16.CENTRAL SALES TAX ACT
Name of the Act: The Central Sales Tax Act, 1956. The Act extends to the whole of
OBJECTIVES OF THIS ACT
a. To give out the principles for determining Inter State Sale (ISS) or
b. Provide for the levy, collection and distribution of taxes on sale of goods in the course of inter-State trade.
c. Declare certain goods to be of special importance (Called Declared goods).
d. Specify the restrictions and conditions on state laws imposing taxes on declared goods.
e. To provide for collection of tax in the event of liquidation of a company.
FEATURES OF CST ACT
a. It states that every dealer who makes an ISS must be a registered dealer.
b. Such dealer, who makes an Inter State Sales, is liable to pay Central Sales Tax.
c. Sec.3 explains when the sale of goods will be called an ISS.
d. It explains what is an import and export sale.
e. Sec.4 explains when a sale will be outside all other States.
f. Normally CST is charged at a single point, but in some cases there can be multiple point tax on account of subsequent sale.
g. Goods for the purpose of CST have been divided into - Declared & other goods.
h. CST is leviable from the first rupee of sales made in the course of Inter-state sale.
i. The Central Sales-tax is levied under this Act but it is collected by the State Government from where the goods have been sold.
Sec.6(1) of CST Act provides that subject to other provisions of the CST Act, every dealer shall be liable to pay tax under this Act on all sale of goods (other than electrical energy) effected by him in the course of Inter-State trade. Sec.6(1) is called ‘Charging Section’ as it imposes levy on sale of goods on Inter-State sale.
Analysis of charging sec.:
F No tax on sale of newspaper! Why? - Not goods (Sec.2(d))
F No tax on sale of Electricity! Why? - Excluded from charging Section 6.
F No tax on Export/Import Sale! Why? - Tax for ISS sale only (Sec.6(1)).
F No tax on purchases! Why? - Tax on sale only (Sec.6(1)) (*)
F Tax leviable on all sales? Why? - The wordings in Sec.6(1) are such (No free limit or second sales exemption as in state laws).
* It is only in State laws cotton, sugar canes etc. are taxed at purchase point.
“GOODS” - 2(d)
Includes any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration. It also includes a transfer of goods on the hire-purchase or other system of payment by installment but does not include a mortgage or hypothecation or pledge of goods.
“APPROPRIATE STATE” - 2(a)
a. In relation to a dealer who has one or more places of business situated in the same State - That State.
b. In relation to a dealer who has places of business situated in different States - Every such State.
“PLACE OF BUSINESS” - 2(dd)
a. In any case where a dealer carries on business through an agent (by whatever name called), the place of business of such agent.
b. A warehouse, godown or other place where a dealer stores his goods and
c. A place where a dealer keeps his books of account.
MEANING OF INTER STATE
A sale of goods shall be named as ISS (Inter state sale) under the following situations:
a. If the sale occasions the movement of goods from one State to another (Sec.3(a)) (E.g.: X of Delhi sells goods to B of M.P. As per the terms of contract, goods are delivered by X in
b. If the sale is effected by a transfer of documents of title to the goods during their movement from one State to another. (Sec.3 (b)). (E.g.: A of
3(a) Vs. 3(b): In the former case the movement of goods is under the contract of sale or purchase but in the latter the contract comes into existence after commencement and before termination of the inter-State movement of the goods.
Meaning of movement: For this purpose, it should be noted that movement of goods commences at the time of delivery to a carrier for transportation and terminates at the time when delivery is taken from such carrier. In other words, so long as the goods are in the custody of the transporter, the goods are deemed to be in movement. (Thus, if goods are booked from
What is ‘Document of Title of Goods’: When the goods are handed over to the carrier/transporter, he hands over a receipt to the seller. The seller sends the receipt to buyer. The buyer gets delivery of goods on submission of the receipt to the carrier/transporter. The receipt of carrier is ‘document of title of goods’. It generally includes the following: Railway receipts (RR) – incase of movement of goods by rail, Lorry receipts (LR) – in case of movement of goods by road, Air way Bill (AB) – in case of movement of goods by air, Bill of Lading (BL) – in case of movement of goods by sea.
Temporary movement through another State is not
Is there any restriction on the number of “endorsement sales”?: No.
Some Special Cases:
a. M/s Kasturi & Sons sold “The Hindu & Business line” from
b. A of
c. A of Mumbai sells goods to B of Singapore. The movement begins from Maharashtra, passes through Andhra Pradesh and ends at
d. When Stock Transfer is treated as Inter-State sale:
Let us assume that Tata Iron and Steel Co. Ltd. (TISCO), manufacturing Steel, has a factory at
However, assume that a buyer from
e. Dispatch through depot - only for name sake: In some cases, ultimate buyer of goods is known even before goods are dispatched from the factory. In some cases, goods are dispatched directly to the buyer. Only Invoice is raised by the depot to show it as a stock transfer. Such dispatch just cannot be considered as ‘stock transfer’. It has to be held as ‘Inter-State Sale’.
f. Location of buyer and seller is immaterial: Can there be an inter state sale between two persons in the same state say Andhra Pradesh?:
¡ Yes, if the goods move from other state to Andhra Pradesh or from Andhra Pradesh to some other state. Thus, even if buyer and seller are within the same State, sale will be inter-state E.g. the buyer may have construction site in another State and may ask seller to dispatch goods directly to the site.
¡ Yes, if the seller makes a sale by transfer of documents of title during the course of inter state movement.
SALE/PURCHASE SAID TO
1. Outside state sale - Sec.4(1): When a sale or purchase is said to take place inside a State, such sale or purchase is deemed to have taken place outside all other States. (E.g.: A sale takes place inside Andhra Pradesh. It should be
2. Inside state sale - Sec.4(2):
a. In the case of Specific or Ascertained goods, a sale is deemed to take place inside the State where such goods are situated at the time when the contract of sale is made. The criterion is where the goods are at the time of sale contract. (E.g. A has 100 chairs in his shop at
b. In the case of Unascertained or Future goods, a sale is deemed to take place inside a State where such goods are situated at the time of their appropriation to the contract of sale by the seller or by the buyer. The criterion is where the goods are at the time of appropriation.
