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Composition scheme under vat act

Anupam( Upcoming CMA) (Internal Audit Executive at Frankfinn Institute of Air Hostess Training) (302 Points)

11 March 2013

Dear Sir/ Ma'am,

I want to know that what are the requirements of a dealer to be fall under composition scheme.

also what are the requirements of normal dealing?

Can a normal dealer transfer to composition scheme?

Thanks & regards,

Anupam

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16 Replies

Sonu Kumar (Account Manager) (665 Points)
Replied 11 March 2013

Composition scheme for small traders

(Similar provision in Section 16 of Delhi Value Added Tax Act, 2004)

If any dealer is having turnover UPTO ` 50 LAKHS, he may apply for Composition Scheme.

Composition Scheme is not allowed in the following cases:

(i) If any dealer is procuring goods from outside the State or is selling or supplying goods to any place outside the State at any time during the year.

(ii) If he is registered under Central Sales Tax Act.

Salient features of the Scheme are asunder:

(i) A dealer covered under Composition Scheme is not allowed to take VAT Credit on his purchases but he must retain all the tax invoices for the goods purchased by him.

(ii) A dealer covered under composition scheme is not allowed to issue tax invoice and also not allowed to charge any tax from the buyer rather he himself has to pay tax on his sales turnover ( @ 1% in Delhi).

(iii) The benefit of composition scheme is that dealer is exempt from maintaining lengthy records required under VAT.

(iv) If any dealer is purchasing goods from a dealer covered under composition scheme, no VAT credit is allowed to such a purchasing dealer.

(v) If any dealer is covered under composition scheme, he must purchase goods only from registered dealer.

(vi) If turnover has exceeded `50 lakhs, he has to shift immediately to the normal system.

(vii) If any dealer is covered under composition scheme, he may reject the scheme and may opt for normal procedure but only from beginning of the year.

(viii) If any dealer is opting out of the composition scheme, he will be allowed VAT credit for the stock held by him on the date of opting out.

A dealer has to apply in the prescribed form for opting the scheme and rejecting the scheme

A dealer opting for composition scheme has to apply in Form No. DVAT 01 under DVAT Act, 2004

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Mahalakshmi (to become a chartered accountant) (43 Points)
Replied 29 January 2014

I cAnt understand point 5. What purpose he has to purxhase from a rgstrd dealer.??!

Avishek Chatterjee (Asst. Mgr) (21 Points)
Replied 17 February 2014

Originally posted by : Mahalakshmi
	I cAnt understand point 5. What purpose he has to purxhase from a rgstrd dealer.??!

If a small trader under composition scheme purchases from U Dealer, he will neither pay VAT on input, plus will get exemption on output, causing undue advantage to him. Hence he is mandated to pay VAT on input, only after which he shall be liable to pay Output VAT under exempted rate.

udbhav (student) (21 Points)
Replied 27 August 2014

Sir/maam, Under composition scheme in VAT.. is the dealer required to pay tax from his own pocket or he adds it in the cost ??

Prateek Ramsinghani (Engineer) (21 Points)
Replied 12 December 2014

Hi,
I have started online selling am I eligible for composition scheme,most of my transactions are out of state.

Thanks

Satyabrata Kabi (Accounts Executive-CMA Inter) (22 Points)
Replied 07 January 2015

No. Out of state sale is not eligible for dealer for composition scheme

Ranjit Kumar (Accountant) (28 Points)
Replied 20 July 2015

Dealer opted composition scheme and purchasee fron non composition dealer how to record in our book purchase transaction

Shubham Bhardwaj (Student) (51 Points)
Replied 11 March 2016

On one hand Expert is saying that dealer of composite scheme is under no compulsion to maintain books as he is directly liablt to pay 1% on the total turnover. And, on other hand the same dealer has to purchase goods only from registered dealer.

My question is what is the point of buying goods from registered dealer if the dealer is paying 1% tax. And, if dealer is purchasing from unrgistered dealer than how the VAT department will come to know & what are the consequences?