Section 8 - Adjustments to Tax under the DVAT Act, 2004
Section 8 of the Delhi Value Added Tax Act, 2004 provides for adjustments to the tax reported by a dealer when a sale is cancelled or changed, its price is revised, goods are returned, or a debt becomes irrecoverable. It also contains a special calculation for the sale of goods previously used partly for taxable and other purposes.
Meaning and provisions of Section 8
The following sets out the substantive conditions and calculations in section 8, with its clauses retained for reference.
Sub-section (1): When an adjustment may arise
(1) Subject to such conditions as may be prescribed, this section shall apply where, in relation to the sale of goods by any dealer -
(a) that sale has been cancelled;
(b) the nature of that sale has been fundamentally varied or altered;
(c) the previously agreed consideration for that sale has been altered by agreement with the recipient, whether due to the offer of a discount or for any other reason;
(d) the goods or part of the goods sold have been returned to the dealer within six months of the date of sale; or
(e) the whole or part of the price owed by the buyer for the purchase of the goods has been written off by the dealer as a bad debt;
and the dealer has -
(i) provided a tax invoice in relation to that sale and the amount shown therein as tax charged on that sale is not the tax properly chargeable on that sale; or
(ii) furnished a return in relation to a tax period in respect of which tax on that sale is attributable, and has accounted for an amount of tax on that sale that is not the amount properly chargeable on that sale.
Sub-section (2): Adjusting the tax in the relevant return
(2) Where a dealer has accounted for an incorrect amount of tax as contemplated in sub-section (1), that dealer shall make an adjustment in calculating the tax payable by that dealer in the return for the tax period during which it has become apparent that the tax is incorrect, and if -
(a) the tax payable in relation to that sale exceeds the tax actually accounted for by the dealer, the amount of that excess shall be deemed to arise in the tax period in which the adjustment is made, and shall not be attributable to any prior tax period; or
(b) the tax actually accounted for exceeds the tax payable in relation to the sale, the amount of that deficiency shall be subtracted from the tax payable by the dealer in the tax period in which the adjustment is made, and shall not be attributable to any prior tax period.
Sub-section (3): Goods put to mixed use
(3) Where a dealer sells goods that have been used in part for making -
(a) sales that are subject to tax under this Act or sales that are not liable to tax under section 7; and
(b) partly for other purposes, the amount of tax on the sale of the goods shall be the greater of -
(i) A - (A x B / C); or (ii) A - B.
Where A = the tax for which the dealer would be liable in respect of the sale apart from this section; B = the amount by which the tax credit of the dealer in respect of the goods was reduced under sub-section (4) of section 9; and C = the amount of the tax credit before reduction under sub-section (4) of section 9.
How adjustments work
Where an eligible event changes the correct tax on a sale, the dealer compares the amount already accounted for with the amount properly chargeable. Under sub-section (2), an increase is added to tax payable in the adjustment period, while an overstatement is subtracted in that period. The provision does not, by itself, shift the adjustment to the original sale period.
For returned goods, clause (1)(d) specifies a six-month period from the date of sale. For bad debts, additional requirements under Rule 7A must be considered. Supporting sale invoices, credit or debit documents, accounts and return records should be retained in accordance with the applicable record-keeping requirements.
Rule 7A - Adjustment to tax for bad debts
Rule 7A of the Delhi Value Added Tax Rules addresses adjustments arising under section 8(1)(e). The amount written off must be recorded as a bad debt in the dealer's books of account and claimed as a deduction under section 36 of the Income-tax Act, 1961. The adjustment is limited to the tax attributable to the qualifying written-off price.
Where outstanding amounts relate to goods taxable at different rates, Rule 7A prescribes an allocation sequence, starting with outstanding interest, then exempt sales, followed by sales in the listed tax-rate categories. If the written-off amount is subsequently recovered, the rule requires a corresponding tax adjustment for the recovery period using the reverse allocation order. Historical rate categories in the rule should not be mistaken for today's applicable VAT rates.
Formula for mixed-use goods
The formula must be read together with section 9(4). Where its inputs or the legal entitlement to tax credit require determination, consult the relevant tax period's records and the applicable rules.
Official legislation and updates
Delhi Value Added Tax Act, 2004 - official departmental PDF (consolidation dated 2014; check subsequent amendments).
Delhi Value Added Tax Rules - Rule 7A and related provisions.
Department of Trade and Taxes - notifications and circulars.
Last reviewed: 6 October 2026. The operation of the provisions depends on the relevant period, commodity and applicable amendments and notifications.