Application of Sec.4: First apply 4(2). Find out the state in which the sale has taken place. Then go to 4(1). The sale is deemed to take place outside all other sates.
3. Suppose there is a single contract of sale of goods situated at more than one place, it shall be treated as if there are separate contracts in respect of the goods at each of such places. E.g.: A Businessman of Baroda having the Godown in
EXPORT OR IMPORT
The sale shall be deemed to take place in the course of export or import:
Export - Movement of goods from a place in
¡ A of
¡ A of
¡ A of
¡ Y imports some goods from
All the above sales are not liable for any State or Central Sales-tax.
“CROSSING THE CUSTOMS FRONTIERS OF
Means crossing the limits of the area of a customs Station in which imported goods or export goods are ordinarily kept before clearance by the customs authorities.
The place Mark" A" is the harbour gate and going in / out through the gate is crossing the Customs frontiers of
(Back ground: Export is a specialised business and many small units are unable to export directly. Export is often affected through specialised agencies like export Houses etc. Such indirect exports also need exemption from taxes (like LST, CST) to make the products competitive. Hence, such penultimate sale before export is also deemed to be in the course of export under Sec.5(3). To remove this hardship Sec.5(3) was incorporated.)
Provisions: Exemption to penultimate sale is available subject to the conditions that the penultimate sale (i.e., last but one sale before export sale) is:
a. For the purpose of complying with export order in relation to export.
b. Such penultimate sale is made after the export order in relation to export.
c. The same goods which are purchased in penultimate sale must be sold as exports, and
d. The dealer claiming the benefit of Sec.5(3) should obtain Form H declaration from the exporter. The details in form H prove prima facie that conditions of section 5(3) have been fulfilled.
E.g.: A of
What is the benefit of Sec.5(3)?: Sec 5(3) = 5(1) =Zero tax
Whether the following are eligible for the benefit of section 5(3)?
a. X, the exporter, first procures goods from Y, the local dealer. Thereafter he finds a foreign buyer Z and makes export sale.
Y will not be eligible for5 (3) benefit because his sale to X was prior to the receipt of the export order by X from Z.
b. A sells goods to B. The latter is to make export sale to C for complying with some pre existing export order. The foreign buyer C breaches the contract. Therefore B makes export sale to another buyer by name D.
A will not get 5(3) concession because the export sale was not made to comply with the original export order with C.
c. X of
Z will not get Sec.5(3) concession because while the export order was for sandalwood oil, Z sold sandalwood after the receipt of the order from X. Further the rule called “the same goods must be exported” has not been complied.
Exceptions to the concept “Same goods”:
a. A sells black grams to B. The goods are black in colour (black skin outside and two cotyledons inside.) B removes the skin and converts the pulse into gram. (White in colour - 2 cotyledons only) for making export sale. There is a processing in the hands of B. The goods sold by A (i.e. Black grams) are not sold in the course of export by B. Will A get 5(3) concession? Ans.: Yes, he will get it. Under Sec.15, Pulses and Grams are treated as same goods. Sec.5(3) concession is available for the sale of pulse by A.
b. A sells paddy to B. The latter hulls the paddy and makes export sale of rice to comply with the pre-existing export order for rice. What A sold is paddy, but what B sold is rice in the course of export. Will A get 5(3) concession? Ans.: Yes, He will get it. Why? Sec.15 recognises paddy and rice as the same commodity for the purposes of section 5(3). Accordingly A’s sale of paddy is eligible for 5(3) concession.
Special issues on Sec.5(3) - Purchase of packing material for export permissible:
a. If gunny bags purchased are used as containers for export of certain goods to a foreign country, it is eligible for Sec.5(3). The last purchase preceding the sale occasioning export should be for complying with export order and hence are eligible for exemption under section 5(3).
b. The ‘banians’ were exported, packed in the polythyne bags. It was held that purchase of polythyne bags is eligible for Sec.5(3).
LIABILITY TO TAX ON INTER-STATE SALES - SEC.6
CHARGING SEC. - SEC.6(1)
Refer to page 2.
NO BENEFIT OF EXEMPTION - SEC.6(1A)
A dealer shall be liable to pay tax under the CST Act on the sale of any goods effected in the course of inter- State trade though no tax is leviable under the local sales tax Act of the appropriate State if such sale is Intra state sale. Therefore exemption in the local sales tax law is irrelevant for the purpose of Central Sales Tax Act. E.g.: In some states, take for e.g. Tamilnadu, no Local sales tax is levied on sales upto prescribed limit (For e.g. it is 3 lakhs in Tamilnadu). But these goods which escape tax under local sales tax cannot avoid tax in CST ACT. Suppose Mr.A's sales turnover under TNGST is less than Rs.3,00,000. No tax under TNGST up to a turnover of Rs.3,00,000. However CST is payable on 3 lakhs also.
Sec.6(2) - Concept of subsequent sales in CST: However exemption is available to the 2nd & subsequent inter state sale provided such sale is effected by transfer of documents of title during the movement from one State to another.
The conditions to be fulfilled for availing this exemption are as follows:
a. There must be an ISS by a registered dealer to another registered dealer/Government.
b. During the movement of such goods from one state to another, a 2nd inter-State sale by transfer of documents of title should take place.
c. Such transfer of documents should be either to the Government or to a registered dealer other than Government.
d. The dealer who makes the first inter state sale should give Form E-I to the purchasing registered dealer /Govt. and obtain Form C/D as the case may be, from him.
e. The registered purchasing dealer, who made the subsequent sale by transfer of documents of title, will issue Form E-II to the subsequent registered purchasing dealer / Government and must obtain C/D form from them.
f. Similar procedure will be followed for any subsequent sale which may take place during the movement of such goods.
