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TMI BlogReversal of Input Tax Credit under Section 10 of the DVAT Act, 2004 in respect of Credit Note/ Debit Note related to discounts.X X X X Extracts X X X X X X X X Extracts X X X X ..... or rejects goods purchased, as a consequence of which the tax credit claimed by him in any tax period in respect of which the purchase of goods relates, becomes short or excess, he shall compensate such short or excess by adjusting the amount of the tax credit allowed to him in the tax period in which the credit note or debit note has been issued. Such adjustment of tax credit shall be made in the context of sale/purchase made in Delhi and not in the context of interstate sale/purchase. 2. The Credit Note issued by the Selling Dealer may relate to : (i) Trade Discount by any name called including quantity discounts, end of year discounts, close out discounts, target discounts, bonus or incentives in the form of general credit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealer. 4. Trade discounts could further be classified into two types of discounts- (a) Discounts given at the time of sale According to the trade practice, such discounts are offered at the time of sale and VAT is charged on the resultant cost. Suppose, the cost of a good is Rs. 120/-. The seller offers a discount of Rs. 20/-. The resultant cost of the commodity now becomes Rs. 100/- and VAT @ 12.5% (say) would be Rs. 12.50 making the sale price to Rs.112.50. The seller is liable to pay Rs. 12.50 as VAT to Government and the buyer is entitled to an ITC of Rs. 12.50 on the purchase. The tax liability of the buyer would depend on the sale price at which the good is sold to consumer. In this case, no VAT adjustment is required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no system of issue of certificate to buyer by seller stating that the output tax corresponding to credit note has been adjusted or not and neither it is desirable in VAT regime. 6. Cash discount stated at 2 (vi) issued by selling dealer is not eligible for adjustment to Output Tax in terms of provisions of Section 8 of the DVAT Act . Therefore, the Credit Notes issued on this account need not be mentioned in Annexure 2C of the return. Similarly, the purchasing dealer need not to mention such Credit Notes in Annexure 2D of the return in Form DVAT-16. 7. Input Tax Credit has to be adjusted by the Purchasing Dealer in respect of Credit /Debit Notes related to items listed at 2(i) to 2(v). Credit note related to cash discount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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