The Delhi Sales Tax on Works Contracts Act, 1999

Preliminary

("Short title, extent and commencement")

1. (1) This Act may be called the Delhi Sales Tax on Works Contracts Act, 1999.
2. (2) It extends to the whole of the National Capital Territory of Delhi.
3. (3) It shall come into force on such date as the Government may, by notification in the official Gazette, appoint.

("Definitions")

1. (1) In this Act, unless the context otherwise requires:-
   • (a) "contractor" means any person who executes a works contract and includes a sub-contractor;
   • (b) "contractee" means any person for whom or for whose benefit a works contract is executed;
   • (c) "The Delhi Sales Tax Act" means the Delhi Sales Tax Act, 1975 (43 of 1975);
   • (d) "dealer" means any person, who whether for valuable consideration, commission, remuneration or otherwise, transfers property in goods (whether as goods or in some other form) involved in the execution of a works contract and includes any State Government and the Central Government which so transfers such property in goods, and any society, club or association of persons which so transfers the property in goods to its members;
   • (e) "declared goods" means goods as declared by the Central Sales Tax Act, 1956 (74 of 1956);
   • (f) "goods" means every kind of movable property (other than newspapers, actionable claims, stocks, shares and securities) and includes all materials, articles and things of any kind involved in the execution of a works contract;
   • (g) "Government" means the Lt. Governor as defined under Article 239 AA of the Constitution;
   • (h) "Lt. Governor" means Lt. Governor of National Capital Territory of Delhi as appointed by the President under Article 239 of the Constitution;
     • (i) "person" includes an individual, or body of individuals whether incorporated or not, a Hindu undivided Family, a firm, a local authority, a corporation, a company, body or authority owned or set up by, or subject to administrative control of the Central Government or any State Government (including the Government of a Union territory) or a cooperative society, whether registered or not;
   • (j) "prescribed" means prescribed by rules;
   • (k) "registered dealer" means a dealer registered under section 11;
   • (l) "rules" means rules made under this Act;
   • (m) "sale" means a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract in Delhi; and the word "sell" with all its grammatical variation and cognate expressions shall be construed accordingly;
   • (n) "sale price" in relation to a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract in Delhi, means such amount as is arrived at by deducting from the amount of valuable consideration paid or payable to a person for execution of such works contract, the amount representing labour and service charges for such execution;
   • (o) "taxable turnover" means such turnover as is arrived at after deducting from the turnover of sale such as may be prescribed;
   • (p) "tax" means the tax payable under this Act and includes a lump sum amount by way of composition payable in lieu of the amount of tax;
   • (q) "turnover of sale" means the aggregate of the amount of sale price received or receivable by a dealer in respect of any transfer of property in goods involved in the execution of any works contract whether executed fully or partly during any period;
   • (r) "works contract" includes any agreement for carrying out for cash or for deferred payment or for any valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property; "year" means the financial year.
2. (2) All words and expression used and not defined in this Act but defined in the Delhi Sales Tax Act, 1975 shall have the meanings assigned to them in that Act.

Incidence and Levy of Tax

Incidence of Tax.—(1) Every dealer whose turnover of sales during the year immediately preceding the commencement of this Act exceeds the taxable quantum, shall be liable to pay tax under this Act on his taxable turnover of sales effected by him on or after such commencement.

1. (2) Every dealer to whom sub-section
2. (1) does not apply, shall, with effect from the date immediately following the day on which his turnover of all sales calculated from the commencement of any year first exceeds, within such year, the taxable quantum, be liable to pay tax under this Act on all sales effected by him after that date.
3. (3) Every dealer who becomes liable to pay tax under this Act, shall continue to be so liable until his registration certificate is duly cancelled, and upon such cancellation his liability to pay tax, other than tax already levied or leviable, shall, until his turnover of all sales again first exceeds the limit specified in sub-section (1), cease: Provided that where any dealer has become liable to pay tax under this Act, and up to the time when his turnover of all sales does not exceed such limit, no tax shall be payable.
4. (4) For the purpose of this Act "taxable quantum" means five lakh rupees.

Liability of a dealer.—Subject to the provisions of this Act and the rules made thereunder, a tax shall be levied on the taxable turnover involving transfer of property in goods in the execution of works contract commenced or continued for execution on or after the commencement of this Act, whether such contract was entered into prior or subsequent to such commencement.

Levy of Tax.—(1) Same as provided in sub-section (2), there shall be levied a tax on the taxable turnover of sales involving transfer of property in goods in the execution of a works contract relating to such works contracts as may be prescribed, at the rate of four per cent of such turnover.

