Delhi VAT Act, 2004 / Section 9

Section 9 of Delhi Value Added Tax Act, 2004 - Tax Credit

Section 9 of the Delhi Value Added Tax Act, 2004 (DVAT Act) governs tax credit on qualifying purchases, subject to statutory restrictions, prescribed conditions and supporting tax invoices. It also provides for proportionate reductions, transfers outside Delhi and special treatment of capital goods.

Applicability as of 6 October 2026: The Delhi Goods and Services Tax Act, 2017 generally governs input tax credit for GST-covered supplies from 1 July 2017. Section 9 of the DVAT Act remains relevant to applicable non-GST goods and legacy VAT periods, subject to amendments and notifications. The detailed provision below reflects the supplied consolidated statutory wording; consult the current Gazette for any later changes.

Meaning and scope of tax credit

Tax credit under Section 9 is the eligible input VAT arising on purchases used directly or indirectly for making taxable sales under Section 3 or sales outside the Delhi VAT charge under Section 7. A registered dealer includes a dealer registered or required to register under the Act. Capital goods and non-creditable goods must be identified by the definitions in Section 2 and applicable rules.

Eligibility and exclusions - Section 9(1) to (3)

Ordinarily, credit relates to purchases in the course of a dealer's business for qualifying sales. The restrictions cover purchases from unregistered or composition dealers, non-creditable goods, specified building materials, casual traders and specified Fifth Schedule dealers. The supplied text also includes a condition relating to the selling dealer's deposit or lawful adjustment of tax and correct reporting. Such provisions must be read with judicial decisions and the applicable tax period, not applied mechanically.

Proportionate credit, transfers and documentation

Where purchases serve both eligible and ineligible purposes, Section 9(4)-(5) requires a fair, reasonable proportionate allocation. Other subsections address non-sale transfers to non-resident branches or agents, specified interstate sales, exempt goods, and documentary requirements. Section 10 separately deals with adjustments to tax credit.

Capital goods and staggered credit

The supplied Section 9(9) provides for one-third of eligible capital-goods input tax in the purchase tax period and the remaining two-thirds in corresponding periods in the next two financial years, subject to provisos concerning sale, transfer, mixed use, exempt goods and depreciation. Section 9(11) specifies a separate one-fourth and three-fourths allocation for goods used for the particular type of sale defined in Section 2(1)(zc)(vi). These rules are period-specific DVAT provisions, not general GST input-tax-credit rules.

Section 9 - Detailed statutory provisions (supplied text)

Rules 6 and 7 are referenced in the source page. Subsection (6) appears without its number in that source; its introductory words are reproduced in sequence below. The text is supplied for statutory reference and must be checked against later amendments and notifications.

(1) Subject to sub-section (2) of this section and such conditions, restrictions and limitations as may be prescribed, a dealer who is registered or is required to be registered under this Act shall be entitled to a tax credit in respect of the turnover of purchases occurring during the tax period where the purchase arises in the course of his activities as a dealer and the goods are to be used by him directly or indirectly for the purpose of making

(a) sales which are liable to tax under section 3 of this Act; or

(b) sales which are not liable to tax under section 7 of this Act.

Explanation.- Sales which are not liable to tax under section 7 of this Act involve exports from Delhi whether to other States or Union territories or to foreign countries.

(2) No tax credit shall be allowed

(a) in the case of the purchase of goods for goods purchased from a person who is not a registered dealer;

(b) for the purchase of non-creditable goods;

(c) for the purchase of goods which are to be incorporated into the structure of a building owned or occupied by the person;

Explanation.- This sub-section does not prevent a tax credit arising for goods and building materials that are purchased either for the purpose of re-sale in an unmodified form, or for the performance of a works contract on a building owned or occupied by another;

(d) for goods purchased from a dealer who has elected to pay tax under section 16 of this Act;

(e) for goods purchased from a casual trader;

(f) to the dealers or class of dealers specified in the Fifth Schedule except the entry no.1 of the said Schedule.

(g) to the dealers or class of dealers unless the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period.

(3) The amount of the tax credit to which a dealer is entitled in respect of the purchase of goods shall be the amount of input tax arising in the tax period reduced in the manner described in sub-sections 4 [(4), (6) and (10) of this section.

(4) Where a dealer has purchased goods and the goods are to be used partly for the purpose of making the sales referred to in sub-section (1) of this section and partly for other purposes, the amount of the tax credit shall be reduced proportionately.

(5) The method used by a dealer to determine the extent to which the goods are used in the manner specified in sub-section (4) of this section, shall be fair and reasonable in the circumstances:

PROVIDED that the Commissioner may -

(a) after giving reasons in writing, reject the method adopted by the dealer and calculate the amount of tax credit; and

(b) prescribe methods for calculating the amount of tax credit or the amount of any adjustment or reduction of a tax credit in certain instances.