E.g.: X of
The following declaration forms must be issued by the various dealers:
Type of transaction
Subsequent sale u/s. 6(2) in Sec.3(b) mode
Second subsequent sale during same transit
From E- I
From E- II
From E- II
From E –II
In the above cases, From D will be issued if sale is made to a government.
a. Any number of times: Any number of subsequent Inter state sales effected in the course movement of the goods from one state to another by transfer of documents of title by one dealer to another shall be exempt provided the above conditions are fulfilled and relevant forms are obtained and filed.
b. Inspite of the exemptions available for subsequent sale u\s. 6(2), multiple taxation takes place in the following situations
¡ Subsequent sale u\s. 6 (2) made by one registered dealer to an unregistered dealer.
¡ Subsequent sale made by the above said unregistered dealer to a registered dealer and a subsequent sale by the latter to another registered dealer and so on.
CONSIGNMENT TAX - (SEC.6A)
a. Consignment/ stock transfer is one of the ways of avoiding Central Sale Tax. Hence, Constitution was amended w.e.f.
b. A dealer can claim that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by way of branch transfer, or consignment transfer and not by way of sale. But the burden of proof for availing such exemption is on the dealer who shall be required to furnish to the assessing authority declaration in the prescribed Form F with prescribed particulars together with the evidence of dispatch of such goods.
c. The assessing authority may make an order, after making such enquiry as considered necessary and being satisfied that the particulars contained in the declaration furnished are true, to that effect.
SEC.7-REGISTRATION OF DEALERS
“DEALER” - 2(b)
Means any person who carries on the business of buying or selling or supplying or distributing goods, for cash or for credit or for commission and includes:
a. A local authority, a company, any co- operative society or other society, club, firm, Hindu Undivided Family or other association of persons which carries on such business.
b. A broker, commission agent, del-credere agent by whatever name called, who carries on business of buying, selling, supplying or distributing goods belonging to any principal whether disclosed or not &
c. An auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not.
Expl.2 provides that: Is government a dealer?
a. Government when buys or sells or supplies or distributes goods, for cash or for credit or for commission shall be deemed to be a dealer.
b. However, such Government shall not be deemed to be a dealer in relation to any sale, supply or distribution of surplus, unserviceable or old stores or waste products or obsolete or discarded machinery or parts thereof.
a. The goods of a Maharaja are sold by an Auctioneer. Who will pay tax-Maharaja or Auctioneer?: Auctioneer is the dealer. Tax is payable by the dealer. Therefore, the liability to pay tax is on the auctioneer and not on the Maharaja.
b. A forest officer of the Government of Andhra Pradesh sells sandalwood as well as discarded furniture. Is he a dealer?: He is a dealer for the sale of sandalwood only. He is not a dealer for the sale of condemned furniture.
c. In order to be a dealer, ownership of goods is not essential, as the dealer can be an agent on behalf of the principal for such goods.
“REGISTERED DEALER” - 2(f)
Means a dealer who is registered u/s.7.
1. Compulsory: As per Sec.7(1), every dealer liable to pay Central Sale Tax has to register himself with sales tax authority. (As per section 6(1) of CST Act, every dealer effecting sale in the course of
2. Voluntary registration: It can be applied if the following two conditions are satisfied:
a. He must be a dealer liable to pay tax under the Sales Tax Law of appropriate State.
b. He is not liable to pay tax under the CST Act, i.e. he does not make an ISS.
It is useful when dealer makes Inter state purchases but all his sales are intra state.
BENEFITS OF REGISTRATION
a. Concessional rate of tax on Inter state purchases under cover of C form.
b. Exemption from payment of tax under Sec.6 (2) (Page 11).
c. Branch transfer/stock transfer is exempt by submitting Form F.
d. Can claim benefit U/s 5(3) by issuing H form.
e. No tax on purchases by a unit in Special economic zone.
f. The dealer can avoid penalty or prosecution proceedings for non-registration.
1. Purpose: The security is demanded for ensuring (a) Proper collection of tax payable under the Act (b) For the proper custody and use of the forms prescribed under the Act.
a. The registering authority can demand for security not exceeding in the aggregate the tax payable for the year on the turnover estimated.
b. Demand can also be raised for furnishing of security in addition to the security already furnished, for keeping pace with the growth of business.
3. Timing: The security can be demanded before or after granting the registration.
4. Mode of security: The registering authority may require the dealer to furnish security in any one or more of the following modes: (a) Cash (b) Promissory notes (c) Post office certificates (d) Post office savings pass book (e) FDR’s of any scheduled bank (f) Surety bond of a dealer etc.
a. Where the security furnished by a dealer is in the form of a surety bond &
b. The surety becomes insolvent or dies, the dealer should inform the registration authority within 30 days of the occurrence of the event &
c. Within 90 days furnish a fresh bond or furnish other security for the amount of the bond.
a. The Security can be forfeited by the authority granting the registration:
¡ For realising any amount of tax or penalty payable by the dealer.
¡ If the dealer is found to have misused any of the forms or
¡ If the dealer is found to have failed to keep them in proper custody.
b. The dealer shall be given an opportunity of being heard.
7. Refund: The authority granting a certificate of registration may, on application by the concerned dealer, refund the part or whole of the security if not required.
8. Appeal: Any person aggrieved by an order passed by the registration authority demanding security or forfeiting or refunding security can prefer an appeal against such order within 30 days of the service of order, after furnishing the security.
a. The appellate authority may, for sufficient cause, permit the filing of appeal belatedly or without furnishing whole or part of such security.
b. The order passed by the appellate authority in any appeal shall be final.