1. (2) No tax shall be levied on the turnover of sales of transfer of property in goods, specified in the execution of works contract, if such goods are transferred from the contractor to the contractee in the same form in which they were purchased by the contractor.
2. (3) No such tax shall be leviable on turnover of sales for the transfer of property in goods (whether as goods or in some other form) in pursuance of a works contract whether wholly or partly subject to the production of proof, as may be prescribed, that such sub-contractor is a registered dealer liable to tax and that the turnover of such amount is included in the return of the contractor or the sub-contractor.
3. (4) For the purpose of this Act "taxable quantum" means five lakh rupees.

Composition of Tax.—(1) Subject to such conditions as may be prescribed, the Commissioner may, if a dealer so elects, accept in lieu of the amount of tax payable by him under this Act, by way of composition, a lump sum amount at the rate of four per cent of his total amount of valuable consideration paid or payable to him for the execution of the works contract whether wholly or partly under the terms of the contract.

1. (2) Where in respect of sale price referable to any works contract whether involving both transfer of property in goods and labour and service, or involves only labour and service but the dealer is unable to produce accounts to the satisfaction of the assessing authority or, as the case may be, he does not maintain proper accounts of the actual value of labour and services, he shall, after giving the dealer a reasonable opportunity of being heard, calculate the lump sum amount at such rate as may be appropriate: Provided that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section
2. (3) of section 7, the amounts so deducted shall be deducted from the amount on which composition is to be made under this sub-section.

"6A Collection of tax by dealer.-A dealer registered under this Act may collect tax on the works contract executed by him in Delhi in accordance with the provisions of this Act at the rate not exceeding the rates specified under section 5 or section 6, as the case may be, of this Act."

1. (1) Every person, other than an individual and Hindu undivided family responsible for making payment to any dealer (hereinafter referred to as "the contractee") for discharge of any liability on account of valuable consideration payable for the transfer of property in goods (whether as goods or in some other form) in pursuance of a contract shall at the time of credit of such sum to the account of the contractor or at the time of making such payment to the contractor either in cash or in any other manner, deduct an amount equal to two percent from such sum towards the tax payable under this Act.
2. (2) Without prejudice to the provisions of sub-section (7), if any person fails to make deduction, or, after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of two per cent per month on the amount deductable under this section but not so deducted and, if deducted, not so deposited from the date on which such amount was deductable to the date on which such payment is actually deposited.
3. (3) Any contractor responsible for making any payment or discharge of any liability to any sub-contractor, in pursuance of a contract with the sub-contractor, for the transfer of property in goods (whether as goods or in some other form) involved in the execution, whether wholly or in part of works contract undertaken by the contractor, shall at the time of such payment or discharge, in cash or by cheque or draft or any other mode, deduct an amount equal to two percent of such payment or discharge, purporting to be part or full amount of the tax payable under this Act: Provided that no deduction under this sub-section shall be made on the amount on which deduction has been made under sub-section (1), or sub-section
4. (3) subject to production of a certificate as prescribed in sub-section
5. (5) of this section. (3A)
   • (i) A contractor with respect to the contracts other than the private contracts, may make an application to the concerned assessing authority authorising him to deduct tax at the rate of two percent towards the tax payable under this Act instead of two percent as provided in sub-section
6. (1) of this section.
   • (ii) Where an application is made by the contractor under clause
   • (i) of this sub-section, and a copy thereof is forwarded to the appropriate assessing authority by the contractor, the contractor shall be deemed to have opted for composition under section 6 of this Act.
   • (iii) A contractor, to whom the provision of clause
   • (i) of this sub-section applies, may be assessed in a summary manner on the basis of the annual return filed by him without being called upon to produce the books of accounts and other records relating to his business.
7. (4) The amount deducted under sub-section
8. (1) or sub-section
9. (3) shall be deposited into the government treasury by the person making such deduction within fifteen days following the month in which such deduction is made in the manner as may be prescribed.
10. (5) Any person making such deduction under sub-section
11. (1) or sub-section
12. (3) shall, at the time of making such payment or discharge, furnish to the dealer or contractor from whose bills or invoices such deduction is made a certificate in such form as may be prescribed in respect of the amount so deducted, the rate at which it has been deducted and the relevant assessment year.
13. (6) Any deduction made in accordance with the provisions of this section and credited into the government treasury shall be treated as payment of tax on behalf of the person from whose bills or invoices the deduction has been made and credit shall be given to him for the amount so deducted on the production of the certificate, referred to in sub-section
14. (5) above, in the assessment made for the relevant assessment year: Provided further that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section
15. (3) the amounts of such payments shall be deducted from the amount on which tax deduction is to be made under this sub-section by the contractee at the rate as prescribed in sub-subsection
16. (1) of section 7: Provided that nothing contained in this section shall apply to works contract executed in the course of inter-state trade or commerce or outside the State, or in the course of import or export out of India.
17. (7) If any person, as is referred to in sub-section
18. (1) or sub-section
19. (2) or sub-section
20. (3) or sub-section (3A), fails to make the deduction, or, after deducting, fails to deposit the amount so deducted as required by sub-section (4), the assessing authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section besides tax deductible but, not so deducted and, if deducted, not so deposited into the Government treasury.
21. (8) (Omitted / Not applicable)
22. (9) Where the amount has not been deposited after deduction, such amount together with interest and penalty referred to in sub-section
23. (7) and sub-section
24. (8) shall be a charge upon all the assets of the person concerned and recoverable as arrears of land revenue.
25. (10) Every person responsible for making deduction of tax under this section shall apply to the Commissioner for a "Tax Deduction Account Number" within the prescribed time and in the prescribed form and shall also furnish an annual return in the prescribed form within the prescribed period.

