us first analyse/discuss provisions of DTCAS. 

1. Applicability date-    

It is applicable from the date of its publication in the official Gazette i.e. 20.09.2013. 

2. Who can apply ( who can be declarant )-    

Every dealer ( registered or unregistered) can declare under this scheme who has any tax due for the specified period. Even if order of assessment has been issued or case is pending in objection/appeal/tribunal/high court/supreme court etc. 

3. Period for which declaration can be made-     

Declaration can be made for following period(s) if tax due for these period is pending ( fully/partly) on 31.08.2013:      

(i) 01.04.2005 to 31.03.2013- For  DVAT Act, 2005 or CST Act,1956 and Delhi Sales Tax Act, 1975  or Delhi Sales Tax on Works Contract Act,1999 or Delhi Sales Tax on Right to use goods Act,2002 or Delhi Tax on Entry of Motor Vehicles into Local Area Act,1994.     

(ii) Period prior to 01.04.2005 to 31.03.2013- For CST Act,1956 and Delhi Sales Tax Act, 1975  or Delhi Sales Tax on Works Contract Act,1999 or Delhi Sales Tax on Right to use goods Act,2002 or Delhi Tax on Entry of Motor Vehicles into Local Area Act,1994. 

 (iii) 01.04.2005 to 31.03.2013- For  a person whi required to deduct TDS as per Sec 36A of DVAT Act,2004.

4. Benefit to declarant- 

Like Service tax amnesty scheme here also dealer/ person will get immunity  from interest, penalty and other proceedings. But also like service tax it seems more beneficial for unregistered dealers as this scheme does not cover cases of notice of assessment of penalty issued without having any relation to tax deficiency. So if any order has been issued for late return filing or late registration application or non/delay filing of details in STOCK-1 for any registered dealer then it seems that this penalty is not covered under the scheme and immunity is not available. But for unregistered dealer immunity from penalty for non-registration and non-filling return in time specifically allowed. 

Tax deficiency has been defined in Sec 86 (1) of the DVAT Act,2004 as "'In this section "tax deficiency" means the difference between the tax properly payable by the person in accordance with the .provisions of this Act and the amount of tax paid by the person in respect of a calendar month.

Explanations~l - 'Tax properly payable' includes the amount of tax assessed under section 32 of the' Act',
2, Due tax paid after the period specified in sub-section (4) of section 3 of the Act, is also a tax deficiency." 

5. Calculation of Tax due-    

For better analyses and understanding of calculation of Tax due we are dividing transaction into 3 parts- Works contract, TDS, others ( sales, right to use etc.) :

(i) WORKS CONTRACT- 

It covers Tax due under DVAT Act,2004 and Delhi Sales Tax on Works Contract Act,1999 both. 

       (a) Works contract where contractor is constructing any building, residential unit, commercial complex etc and selling them before completion of construction and value of land is included in total consideration then tax due will be calculated @ 1% of total consideration ( including value of laboure, services etc.)

       (b) In all other cases of works contract ( including construction contract mentioned above but value of land is not included in total consideration) tax due will be calculated @ 3% of total consideration ( including value of laboure, services etc.).

(ii) TAX DEDUCTED AT SOURCE

It covers only DVAT Act,2004

Here one point to be noted that these calculations are applicable only where neither contractor has paid due dues and nor contractee has deducted TDS as required.

Tax due will be calculated @ 3% of total sum paid for works contract or amount actually deducted whichever is higher less amount deposited towards such TDS.

Here a great relief to contractor/ contractee as the case may be is that if a contractee if declaring tax due in respect of a ( or more) works contract awarded to a contractor then such contractor will also be treated as declarant and get immunity from such contract and vice versa . For example- If  A Ltd. has awarded a contract of Rs.50,000/- to Mr. X on which TDS is applicable and both of them have not included this contract in their vat return/ TDS return then if A Ltd. declared this contract under the scheme then Mr. X will also be treated as declarant and get immunity from penalty, interest etc. in relation to such contracts only and vice-versa.

(iii) SALE, RIGHT TO USE ETC.

It covers all acts mentioned in point 3 (i) above except Works contract and TDS.

