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Section 40 of Delhi Value Added Tax Act, 2004 - Collection of Tax Only by Registered Dealers

Section 40 of the Delhi Value Added Tax Act, 2004 (DVAT Act) restricts the collection of tax on sales of goods in Delhi. Only a registered dealer may collect DVAT, and even a registered dealer must collect it in accordance with the Act, the applicable rules and statutory rates.

Current applicability: Since 1 July 2017, GST generally governs supplies of most goods, but the DVAT framework remains relevant to certain goods outside GST and to legacy VAT periods and proceedings. Confirm the goods, transaction date, registration status and applicable notifications before relying on this provision. GST registration does not, by itself, confer DVAT registration.

Meaning and scope of Section 40

Under sub-section (1), a person who is not a registered dealer is prohibited from collecting any amount by way of DVAT on a sale of goods in Delhi. A registered dealer is also prohibited from collecting DVAT except as authorised by the Act and rules and at the prescribed rates. Registration means registration under the relevant DVAT provisions, not merely holding another tax registration.

Sub-section (2) provides that DVAT collected by a person who is not a registered dealer shall not be refunded and shall stand forfeited. The provision prevents a person from retaining or claiming back amounts collected from customers as a tax they had no authority to charge.

Section 40 - Statutory text reproduced from the original page

(1) No person who is not a registered dealer shall collect in respect of any sale of goods by him in Delhi any amount by way of tax under this Act and no registered dealer shall make any such collection except in accordance with this Act and the rules made thereunder and at the rates specified under this Act.

(2) Tax collected by a person who is not a registered dealer shall not be refunded and shall stand forfeited.

Practical implications

  • Unregistered seller: A seller without DVAT registration cannot add a separate DVAT charge to a Delhi sale merely because tax would otherwise be due under the law.
  • Registered seller: Registration does not permit arbitrary rates or charging VAT on goods or transactions outside the applicable DVAT charging provisions.
  • Improper collection: Amounts collected by an unregistered person as DVAT are subject to the forfeiture rule in sub-section (2); separate questions of liability, penalties or remedies depend on the applicable provisions and facts.
  • Invoices and records: Dealers should retain evidence of the relevant registration, tax rate, invoices and transaction period.

Read this section with Section 21 (amendment of registration), Section 22 (cancellation), Section 36 (payment of tax) and Section 40A (anti-avoidance arrangements).

Official legal sources

For authoritative updates and historical application, consult the Delhi Department of Trade and Taxes, its DVAT notifications, the department's historical DVAT Act compilation and India Code. The linked historical compilation is not a substitute for checking subsequent amendments. For GST-covered supplies, see the GST portal.