Section 5 of Delhi Value Added Tax Act, 2004 - Taxable Turnover

Section 5 of the Delhi Value Added Tax Act, 2004 (DVAT Act) defines taxable turnover and explains how the taxable portion of a works contract is determined. The provision must be read with the applicable schedules, rules and notifications, particularly following the introduction of GST on 1 July 2017.

Meaning of taxable turnover under Section 5(1)

Under Section 5(1), taxable turnover is the portion of a dealer's turnover arising during a tax period that remains after deducting the following:

1. Section 5(1)(a): Turnover from sales that are not subject to tax under Section 7.
2. Section 5(1)(b): Turnover from sales of goods declared exempt under Section 6.

Accordingly, the taxable turnover is determined from the turnover of the relevant tax period after the statutory exclusions are made. Section 2 defines turnover as the aggregate sale prices received or receivable in a tax period, reduced by tax for which the dealer is liable under Section 3. It also defines related terms such as sale price, tax period and works contract.

Sales excluded from taxable turnover

Section 7 - Sales not subject to tax

Section 7 addresses categories of sales that cannot be taxed as local Delhi sales under the DVAT framework, including transactions governed by the constitutional and Central Sales Tax rules concerning inter-State trade, imports and exports. Their legal character depends on the facts and the applicable provisions; such sales are excluded when computing taxable turnover under Section 5(1)(a).

Section 6 - Exempt sales

Section 6 provides exemptions, including sales of goods specified in the First Schedule subject to its conditions and exceptions, and certain other statutory exemptions. Turnover of qualifying exempt sales is deducted under Section 5(1)(b). The relevant schedule and any amendments should be checked for the period concerned.

Section 5(2) - Taxable turnover in works contracts

For turnover arising from the execution of a works contract, Section 5(2) includes the total consideration paid or payable to the dealer under the contract, excluding charges towards labour, services and other like charges, subject to prescribed conditions.

Proviso: Where the labour, service and similar charges cannot be ascertained from the dealer's books of account, those charges must be computed using the percentages prescribed in the rules. The applicable percentages are not a universal flat deduction and depend on the relevant rules and nature of the contract.

Rule 3 of the Delhi VAT Rules, 2005

Rule 3 (official departmental compilation) elaborates the computation for works contracts. It provides for exclusion of documented labour, services and similar charges, and, in specified civil works contracts, the cost of land, subject to prescribed records and conditions. It also addresses certain collaboration and joint-development arrangements and cases in which charges are not ascertainable from accounts. The linked departmental compilation is dated 5 March 2014; subsequent amendments and notifications must be verified for the relevant period.

Relationship with other DVAT provisions

Section 3 governs the imposition of tax; Section 4 deals with rates; Section 5 determines taxable turnover; Sections 6 and 7 govern exempt and non-taxable sales; and Section 11 concerns net tax. Taxable turnover is therefore a component of the calculation, not necessarily the final tax payable.

DVAT and GST after 1 July 2017

The Delhi Goods and Services Tax Act, 2017 and related GST legislation generally apply to GST-covered supplies. The DVAT Act continues to be administered for matters within its remaining scope, including applicable non-GST goods and legacy periods. In particular, the treatment of petroleum products and alcoholic liquor requires attention to the specific statutory exclusions, rates and current notifications. Works contracts involving immovable property generally fall under GST rules for post-transition supplies rather than the historical DVAT computation.

Official law and reference material

• Delhi Value Added Tax Act, 2004 - departmental consolidated text (as on 5 March 2014)
• Delhi VAT Rules - departmental consolidated text (as on 5 March 2014)
• Department of Trade and Taxes, Government of NCT of Delhi - consult current notices, amendments and notifications
• Delhi GST legislation and amendments

Last reviewed: 6 October 2026. The official compilations linked above are historical snapshots and should be read with subsequent gazette amendments, applicable rules and notifications. This article is general legal information.