Tax Clearance Certificate and Accounts

Tax Clearance Certificate.—(1) Notwithstanding anything contained in any other law for the time being in force, no person shall enter into any Works contract with any dealer for execution by him of such works contract and shall make payment to such dealer for execution of works contract, unless the Commissioner certifies in the prescribed manner that such dealer:—

1. (i) has no liability to pay tax, interest, penalty or any amount due or has not defaulted in furnishing any return or returns together with the receipted challan or challans showing payment of all tax payable under this Act;
2. (ii) has not defaulted in making payment of tax otherwise payable by or due from him under this Act;
3. (iii) has made satisfactory provision for securing the payment of tax by furnishing bank guarantee in favour of the Commissioner or otherwise, as the case may be;

1. (2) Notwithstanding anything contained in sub-section (1), the Commissioner may, after making such enquiry as he may think fit and after affording an opportunity of being heard, certify in the prescribed form, the payment may, not-withstanding anything contained in sub-section (1), be made to such dealer for execution of a works contract, provided that he has applied for registration within the prescribed time.

Registration of dealers.—(1) No dealer who is liable to pay tax under this Act, shall, after the commencement of this Act, execute or continue to execute a works contract, unless, he possesses a valid certificate of registration as provided by this Act: Provided that the dealer shall be eligible to be registered if he has started the business of transfer of property in goods involved in execution of works contract for first time in Delhi.

1. (2) Where on application made by a dealer in the prescribed form, the Commissioner, after making such enquiry, as he may deem fit for the purpose of the provisions of the Act and the rules, is satisfied that the dealer is eligible for registration, he shall grant him a certificate of registration in the prescribed form, which shall take effect from the date on which registration certificate took effect until it is cancelled, notwithstanding the date of the grant of such certificate of the Commissioner.
2. (3) The application for registration shall contain such particulars as may be prescribed.

Accounts.—(1) Every dealer liable to pay tax under this Act shall maintain and keep true and up-to-date accounts of the value of goods transferred, whether as goods or in some other form, in the execution of works contract, and such other accounts as may be prescribed: Provided that if the Commissioner is of the opinion that the accounts maintained by any dealer or class of dealers are not sufficient to enable him to assess the tax due from such dealer or dealers, he may require such dealer or dealers to maintain such accounts as he may direct.

1. (2) Every registered dealer shall issue a tax invoice or a bill or a cash memorandum in respect of the goods transferred in the execution of works contract by him, which shall be serially numbered and signed and dated by such dealer or his regular employee, and shall specify such other particulars as may be prescribed.
2. (3) The provisions of section 18 of the Delhi Sales Tax Act and Rules framed thereunder as regards the maintenance of accounts shall, mutatis mutandis, apply to a dealer liable to pay tax under this Act.

