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 if he returns 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 ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loss Account of 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 ₹ 120/-. The seller offers a discount of ₹ 20/-. The resultant cost of the commodity now becomes ₹ 100/- and VAT @ 12.5% (say) would be ₹ 12.50 making the sale price to ₹ 112.50. The seller is liable to pay ₹ 12.50 as VAT to Government and the buyer is entitled to an ITC of ₹ 12.50 on the purchase. The tax liability of the buyer would depend on the sale price at which the goods is sold to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he pairing selling dealers have also reduced their output tax liability. The sellers may be registered in different wards. There 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 . Likewise, credit notes issued for items stated at 2(iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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