Application has to be signed by (a) Proprietor of business (b) One of the partners in case of business owned by partnership firm (c) Kartha or Manager of HUF (d) Director or principal officer of Company (e) Principal Officer in case of AOP or (f) Officer authorised by Government in case of Government.
AMENDMENT OF CERTIFICATE OF REGISTRATION
A certificate may be amended either on the request of the dealer or by the authority himself after due notice to the dealer. The amendment is done in the following circumstances:
a. When there is a change in the name of the business Or
b. When there is a change in the nature of the dealer’s business Or
c. When there is a change in the class or classes of goods Or
d. Change/addition of place of business, warehouse etc.,
e. For any other reason.
CANCELLATION OF REGISTRATION
1. Cancellation by the Assessing Authority by its own motion: This can be done, after giving an opportunity to the dealer, under the following circumstances:
a. If the dealer has ceased to carry on business Or
b. If the dealer has ceased to exist Or
c. If the dealer fails to furnish security or additional security when asked for Or
d. If the dealer fails to furnish fresh surety bond within 90 days on the death of the surety or his becoming insolvent Or
e. If the dealer fails to pay any tax or penalty payable under this Act.
f. If the dealer ceases to pay tax under the Sales Tax law of the appropriate State.
g. For any other sufficient reason.
a. A registered dealer may apply within 6 months before the end of a year to the authority for the cancellation & the authority shall cancel the registration if the dealer is not liable to pay tax under this Act.
b. Any such cancellation shall take effect from the end of the year.
Registration certificate is not transferable.
EFFECTIVE DATE OF REGISTRATION
Compulsory registration is effective from the date of inter state sale if the registration is applied within 30 days of making the inter state sale. However, voluntary, registration will be effective from the date of making the application for registration.
RATES OF TAX ON ISS - SEC.8
the C.G. or a S.G.:
1.1. If LST (State sales tax rate) is <>
1.2. If LST Rate is 4% or > 4%.
goods to a registered dealer:
2.1. If LST rate <>
2.2. If LST rate 4% or > 4%.
Goods to a registered dealer in any SEZ.
1, 2 and 3 supra:
4.2.1. If LST rate is Nil.
4.2.2. If LST rate is > 0.
Twice LST (Note 2)
Nil (Note 2)
10% or LST á
LST can't be > 4%
1. If local sales tax rate is nil, then the central sales tax rate will be Zero. Moreover, Form C or D is also not required. Such a case may also be covered by 4.1 or 4.2.1
2. Sec.8(2) provides that if certain goods are exempt generally from states sales tax, the central sales tax payable on such goods will be nil, even if goods are sold to unregistered dealer.
“SALES TAX LAW” - 2(i)
Means any law for the time being in force in any State which provides for the levy of taxes on the sale or purchase of goods.
“GENERAL SALES TAX LAW”
Means the law for the time being in force in any State which provides for the levy of tax on the sale or purchase of goods generally.
BENEFIT OF UNCONDITIONAL EXEMPTION - SEC.8(2)
Certain goods enjoy tax exemptions unconditionally under local state law. The exemptions may be total (i.e., zero tax) or partial (i.e. reduced rate of tax). The concession should be available unconditionally i.e. it should be enjoyable generally without any stipulations. Then the same concession is automatically enjoyable on ISS also (Even if the goods are sold to registered dealer or unregistered dealer). (E.g. There is no tax on sale of coconut to anyone inside Andhra Pradesh. The same concession automatically applies to CST. This means that in Andhra Pradesh there is no Central Sales Tax on coconuts. Suppose if, the exemption notification is as follows: Coconuts - No tax on sales, other than sales to oil mills. The exemption is conditional & hence the exemption will not apply to ISS).
CONCESSIONAL RATE FOR SPECIFIED GOODS - SEC.8(3)
Following are the goods specified u/s 8(3) in respect of which a sale to a registered dealer is liable to tax at concessional rates (i.e. 4% or local rate â ), provided that the transactions are covered by Form C or D:
a. For resale by him or
b. For use by him in the manufacturing or processing of goods for sale or
c. For use in the mining or
d. For use in the generation or distribution of electricity or any other form of power or
e. For use in telecommunication network or
f. Containers or packing materials used for packing goods specified in the certificate of registration or
g. Packing the packing material itself.
DECLARATIONS NECESSARY FOR THE CONCESSIONAL RATE - SEC.8(4)
The concessional rate U/s.8(1) is subject to the buyer giving the seller the following declarations:
C form Declaration
D form Declaration
C form says buyer is a registered dealer. D form says buyer is Government department.
POWERS OF THE S.G.TO GRANT REDUCTION/EXEMPTION - SEC.8(5)
The power to levy CST is vested in the Union Parliament. The power to grant exemption/reduction is delegated to State Government through Sec.8(5).
The main features of the delegation are as follows:
a. The exemption may be whole or part.
b. The state governments may put some conditions.
c. The exemption shall be in public interest only.
d. The exemption may be in favour of specified class of goods or specified class of dealers.
UNITS LOCATED IN ANY SPECIAL ECONOMIC ZONE - SEC.8(6),(7) & (8)
No CST is payable in respect of sales made to a dealer in SEZ, if the following conditions are satisfied:
a. Such goods are for the purpose of manufacture, processing, assembling, repairing, reconditioning, re-engineering, or for use as trading or packing material or packing accessories in a unit located in any special economic zone.
b. Such goods should be of such class or classes of goods as specified in the certificate of registration of the registered dealer.
c. The selling dealer should obtain from the buying dealer in SEZ a declaration in form H duly countersigned and certified by the Development Commissioner, SEZ.
CONCEPT OF TURNOVER
“TURNOVER” - 2(j)
Means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade made during any prescribed period. Keep in mind that CST is levied on turnover but not on sale price.