Registration

Inspection, search, seizure and assessment provisions.—(1) Any assessing authority or any officer authorised by the Commissioner in this behalf may, for the purposes of this Act:

1. (a) require any dealer to produce accounts, registers and documents relating to his business activities for examinations;
2. (b) inspect the cash in the possession of the dealer or in the possession of any body else on behalf of such dealer, wherever such goods are;
3. (c) make search of such place including the search of the person found there, where concealment of facts relating to business is suspected;
4. (d) break open the doors of any premises or to break open any almirah, box, receptacle in which any goods, accounts, registers or documents of the dealer are suspected to be kept, but access to such premises, almirah, box or receptacle is denied;
5. (e) to record the statement of the dealer or his manager, agent or servant or to take extract from any record and to put identification marks on accounts, registers or documents and on any door, almirah, box or receptacle. Explanation.—(1) There shall be a presumption that all goods, accounts registers or documents, if found at any place of business of a dealer during search that they relate to his business.

1. (2) Power under clauses
   • (d) and
   • (e) of sub-section (1), shall be exercised by the Inspector in the presence of an authority not below the rank of assistant sales tax officer.
2. (3) Where any accounts, registers or documents are found by any assessing authority or any officer not below the rank of assistant sales tax officer in any place of business, such authority or officer may, for reasons to be recorded in writing, impound and retain them in its custody for a period not exceeding six months, and shall give the dealer or any other person who has produced such accounts, register or documents a receipt for the same.
3. (4) If at the time of inspection, the assessing authority or sales tax officer authorised by the Commissioner in this behalf has reason to suspect that the dealer is attempting to avoid or evade tax or is concealing his tax liability in any manner, he may, for reasons to be recorded in writing, seize such accounts, registers or documents as may be necessary and grant a receipt for the same.
4. (5) The accounts, registers or documents impounded under sub-section
5. (3) or seized under sub-section
6. (4) could be retained even beyond a period of six months and upto a maximum period of two years from the date of impounding or seizure, as the case may be, by such authority or officer, after having obtained permission in writing of the Commissioner or the Deputy Commissioner authorised by the Commissioner.
7. (6) The assessing authority or any other officer not below the rank of assistant sales tax officer authorised by the Commissioner under sub-section
8. (4) may seize any goods liable to tax, which are found in the possession of a dealer or in the possession of any body else on behalf of such dealer and which are not accounted for in his accounts, registers or documents maintained in the course of his business; and a list of goods so seized shall be prepared by such authority or officer and a copy thereof shall be given to the dealer or any other person from whose custody such goods are seized.
9. (7) Where it is not feasible to seize the accounts, registers or documents under sub-section
10. (4) or the goods under sub-section (6), the assessing authority or the officer concerned may serve on the owner or the person who is in immediate possession or control thereof an order that he shall not remove, part with or otherwise deal with them except with the previous permission of such authority or officer, which may, after serving such order, take such steps as may be deemed necessary under the circumstances.
11. (8) The assessing authority or the officer referred to in sub-section
12. (6) may, after having given the dealer an opportunity of being heard, and after having held such further enquiry as it may consider fit, impose on him, for the possession of goods not accounted for, whether seized or not under sub-section (6), a penalty equal to the amount of five times of the tax leviable on such goods or thirty percent of the value of such goods, whichever is less: Provided that such authority or officer may release the goods, if seized, on payment of the penalty imposed or on furnishing such security for the payment thereof as it may consider necessary.
13. (9) The assessing authority or other officer as referred to in sub-section (6), may require any person:
    • (a) Who transports or holds in custody any goods of a dealer, to give any information in his possession in respect of such goods or to allow inspection thereof, as the case may be; and
    • (b) Who maintains or has in his possession, books of accounts, registers or documents relating to the business of a dealer to furnish such information and to produce such books, registers or documents for inspection.

Offences and Penalties.—(1) Where any person—

1. (a) liable to be registered under the Act fails to apply for registration within the prescribed time; or
2. (b) fails to furnish information as required under section 6 of the Act;
3. (c) fraudulently avoids or evades tax or deliberately conceals his tax liability in any manner; or
4. (d) prevents or obstructs, in any manner, an officer under the Act, to enter, inspect and search the business place or any other place where the goods or the accounts, registers and documents are believed to be kept, or prevents or obstructs, such officer to seize the accounts, registers and documents or the goods;
5. (e) fails to maintain accounts in the manner as required under section 10 of the Act;
6. (f) aids or abets any person in the commission of any such offence as aforesaid; shall be liable to be proceeded against and punished in accordance with this section.