Explanation.- A person may object in the manner referred to in section 74 of this Act to a decision of the Commissioner to reject a method of calculating a tax credit.

Notwithstanding anything contained to the contrary in sub-section (1), where -

(a) a dealer has purchased goods (other than capital goods) for which a tax credit arises under sub-section (1) of this section;

(b) the goods or goods manufactured out of such goods are to be exported from Delhi by way of transfer to a

(i) non-resident consignment agent; or

(ii) non-resident branch of the dealer; and

the amount of the tax credit shall be reduced by the prescribed percentage.

(7) For the removal of doubt, no tax credit shall be allowed for -

(a) the purchase of goods from an unregistered dealer;

(b) the purchase of goods which are used exclusively for the manufacture, processing or packing of goods specified in the First Schedule.

(c) any purchase of consumables or of capital goods where the dealer is exclusively engaged in doing job work or labour work and is not engaged in the business of manufacturing of goods for sale by him and incidental to the business of job work or labour work, obtains any waste or scrap goods which are sold by him.

(8) The tax credit may be claimed by a dealer only if he holds a tax invoice at the time the prescribed return for the tax period is furnished.

(9)(a) Notwithstanding anything contained to the contrary in sub-sections (1) and (3) and subject to sub-section (2), tax credit in respect of capital goods shall be allowed as follows: -

(i) 1/3rd of the input tax on such capital goods arising in the tax period, in the same tax period;

(ii) balance 2/3rd of such input tax, in equal proportions, in corresponding tax periods, in two immediately successive financial years :

PROVIDED that, where the dealer sells such capital goods, the dealer shall be allowed as tax credit, the balance amount of the input tax, if any, in respect of such capital goods as has not been earlier availed as tax credit, such tax credit shall be allowed in the tax period in which such capital goods are sold and only after adjusting the output tax payable by him:

PROVIDED FURTHER that where the dealer transfers such capital goods from Delhi otherwise than by way of sale before the expiry of three years from the date of purchase, he shall, after claiming the balance amount of input tax, if any, not availed earlier in respect of such capital goods, reduce the input tax credit by the prescribed percentage of the purchase price of such capital goods and make adjustments in the input tax credit in the tax period in which these capital goods are so transferred:

PROVIDED ALSO that where a dealer has purchased capital goods and the capital goods are to be used partly for the purpose of making sales referred to in sub-section (1) of this section and partly for other purposes, the amount of tax credit shall be reduced proportionately:

PROVIDED ALSO that no tax credit in respect of capital goods shall be allowed if such capital goods are used exclusively for the purpose of making sale of exempted goods specified in the first schedule:

PROVIDED ALSO that no tax credit in respect of capital goods shall be allowed on that part of the value of such capital goods which represents the amount of input tax on such capital goods, which the dealer claims as depreciation under section 32 of the Income Tax Act, 1961 (43 of 1961).

(b) If any capital goods in respect of which tax credit is allowed under clause

(a) of this sub-section is transferred to any other person otherwise than by way of sale at the fair market value before the expiry of a period of five years from the date of purchase, the tax credit claimed in respect of such purchase shall be reversed in the tax period during which such transfer takes place.

(10) Notwithstanding anything contained to the contrary in sub-section (1), where

(a) a dealer has purchased goods (other than capital goods) for which a tax credit arises under sub-section (1) of this section; and,

(b) the goods or goods manufactured out of such goods are to be exported from Delhi by way of sale made under sub-section (1) of Section 8 of the Central Sales Tax Act, 1956, the amount of the tax credit shall be reduced by the prescribed percentage.

(11) Subject to sub-section (1), (2) and (3) of this section, the tax credit of goods to be used for sale, as defined in sub-clause (vi) of clause (zc) of sub-section (1) of Section 2 of the Act, shall be allowed as follows:

(a) 1/4th of the input tax on such goods arising in the tax period, in the same tax period;

(b) balance 3/4th of such input tax, in equal proportions, in corresponding tax periods, in three immediately successive financial years.

DVAT and GST: which credit provisions apply?

For GST-covered supplies, consult the Delhi Goods and Services Tax Act, 2017, particularly Sections 16 to 18 governing GST input tax credit. DVAT credit claims for earlier tax periods, or for goods remaining within the DVAT regime, require the applicable version of the DVAT Act, rules, notifications and supporting records.

Official legislation and notifications

Frequently asked questions

Is every purchase eligible for Delhi VAT tax credit?

No. Section 9 imposes exclusions, proportional reductions and documentary conditions, and later amendments or decisions may affect the outcome.

Is the DVAT capital-goods instalment rule the same as GST?

No. Section 9(9) is a DVAT-specific rule. GST-covered purchases must be tested under the GST credit provisions.

For a particular transaction, verify the law in force on the purchase and sale dates and any applicable judicial rulings.