Sec.8A spells out the adjustments to be made to compute the turnover.
a. Amount payable to a dealer (payment by the buyer to seller)
b. As consideration for sale of any goods.
a. Cash discount (Trade discounts are also excluded)
b. Freight, delivery and installation cost, if charged separately (i.e. not included in sale price but indicated separately in the bill or i.e. freight merging with sale price is includible).
c. Octroi/Entry Tax.
d. Deposits taken for returnable containers.
e. Insurance charges of goods insured at the request of the buyer.
a. Sums charged for anything done by the seller at the time of or before delivery of the goods to the buyer (E.g. Packing, labeling, designing etc).
b. Excise duty, Customs duty, sales tax & CST.
c. Royalty, warranty charges, etc. are also includable in sale price, whether charged separately or not and whether recovered along with sale price or not.
d. Insurance charges if goods are insured by the seller.
e. Charity or Dharmada collected by the dealer will form part of the sale price.
f. Weightment charges.
E.g.: The Sale Price can be determined in the following manner:
Price of the Goods sold
Other Charges incurred before delivery Total
Cash or Other Discount
“YEAR” - 2(k)
‘Year’ under the General Sales Tax Law of the
DETERMINATION OF TAXABLE TURNOVER - SEC.8A
The following deductions are to be made from the turnover to get taxable turnover.
Returns: The sale price of all goods returned by the buyers within a period of 6 months from the date of delivery shall be deductible while calculating taxable turnover. It does not matter whether the goods have been returned in the same year or next year. What is relevant is six month period only. However, deduction is available from the turnover of the period in which such sales are originally made. (E.g.: If goods sold on Feb.10, 2003 are returned on Aug. 5th, 2003, sale price of such goods shall be deducted from the turnover of the year 2002-2003 and not of the year 2003-04.)
Rejections: No time limit is applicable, since no sale at all taken place.
C.S.T. included in sale price: Sales tax included in sale price shall be deducted. The sales tax amount is arrived at by using the following formula:
Example: A sells goods X and Y. Goods X are charged @ 4% and goods Y (which are declared goods) @ 2%. The aggregate sale price, including C.S.T. of X and Y, is Rs.4,12,000 which includes Rs.2,08,000 of goods X and Rs.2,04,000 of goods Y. Calculate the turnover of A. All sales are made on submission of C/D form by buyer.
Aggregate sale price
Rate of tax
C.S.T to be deducted
Turnover (Aggregate Sale price – C.S.T.) (2,08,000-8,000)
Aggregate sale price
Rate of tax
C.S.T. to be deducted
Turnover (Aggregate sale price – C.S.T.) (2,04,000-4,000)
Aggregate Turnover of Goods X and Y (2,00,000 + 2,00,000) = 4,00,000.
Q.No.1. Compute taxable turnover and CST payable by a dealer carrying on business in
. T.O. for the year is Rs.16 Lakhs which included the following: New Delhi
Installation charges (Shown separately)
Freight & Insurance recovered separately in invoices
Goods returned within 6 months of sale (Inclusive CST)
Buyers have issued C forms for all purposes. Applicable tax rate is 4%. Insurance was made at the request of the buyer.
Step 1 - Turnover i.e. Aggregate of sale prices (Incl. of CST):
| || |
Step 2: Adjustments u/s 8A - Results into taxable turnover:
Turnover net of sales returns: 14,67,000 – 40,000 = 14,27,000.
Since this turnover is inclusive of CST, this is to be excluded to get taxable turnover.
Step 3 - Tax payable: 14,27,000 – 13,72,116 Or 13,72,116 X 4%.
Tax rate: C form received. Hence 4% only.
a. Trade discount is to be deducted. Excise duty is includible. Hence ignored
b. Installation, Freight etc., have been indicated separately. They are to be deducted.
c. Sales return is within six months. Hence deductible.
Q.No.2. A dealer effected following sales during the first quarter of 1997-98:
a. Invoice No. 1171 dt. 2.4.97 for Rs.26,400 plus tax @ 4%.
b. Invoice No. 1172 dt. 19.4.97 for Rs.70,000 plus tax @ 4%.
c. Invoice No. 1173 dt. 2.5.97 for Rs.52,000 (inclusive of tax).
d. Invoice No. 1174 dt. 4.6.97 for Rs.12,200 plus CST @ 4%.
e. Invoice No. 1175 dt. 25.6.97 for Rs.20,000 plus CST @ 4%.
f. Goods worth 6,100 (exclusive of tax) against invoice No.1174 were returned on 28.6.97.
g. Goods worth Rs. 5,200 (inclusive of tax) sold on 25.12.96 were returned on 30.6.97.
All sales are ISS. Calculate the turnover and sales tax payable if the rate of tax is 4%.
Q.No.3. Mr. Vishal is a dealer. His sales during the first quarter of 1997 - 98 (April - June):
10,000 + tax @ 4%
80,000 + tax @ 4%
62,400 (inclusive of tax)
14,000 + tax @ 4%
18,000 + tax @ 4%
a. Goods worth Rs.7,000 (Exclusive of tax) against Invoice No.4 were returned on 29.06.97.
b. Goods worth Rs.13,000 (inclusive of tax) sold on 26.12.96 were returned on 30.06.97.
c. Goods worth Rs.6,500 (inclusive of tax) sold on 27.12.96 were returned on 30.06.97.
Calculate the Turnover and the tax payable if the rate of tax is 4%.
Q.No.4. Shri Kishore Kumar Bhatt of
a. The general tax rates of the appropriate state for the goods sold in the course of intra state trade were as under: (All sales to unregistered buyers)
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Tax Rates %
from sales tax.
b. Shri Kishore Kumar Bhatt collected sales tax from his customers for inter-state sales in accordance with the rates prescribed under the sales tax law of the appropriate state and the tax so collected was included in the total sales.
c. The goods taxable at the rate of 4% and 3% are declared goods.