1. (2) If a dealer fails without reasonable cause to comply with any of the provisions of this Act or the rules made thereunder, for which no specific penalty is provided under this section, he shall be liable to prosecution under this section: Explanation.—An offence under this clause shall be deemed to be a continuing offence until full payment is made;
2. (3) If a dealer fails without reasonable cause to comply with any of the provisions of this Act or the rules made thereunder, he shall be liable to a penalty not exceeding four thousand and where such contravention or failure is a continuing one, to a daily penalty not exceeding two hundred rupees for every day, during the period of such contravention or failure provided that no such penalty shall be imposed without affording the dealer a reasonable opportunity of being heard.

Cognizance of offences.—No Court shall take cognizance of any offence under this Act or under the rules made thereunder, except on complaint being made against such person by the assessing authority of the area or any other competent officer having obtained sanction from the Deputy Commissioner.

Offences by whom triable.--(1) No court shall take cognizance of any offence under this Act, or under the rules made thereunder, except with the previous sanction of the Commissioner, and no court inferior to that of a Metropolitan Magistrate shall try any such offence.

1. (2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences punishable under this Act shall be cognizable and bailable.

Inspection, Search, Seizure and Investigation

Power to make rules.--(1) The Government may, by notification in the official Gazette, make rules for carrying out the purposes of this Act.

1. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:--
   • (a) all matters expressly required or allowed by this Act to be prescribed;
   • (b) the terms and conditions subject to which a dealer may be registered;
   • (c) the period for which, and the conditions subject to which, the certificate of registration may be granted or renewed;
   • (d) the manner of verification of the taxable turnover;
   • (e) the form in which, and the particulars to be contained in, any return to be furnished under this Act;
   • (f) the manner in which tax shall be assessed, collected and recovered;
   • (g) the procedure for inspection, search and seizure;
   • (h) the form and manner of application for tax clearance certificate;
     • (i) the procedure to be followed in proceedings before the assessing authority;
   • (j) the procedure for imposition of penalty and for recovery of tax, penalty and interest;
   • (k) any other matter which is to be or may be prescribed.
2. (3) The provisions of section 18 of the Delhi Sales Tax Act and Rules framed thereunder as regards the procedure for imposing penalties or for recovery of tax shall, mutatis mutandis, apply to this Act.
3. (4) All rules made under this section shall be subject to the condition of previous publication: Provided that if the Government is satisfied that circumstances exist, which render it necessary that any rule should be made without delay, the Government may, for reasons to be recorded in writing, make any rule without such previous publication.
4. (5) Every rule made under this section shall be laid, as soon as may be after it is made, before the Legislative Assembly while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, the Legislative Assembly agrees in making any modification in the rule or the Legislative Assembly agrees that the rule should not be made and notifies such decision in the Official Gazette, the rule shall from the date of publication of such notification have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done or omitted to be done under that rule.

Authorities under the Delhi Sales Tax Act

Authorities under the Delhi Sales Tax Act.—(1) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the Delhi Sales Tax Act [shall be empowered to assess, reassess, collect and enforce payment of tax including any interest or penalty payable by a dealer under this Act] and the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under the Delhi Sales Tax Act and for this purpose they may exercise all or any of the powers they have under the Delhi Sales Tax Act, and the provisions of the Delhi Sales Tax Act, including provisions relating to returns, notices, assessment, re-assessment, appeals, rectification, registration of any dealer liable to this Act, imposition of the tax liability of any person under this Act and the provisions relating to offences and penalties (in respect of any offence) of the Delhi Sales Tax Act shall apply accordingly: Provided that in the case of any offence, for which the punishment is provided under this Act, such punishment shall be imposed under this Act.

Miscellaneous and Rules

Laying of rules.—(1) The Government shall lay the rules made under this Act before the Legislative Assembly of the National Capital Territory of Delhi, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions.

1. (2) If the Legislative Assembly agrees in making any modification in the rule or the Legislative Assembly agrees that the rule should not be made and notifies such decision in the Official Gazatte, the rule shall from the date of publication of such notification have effect only in such modified form or be of no effect, as the case may be: however, that any such modification or annulment shall be without prejudice to the validity of anything previously done or omitted to be done under that rule.
2. (3) Rules made under this section shall be subject to the condition of previous publication: if the Government is satisfied that circumstances exist which render it necessary that any rules should be made without delay, it may dispense with the condition of previous publication.
3. (4) Every rule made under this section shall be laid, as soon as may be after it is made, before the Legislative Assembly.

-1 18. Power to remove difficulty:--If any difficulty arises in giving effect to the provisions of this Act, the Government may, by order published in the official Gazette, make such provisions, not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty: Provided that no such order shall be made after the expiry of a period of two years from the date of publication of this Act in the official Gazette.