Amendments in the Composition Scheme for Works Contract Dealers under Delhi VAT Vide Notification No. 3(5)/Fin.(Rev 8208 I)/2013 8208 14/dsvi/801 dated 30.09.2013 with effect from 01.10.2013 HIGHLIGHTS 1. The composition scheme, notified vide No. 3(13)/Fin.(rev 8208 1)/2012 8208 13/dsvi/180 dated 28.2.2013 (effective from 1.4.2013), issued u/s 16(12) of the DVAT Act for works contract dealers has been modified vide present notification. 2. The dealers are allowed to withdraw from composition scheme only from the beginning of the financial year. However, in view of the amendments by the present notification, they may 8208 withdraw from the composition scheme, if already opted, by filing an application till 31.10.2013 or opt for the composition scheme from 01.10.2013 or switch over from Scheme A to Scheme B , or vice 8208 a 8208 versa, w.e.f. 01.10.2013. It may be recalled that there are two Schemes for the works contractors (i) Scheme A , having lower rate of tax, only for those dealers who are executing works contracts in Delhi and (ii) Scheme B , having higher rate of tax, where the contractors can make central purchases/transfers against declaration forms and import from other countries. 3. The Composition dealer shall be eligible to opt for only one of the Scheme, i.e. Scheme A or Scheme B , for all categories of works contracts to be executed by him in the financial year. 4. Limit for purchases from unregistered dealers has been increased to 5 percent (earlier 2 percent ) of total purchase turnover during the year, or Rs.50 lacs (earlier limit of Rs.25 lacs), whichever is lower. 5. In case, a composition dealer fails to comply with the stipulated conditions of the Scheme Earlier 8208 entire amount deposited was to be forfeited Now 8208 forfeiture would be restricted to the extent of 50 percent . 6. The contractor, who was paying tax under the normal scheme, is required to pay tax on the entire opening stock held on the date of option for the composition scheme. This amendment will enable the contractor (opting for this Scheme w.e.f. 01.10.2013 or any subsequent financial year) to adjust his carry forward amount as per DVAT 8208 16 against the amount payable as per SS 8208 01 and to carry forward (or claim refund) the remaining amount, if any, in the subsequent tax periods. For example, on the date of option, a dealer is liable to pay tax of Rs. One lakh on his stock on 1.10.2013. He has carry forward amount of tax of Rs. Three lakhs on 30.09.2013. He may adjust his liability of Rs. One lakh from his carry forward amount as per DVAT 8208 16 and remaining Rs. Two lakhs may be claimed as refund, or carry forward to the subsequent tax periods. 7. If a dealer shifts from scheme B to A , he shall pay tax on his entire stock on the date of option at the rate specified in section 4 of the Act. It may be noted that such dealer is required to pay tax even on goods purchased within Delhi on which he has not claimed any input tax credit at the time of purchase (since at that time also, he was under the composition scheme). 8. Cases where main 8208 contractor (MC) and sub 8208 contractor (SC), both are under the composition scheme Earlier, SC could deduct amount of turnover based upon CC 8208 01 issued by MC. Now, SC shall be eligible to deduct the amount of tax 8208 To be computed on the amount paid to him by MC as mentioned in CC 8208 01, at lower of the two rates of composition one opted for by MC, and second by SC. In short, SC could claim deduction, at the most, for the amount of tax paid by MC on such turnover (instead of entire turnover stated in CC 8208 01). For example, MC has issued Form CC 8208 01 for Rs.1,00,000/ 8208 to his SC. The MC has opted for composition scheme at the rate of 3 percent , whereas SC has opted for composition scheme of 6 percent . In such a case, SC shall be eligible to claim exemption of Rs.3,000/ 8208 1,00,000/ 8208 3 percent (lesser rate of tax) from his liability of Rs.6,000/ 8208 (6 percent of Rs.1,00,000/). The Reason Where MC and SC are paying tax at the same rate, then there is no impact. But, where SC is paying tax, at a higher rate of tax than MC say, SC at the rate of 6 percent and MC at the rate of 3 percent 8208 If SC is allowed deduction of turnover stated in CC 8208 01, then SC would get benefit of 6 percent of the turnover, whereas MC has paid only at the rate of 3 percent . To remove this anomaly, this amendment has been carried. Further, MC shall be required to deduct VAT 8208 TDS at the differential rate, i.e. 3 percent (6 percent 8208 3 percent ) on Rs.1,00,000/ 8208 (earlier, in such cases, no tax was required to be deducted by MC). 