Determine the taxable turnover & CST payable by Shri Kishore Kumar Bhatt,
Q.No.5. Determine the Central Sales Tax liability from the following data when a sale is effected from
As applicable for ‘C’ forms
Quantity rejected by buyer with in 3 days of delivery
Quantity returned by buyer after 6 months of dispatch
SEC.9-LEVY AND COLLECTION OF TAX
In the case of subsequent sales [which are not exempt by Sec.6(2)] which state is authorised to collect CST? - When goods are in movement from one state to another and are sold by transfer of documents, there is no central sales tax liability if certain conditions are satisfied. If these are not satisfied, then sales tax shall be collected as follows:
a. Subsequent sale made by Registered Dealer: The subsequent seller’s appropriate state is the state that is competent to collect tax in respect of the subsequent sales made by them. The competence of the state to collect tax is determined by the state in which the dealer making the subsequent sale is registered and NOT by the location of goods at the time of such sale. The dealer is known and hence the eye is NOT on goods.
b. Subsequent sale made by unregistered dealer: The situation of goods at the time of subsequent sale determines the competence of tax collection by a state. Here the tax shall be collected by the state where in the goods are at the time of subsequent sale. The dealer is not known and hence the eye is on goods.
3(a) Or 3(b) sale
State from which movement of goods started
Subsequent sale (*) made by Registered dealer
State where he is registered
Subsequent sale (*) made by Unregistered dealer
State where such goods are located at the time of subsequent sale has been affected
* Not exempt by Sec.6(2) since the conditions given in that sec. are not satisfied.
Illustration: A of Chennai sells goods to B of Calcutta. Both are registered dealers. During the course of inter state movement of goods, B makes an endorsement sale (subsequent sale) by transfer of documents of title. When B makes sale, the goods may be physically present in Andhra Pradesh or Orissa. This is not a relevant factor at all. What is relevant is who made the sale and where is he registered. Here B (Seller) is registered in
What difference will it make if B happens to be an unregistered dealer? In this case we need to find out where the goods were present physically at the time of subsequent sale. If the goods are in Andhra Pradesh, then that Andhra Pradesh Government will collect tax. Here the criterion is the situation of goods.
COLLECTION OF TAX TO BE ONLY BY REGISTERED DEALERS - SEC.9A
Any person who is not a registered dealer is prohibited from collecting any amount by way of tax under the Act in respect of any sale.
SEC.10- OFFENCES & PENALTIES
The offences listed hereunder and committed by a person would be punishable with simple imprisonment which may extend to 6 months, or with fine or with both. The offenses are:
a. Furnishing an incorrect certificate or declaration under the following provisions:
b. Failure to get registration or failure to furnish security.
c. Being a registered dealer, representing falsely when purchasing any goods, that such goods are covered by his certificate of registration.
d. Not being a registered dealer, falsely representing that he is a registered dealer.
e. After purchasing any goods for specific purposes stipulated U/s.8(3), failure to make use of the goods for any such purpose.
f. Being in possession of any form prescribed for the purpose of Sec.8(4) but not obtained in accordance with the provisions of the Act or Rules.
g. Collection of any amount by way of tax without being a registered dealer or in violation of the provisions of the Act or Rules.
SEC.14 - DECLARED GOODS
The following goods are declared as goods of special importance in inter-State trade:
Cereals (paddy, rice, wheat, ragi, barley.)
Oil seeds (Peanut, Til, Castor).
Pulses (Black Gram, Green Gram)
Cotton, Cotton fabrics, Cotton yarn
Hides and skins (Both raw & Dressed).
Tobacco and its products
Iron and steel.
Woven fabrics of wool
RESTRICTIONS AND CONDITIONS IN REGARD TO TAX ON
Every sales tax law of state shall be subject to the following conditions in so far as it levies tax on the sale or purchase of the above mentioned declared goods
a. The rate of tax shall not exceed 4%.
b. Where tax is levied under the state law for sale or purchase of any declared goods inside that state and such goods are sold in the course of inter-State trade for which tax under this Act has been paid, the tax levied under State law shall be refunded to the person making such inter-State sale. (The refund shall not be granted unless Inter-state sales tax has been actually paid).
c. Set off tax paid on paddy: Where tax has been levied under state law in respect of the sale or purchase of paddy inside that state, the tax leviable on rice resulted out of such paddy shall be reduced by the amount of tax levied on such paddy. (Rice tax = Rice tax - Paddy tax. This is just like Cenvat credit.)
Note: The abatement in tariff is permissible under the following two conditions:
¡ Paddy should have been procured inside the state (LST is suffered).
¡ The rice hulled out of such paddy should be sold inside the same state (LST is suffered).
¡ In other words, the concession is not available if paddy has been bought from outside the state or if the rice hulled from the locally bought paddy has been sold interstate i.e. purchase of paddy & sale of rice both should be intra state only.
d. Each of the pulses referred to in Sec.14, shall be treated as a single commodity for levy of tax under the State law & for Sec.5(3). If tax is paid on raw pulses, no further tax is payable after it is processed.
e. For the purposes of Sec.5(3), paddy and rice are treated as the same commodity.
IMPOSITION OF PENALTY IN LIEU OF PROSECUTION - SEC.1OA
Any person purchasing goods who has committed the offence of misrepresenting that he is a registered dealer or that the goods are covered by his certificate of registration or not using the goods for the specified purpose, shall be imposed with a penalty of:
Declared goods: Penalty = 1 ½ X Double local rate.
Other than Declared goods: Penalty = 1 ½ X 10% or local rate whichever is more (á)
No prosecution shall be instituted u/s.10 in respect of the same facts on which a penalty has been imposed under this section.
Note: No doubt the dealer commits the said offences for saving the tax difference between “with C Form rate” and “Without C Form rate”. The penalty @ 150% (Max.) is not to be worked out on this difference. This penalty is 150% of the without C form rate. Also penalty is addition to sales tax.