As per scheme these are divided into 2 parts, first where order of assessment u/s 32 of DVAT Act,2004 has not been served  and second where order of assessment u/s 32 has been served. 

      (a) where order of assessment u/s 32 has not been served- In such case formula is

                         ( TAXABLE TURNOVER x RATE OF TAX IN SCHEDULES) - TAX PAID

           This formula is to be applied commodity wise. 

      (b)  Where order of assessment has been served -  Tax due will be 

                               TAX + INTEREST AS PER NOTICE OF ASSESSMENT - TAX/INTEREST PAID

6. Provisions for unregistered dealer- 

 If an unregistered dealer is making declaration under the scheme then such dealer shall obtain registration. Also also file the return for the period "from 01.04.2013 to the date of registration"  and pay taxes in DVAT-20 and furnish these to the authority at the time of furnishing  declaration under the scheme. Also in clause 5 (4) mentioned that "No proceeding shall be instituted within 48 hours of securing a registration, provided, the registrant declares his intent of opting under the Scheme at the time of applying for TIN/ TAN". Purpose of this sub-clause not clear. If the declarant has informed his intention to opt for this scheme at the time of registration then what proceeding will be instituted after 48 hours. We have to wait for clarity from department or does it mean that such dealer has to furnish declaration within 48 hours of registration, hopefully this should not be interpretation of this sub-clause.Such unregistered dealers who get registered and furnish declaration under the scheme will get immunity from penalty of non/late filling of return and non-registration. A question here comes that if registration is effective from the date earlier than 31.03.12 then whether penalty for submission of Form Stock-1 will also be waived off. Need clarification from department. 

7.Procedure for making declaration and payment of tax dues- 

 Procedure related to submission of declaration, payment etc is herebelow: 

  (i)  Declaration will be made in Form DSC-1 on or before 31.01.2014. This declaration will be made online.

  (ii)  Minimum 50% of tax dues must be paid before making of declaration and attach of same will be attached with Form DSC-2. Remaining part of tax dues will be paid till 21.01.2014. If declarant does not pay full or part of tax dues, then suhc tax dues shall be recoverable under the provisions of the Act.

  (iii) Acknowledgment for Form DSC-1 will be issued by the designated authority in Form DSC-2 within 15 days of furnishing of declaration.

  (iv) Declarant shall furnish details of payments of tax dues time to time to the designated authority with copy of acknowledgment.

  (v)   On furnishing details full payment of tax dues , the designated authority will issue acknowledgment of discharge within 15 days of furnishing such details.

8. Failure to make true declaration- 

 If the Commissioner is satisfied, for reasons to be recorded in writing, that the declaration made by the dealer was substantially false, he may serve notice ( to be issued maximum within 1 year from date of declaration furnished) to the declarant in respect of such declaration requiring him to show cause as to why he should not be required to pay the tax dues unpaid or short-paid as per the provisions of the Scheme. The Commissioner shall within three months of service of notice make assessment of tax and penalty under section 32 and 33 of the Act, as if that dealer had never made declaration under this Scheme. However, the dealer shall be entitled to the credit of tax paid by him under this Scheme; such dealer may be proceeded under sub-section (2) of section 89 of the Act for furnishing of false declaration. 

9.Other points-  

Some important points not mentioned above are:

  (i)  All statutory appeals/ revisions pending before quasi-judicial forums upto the stage of Tribunal shall be deemed to have been withdrawn once the Scheme is opted for. Further, all matters pending in the High Court and Supreme Court shall be withdrawn by the declarant and he will need to submit the application filed for withdrawl with the declaration. for the case to be withdrawn before the court.

  (ii)  a declaration made under the scheme shall become conclusive upon issuance of acknowledgement of discharge in Form DSC-3 and no matter shall be reopened/ reassessed/ reviewed thereafter in any proceedings under this Scheme or under the Act before any authority or court relating to the period covered by such declaration to the extent of tax dues declared by the declarant

  (iii) 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.

  (iv)  Any amount paid in pursuance of a declaration made under the scheme shall not be refundable under any circumstances.

In next part we'll discuss provisions in FAQ format. If any professional has any question/doubt please mention in comment so that, that can also be included in FAQ for benefit of all professionals. 

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