9. Other provisions of the Notification dated 28.2.2013 would remain same. Amendments in the Composition Scheme for Works Contract Dealers under Delhi VAT A 8208 Comparison Vide Notification No. 3(5)/Fin.(Rev 8208 I)/2013 8208 14/dsvi/801 dated 30.09.2013 Notification No. 3(13)/Fin.(Rev 8208 I)/2012 8208 13/dsvi/180 dated 28.02.2013 (effective from 01.04.2013) issued under section 16(12) of the Delhi VAT Act has been modified vide present notification These Amendments shall come into force with effect from 01.10.2013. Reference of the Scheme Clause/Text 8208 Upto 30.09.2013 Clause/Text 8208 Effective From 01.10.2013 (1) (2) (3) Proviso inserted below the TABLE Enables the contractor to withdraw from the Scheme w.e.f. 01.10.2013 in view of various amendments in the Scheme. --- PROVIDED FURTHER that the dealers who have already opted for the composition scheme notified on 28/02/2013 will have the option to withdraw from the scheme from the third quarter of 2013 8208 14 by filing Form WC 8208 02 by 31/10/2013. They shall in that case pay tax as normal dealers under section 3 of the Act w.e.f. 01/10/2013. General Condition 1(a) Maximum Limit for purchases from unregistered dealers enhanced. (1) The composition dealer opting for composition under this notification, shall (a) not purchase or procure goods, other than those specified in the First Schedule appended to the Act, within Delhi, from a person who is not registered under the Act, except to the extent of 2 percent of his total purchase turnover during the year or Rs. 25 lakhs, whichever is lower (1) The composition dealer opting for composition under this notification, shall (a) not purchase or procure goods, other than those specified in the First Schedule appended to the Act, within Delhi, from a person who is not registered under the Act, except to the extent of 5 percent of his total purchase turnover during the year or Rs. 50 lakhs, whichever is lower General Condition 5 (Proviso inserted after Sl. No. 5) Authorizes the contractor to opt for either Scheme A or Scheme B for all contracts to be executed by him in a financial year. A dealer who opts to pay composition tax .............. to the rate applicable to each of such contracts. (First Para 8208 same as stated in Column 3 Proviso inserted ) A dealer who opts to pay composition tax under the notification and executes different types of works contracts which are liable to tax at different rates under this notification, shall pay tax according to the rate applicable to each of such contracts PROVIDED that the dealer shall be eligible to opt for only one Scheme, that is either Scheme A or Scheme B , for all categories of works contracts to be executed by him in a financial year. General Condition 8 In case of non 8208 compliance of any condition of the Scheme by the contractor 8208 Forfeiture of amount paid is reduced from 100 percent to 50 percent . In case a dealer has opted for this scheme but has failed to comply with the conditions hellip hellip hellip .. and the amount deposited by such dealer as the composition tax, if any, shall stand forfeited. (Text in Italic green colour inserted Remaining text unchanged) In case a dealer has opted for this scheme but has failed to comply with the conditions specified herein or who, at any later stage, is found not eligible for having opted for this Scheme, all the provisions of the Act and Rules including the liability to pay tax under section 3, if any, shall apply mutatis mutandis as if the dealer had never opted for the composition scheme, from the financial year in which default had been committed and the amount deposited by such dealer as the composition tax, if any, shall stand forfeited to the extent of 50 percent . Modalities 8208 2 ndash First Proviso substituted Authorizes the contractors, already paying tax as normal dealers, to opt for the Scheme w.e.f. 01.10.2013. A works contract dealer hellip hellip hellip .. composition is opted (Same as stated in Column 3 No change), Provided that a dealer who is paying tax under section 