DUTIES AND LIABILITIES OF LIQUIDATOR -SEC.17
a. Intimation of appointment: Every person who is the liquidator or receiver of any company shall within 30 days after his appointment, intimate the same to the appropriate authority.
b. Intimation by authority: The appropriate authority shall notify to the liquidator within 3 months from the date of receipt of notice deposit the amount which in his opinion would be sufficient to provide for any tax due by the company.
c. The liquidator shall not dispose any assets of the company until he has received a intimation by the authority. Once the amount is notified it shall be set aside before the disposal of assets.
d. However, the liquidator can dispose the assets:
¡ In compliance with any order of a court.
¡ For the payment of tax under this act.
¡ For payment to secured creditors who rank in priority over Government debts.
¡ For meeting reasonable costs and expenses of winding up.
e. If the liquidator fails to give the notice or fails to set aside the amount notified he shall be personally liable for the payment of the tax which the company would be liable to pay. Where an amount was notified, liability would be restricted to notified amount.
f. Where there is more than one liquidator then they are liable jointly and severally.
Note: This sec. is similar to Sec.178 of I.Tax act.
LIABILITY OF DIRECTORS OF PVT. CO.IN LIQUIDATION - SEC.18
a. When a private company is wound up & any tax assessed on the company cannot be recovered,
b. Then every person who was a director of the private company at any time during the period for which tax is due shall be jointly and severally liable for the payment of such tax.
c. However, if he proves that the non payment is not because of his negligence or breach of duty in relation to the affairs of the company, no such liability would arise.
Note: This sec. is similar to Sec.179 of I.Tax act.
Issue: All Directors of Private Company (present & past, Full time, part time or Managing director) are personally liable for any tax due under the CST Act. T/F?: True. Directors who were in office “at any time during the period for which the tax is due” shall be held personally responsible.
AUTHORITY TO SETTLE DISPUTES RELATED TO ISS
CENTRAL SALES TAX APPELLATE AUTHORITY - SEC.19
For the purpose of settling inter-state disputes falling under Sec.6A/9, the C.G. shall constitute an authority called “the Central Sales Tax Appellate Authority”.
APPEALS - SEC.20
Time limit for preferring the appeal is 45 days from the date of service of assessment order. It can be extended up to 60 days at the discretion of the Authority.
PROCEDURE ON RECEIPT OF APPLICATION - SEC.21
a. Authority shall send a copy of appeal to the assessing officer & can call for records.
b. The Authority may allow or reject the appeal.
c. The Authority shall try to give judgement within 6 months of the receipt of appeal.
d. The Authority shall communicate its orders to the appellant as well as assessing officer.
POWERS OF THE AUTHORITY - SEC.22
a. Authority shall have the powers of a court like enforcing attendance of persons, compelling production of records etc.
b. The proceedings of the Authority shall be deemed to be judicial proceedings.
PROCEDURE FOR AUTHORITY - SEC.23
The Authority shall regulate its own procedure.
AUTHORITY FOR ADVANCE RULINGS TO ACT AS APPELATE AUTHORITY - SEC.24
The appellate authority is to be constituted by the Central Government. Till then the Advance Ruling Authority shall be asked to function in its place.
TRANSFER OF PROCEEDINGS - SEC.25
After this Authority is formed all cases pending in or to be taken to the appellate forum in the States/Union territories shall also stand transferred to this Authority.
APPLICABILITY OF ORDER PASSED - SEC.26
The orders passed by this Authority are binding on the assessing authorities or other authorities under the GST laws of the States /
FORMS PRESCRIBED UNDER THE CST
Nature and Purpose
This Form is prescribed for application to get registered u/s.7.
Certificate of registration shall be issued by the Authority in this Form.
This is a Form of Declaration to be furnished by registered dealer to the selling dealer to indicate that the goods are covered by his certificate of registration. In inter-state sale Form C entitles concessional rate of tax.
Form D is a certificate to be issued by the Government which makes the purchases to the selling dealer to be eligible for concessional rate of tax.
This Form is a certificate to be issued u/s.6 by the selling dealer who first moved the goods in the case of sale covered by sec.3 (a) (or) by the dealer who makes the first inter-state sale during the movement of the goods from one State to another in the case of a sale falling uls.3(b). This helps to avoid levy of central sales tax for subsequent transfers.
Certificate in Form E-II has to be issued by the first or subsequent transferor (or) by the second or subsequent transferor, as the case may be, to avoid levy of central sales tax on such transfer.
Form to be issued by the transferee in cases of branch transfer of goods.
Form of Indemnity Bond required for certain purposes.
Goods exported are exempt from CST. Goods are often exported by export houses. The export houses purchase these goods from manufactures in
Form to be issued by the buyer, a unit in Special Economic Zone (SEZ) to the selling dealer, duly countersigned and certified by the Development Commissioner, SEZ, for enabling the latter to get the benefit of Section 8(6).
SOME IMPORTANT THEORY QUESTIONS FROM THE PAST EXAM PAPERS
Ans.: Refer to page 5 of this material.
Governed by CST Act, 1956.
Governed by GST Acts of the states.
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Movement is within the state.
Levy on sales only.
Levy may be on sale or purchase,
Every sale is taxable. No free limit.
Tax is liable, only if the T.O exceeds the prescribed limit.
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Registration is not necessary up o the prescribed monetary limits. Therefore, unregistered dealers may make sales.
If the buyers are Registered - Tax at low rate Or Unregistered - Tax at higher rate.
No difference in tariff on account of buyer being registered / Unregistered.
Declaration in Form C, D, E I,
Such declarations are of no relevance.
Ans.: Since there is no foreign destination this will not be treated as export sale. (Burmah Shell Oil Storage v. CTO). If fuel is supplied from Mumbai International airport it will be treated as sale within Maharashtra and State Sales Tax as per Maharashtra Sales Tax Act and rules will be payable .