3 of the Act on the date of this notification, may opt for this scheme by filing an application in Form WC 01 appended to this notification within a period of thirty days from the date of this notification Provided further hellip hellip .. hellip this notification (Second proviso 8208 same as stated in Column 3 No Change) A works contract dealer who is paying tax under section 3 of the Act, can opt for this scheme by filing an application in Form WC 01 appended to this notification within thirty days from the first day of the financial year with effect from which composition is opted Provided that a dealer who is paying tax under section 3 of the Act on the date of this notification or paying tax under the composition scheme notified on 28.02.2013 may opt for this scheme from the third quarter of 2013 8208 14 by filing an application in Form WC 01 Provided further that the dealer who is paying composition tax under the erstwhile Notification No. F.3(78)/Fin.(T and E)/2005 8208 06/1508 kha dated 17th March 2006 may opt for the composition scheme under this notification by filing an application in Form WC 01 appended to this notification within a period of thirty days from the date of coming into force of this notification. Modalities 8208 3 (Text in Italic green colour inserted) The contractor, who was paying tax under the normal scheme, is required to pay tax on the entire opening stock held on the date of option. This amendment enables the contractor, opting for this Scheme w.e.f. 01.10.2013 or any subsequent financial year, to adjust his carry forward amount as per DVAT 8208 16 against the amount payable as per SS 8208 01 and to carry forward (or claim refund) the remaining amount, if any, in the subsequent tax periods. A dealer paying tax under section 3 of the Act hellip hellip hellip hellip hellip in proof of payment of tax in DVAT 20. (Text in Italic green colour inserted Remaining ndash Text unchanged) A dealer paying tax under section 3 of the Act and opting to pay tax under this Scheme, shall be required to pay tax, at the rates specified in section 4 of the Act, on the entire opening stock of goods held by him on the first day of the period with effect from which the dealer opts to pay the tax under this Scheme. The dealer shall furnish, along with his application for availing for the composition scheme, the details of such stock and the payment of tax thereon in Form SS 01 appended to this notification along with the copy of challan in proof of payment of tax in DVAT 20. However, as per the Form DVAT 8208 16 filed by the dealer, if the dealer has certain tax amount to his credit at the end of the second quarter of the year 2013 8208 14 or at the end of the previous financial year, as the case may be, he shall be entitled to adjust the amount payable as per SS 8208 01 with the said tax amount at his credit. After the said adjustment, if the dealer is still left with some tax amount at his credit, he may, at his option, either claim refund of the remaining amount or carry forward the same to subsequent tax periods. Modalities 8208 3A inserted Authorizes the contractors to shift from Scheme A to B (and vice 8208 a 8208 versa) w.e.f. 01.10.2013 or any subsequent financial year and specifies its modalities. In case, a dealer shifts from scheme B to A , he shall pay tax on entire opening stock. Please note that such dealer is required to pay tax even on goods purchased within Delhi on which he has not claimed any ITC. It will amount to double taxation on such stock. --- (3A) A dealer who is paying tax in scheme B under composition may opt scheme A (and vice 8208 versa) by filing an application to this effect in form WC 8208 01 by 31st October, 2013 for the last two quarters of the year 2013 8208 14 or within a period of 30 days from the 1st day of the year for that year with effect from which he opts to change the scheme Provided that in case of a dealer changing from scheme B to scheme A rsquo , he shall be required to pay tax at the rate specified in section 4 of the Act, on the entire opening stock of goods held by him on the first day of October, 2013 for the year 2013 8208 14 or on the first day of the year with effect from which the dealer opts to change the scheme. The dealer shall furnish, along with his application for changing the scheme, the details of such stock and the payment of tax thereon in Form SS 01 along with the copy of challan in proof of payment of tax in DVAT 20. Modalities 8208 7 substituted Specifies the revised manner for the maincontractor (MC) for issuance of Form CC 8208 01 to the sub 8208 contractor (SC) and deduction of TDS on amount stated in CC 8208 01. Earlier, SC could deduct his turnover based upon CC 8208 01 issued by MC. Now, in short, SC could claim deduction for amount of tax paid by MC on such turnover (instead of entire turnover stated in CC 8208 01). The Reason Where MC and SC were paying tax at the same rate, there was no impact. But, where SC was paying tax at the rate of 6 percent and MC at the rate of 3 percent 8208 if SC is allowed deduction of turnover stated in CC 8208 01, then SC would get benefit of 6 percent of the turnover, whereas MC has paid only at the rate of 3 percent . To remove this anomaly, this amendment has been carried. Where the composition dealer has made any payment to a registered sub 8208 contractor, who also opts for composition under this notification, for the execution of works contract, whether wholly or partly, the composition dealer shall issue a certificate to such subcontractor, in Form CC 01 appended to this notification. Such sub 8208 contractor shall be eligible to deduct from his turnover liable to be taxed under this scheme, the amount mentioned in such certificate by enclosing it with his return. Such amount shall not constitute part of the turnover in Form DVAT 17 of such sub 8208 contractor. The contractor shall not deduct TDS from payments made to such sub 8208 contractors in respect of the turnover covered by the certificate. Where the composition dealer has made any payment to a registered sub 8208 contractor, who also opts for composition under this notification, for the execution of works contract, whether wholly or partly, the composition dealer shall issue a certificate to such subcontractor, in Form CC 01. Such sub 8208 contractor shall be eligible to deduct the amount of tax which shall be computed on the amount paid to him as mentioned in CC 8208 01, at the lower of the two rates of composition opted one each by the contractor and the subcontractor. The said CC 8208 01 shall be enclosed by the subcontractor along with his return. Further, the contractor is exempt from deducting TDS from payments made to such sub 8208 contractors in respect of the turnover covered by the certificate CC 8208 01 PROVIDED that in case where the rate of the composition tax of the contractor is lower than that of the sub 8208 contractor, the contractor shall be liable to deduct TDS at the differential rate of composition tax between the two, from payments made to such subcontractors in respect of the turnover covered by their respective Form CC 8208 01. For example, a contractor has issued Form CC 8208 01 for Rs.1,00,000 to his sub 8208 contractor. The contractor has opted for composition scheme at the rate of 3 percent , whereas the subcontractor has opted for composition scheme of 6 percent . In such case, the sub 8208 contractor shall be eligible to claim exemption of Rs.3,000 1,00,000 3 percent (lesser rate of tax) from his liability of Rs.6,000 (6 percent of Rs.1,00,000). Further, the contractor shall be required to deduct TDS at the differential rate i.e. 3 percent (6 percent 8208 3 percent ) on Rs.1,00,000. Modalities 8208 8 inserted Empowers the DVAT Commissioner ndash for online submission of various forms -- (8) Notwithstanding anything contained in this notification, the Commissioner may notify, by a special or general order, that any or all of the forms appended to this notification shall be filed online. Modalities 8208 9 inserted Applicability of Delhi VAT Act and Rules ndash Residual Provisions. -- (9) All the provisions contained in the DVAT Act, 2004 and DVAT Rules, 2005 which are not contrary to the provisions of the composition scheme under this notification, shall apply to the dealers opting for composition. Form CC 8208 01 ndash New Columns inserted 7 8 9 Last date for completion of sub 8208 contract, if any - - 7 8 9 Composition Tax Rate Total Composition Tax Last date for completion of sub 8208 contract, if any NOTIFICATION No. 3(5)/Fin.(Rev 8208 I)/2013 8208 14/dsvi/801 Dateed 30.09.2013...................

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