Ans.: Goods are dispatched to branch/ consignment agent in another state and then sold from the branch, depot or place of consignment agent. In such a situation, if the movement of goods is occasioned on account of sale, the movement will be treated as ‘inter-state sale’. Thus, if movement of goods is on account of some existing contract or arrangement, the movement of goods will be treated as ‘inter-state sale’.
Ans.: On the dealer. Write the provisions of Sec.6A.
Ans.: Refer to Sec.6(2).
Ans.: At the time of his sale to Manaklal, the latter (exporter) should be in possession of an export order from the foreign buyer. But Manaklal has secured export order only after he procurement of goods. Therefore, Bankatlal’s claim is not in order i.e. he is not eligible to get the benefit of Sec.5(3).
a. Excise Duty.
b. Packing Materials.
c. Returnable Containers.
Ans.: According to CST Act, “
a. It also includes the taxes like excise duty.
b. It also includes any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery of such goods like packing expenses.
c. In the case of returnable containers, the ownership vests with the dealer and does not pass on to the purchaser. The containers are required to be returned to the dealer. The definition of “
Ans.: Though the goods are sent to the agents, since the dispatches are against pre existing orders, the buyers are known. Hence the sales are “inter state sales” only.
Ans.: The statement is not correct. In the CST act, the word used is “Govt” and not “Central Govt.” No distinction is sought to be made between central Govt. and State Govt. Hence every Govt. be it Central or State buying /selling goods will be deemed to be a dealer.
Ans.: The expression has been taken from Sec.8(2) as shown below: If local sales tax rate is nil, then the central sales tax rate will be Zero. Sec.8(2) has been amended to provided that if certain goods are exempt generally from states sales tax, the central sales tax payable on such goods will be nil, even if goods are sold to unregistered dealer. This is the relevance in Central Law.
Ans.: According to Sec. 3(b) of the CST act, if during the course of movement of goods from one state to another state, the title is passed by transfer of document, such a sale is inter- state sale. In the given case, the Railway receipt, which is a document of a title as per law, is handed over to B while the goods are in transit from one state to another state. Therefore, the transaction amounts to inter- state sale.
Ans.: Write about Sec.5(3).
a. Under the Central Sales Ta Act, only movable property falls within the scope of goods.
c. “Works Contract” has been brought under “Deemed Sale”. Hence chargeable to CST w.e.f. 11.5.2002.
d. “Sales” means transfer of property for cash or deferred payment or for any other valuable consideration. Where is transfer of property in goods without consideration, it does not amount to sale within the meaning of the definition under the Act and therefore CST is not attracted.
e. The definition of sale specifically excludes mortgage, hypothecation of goods, charge or pledge on goods. Consequently when there is transfer by way of mortgage, CST cannot be charged.
f. Since Hire purchase is also deemed to be sale under CST Act, S.T. is leviable on the full value of the goods.
g. Cost of installation which is not included in the sale price but charged separately is not liable to sales tax. It is taxable, if merge in sale price.
h. Future goods are taxable in the state in which they are appropriated. (Write relevant part of Sec.4)
i. If the conditions of Sec. 5(3) are not satisfied then tax becomes payable. (Write Sec.5(3)).
j. If exemption under GST is conditional, then tax is leviable under CST. (Write Sec.8(2)).
k. Section 3 of the CST Act clearly indicates the nature of transaction which can be regarded as inter- state sale. Tea and snacks sold to employees in a factory canteen does not fall within the purview of inter- state transaction and therefore not fall within the purview of inter- state transaction and therefore not eligible to CST. Taxability under the CST Act can arise only when there is movement of goods from one state to another.
l. According to the definition of “Goods” u/s. 2(d), all materials, articles, commodities and other kinds of movable property are covered but actionable claims, stocks, shares and securities are excluded. In the given case, the trees are cut and sold as fire wood. Fire wood is a movable property and hence liable to tax.
m. Sales tax gets attracted only if there is a sale within the meaning Sec.2 (g) of the CST Act. In the given case, quarries belong to the railways. The contractor merely obtains ballast (Ballast means small stones binding the railway track to the earth) from the quarries and supplies them at work sites. The contractor neither has any title to the goods nor there is any transfer of property in goods in the given case. Therefore, it is a mere woks contract and no sale is involved. The question of levy of sales tax does not arise. (But as per the latest amended definition of sale it includes works contract also).
n. Refer to sales definition.
a. In VPP sale there is no document of title like LR, RR etc. Therefore, sale u/s. 3(b) is not possible in respect of goods sold by VPP.
b. If the inter state movement in on account of consignment, then liability is to be in accordance with Sec. 6A.
c. If the consignee accepts the VPP, then the sale in completed. If he rejects the parcel, then the sale has not taken place at all. Therefore tax liability does not arise.
Please refer write up on CST Forms (Lat Para of theory material).
Ans.: What is sold is land along with standing crops and trees. The sale does not pertain to the latter alone. What is sold is land but not trees etc. They are not goods and hence do not attract sales tax.
Ans.: Normally, the endorsement sale u/s. 3(b) made by Y to Z is assessable to tax. But if the conditions given in Sec.6(2) are satisfied such sale is exempted from tax.
Ans.: The sale by the
Ans.: If the Registration Certificate (RC) is lost, destroyed, defaced or mutilated, the dealer may ask for a duplicate copy of the RC on payment of Rs.5.
a. Refer to “amendment of certificate of registration”.
b. Refer to “imposition of penalty in lieu of prosecution”.
c. Refer to “units located in any special economic zone”.
d. Refer to Sec.6A.
e. Only Registered Dealers (RD) can make inter state sales. Unregistered Dealer (URD) cannot make inter state sales. Registration is compulsory u/s.7(1). In the circumstances, the question of comparison between RD and URD as a seller does not arise. There is however, difference between sales to RD and URD. The former can give C form but the latter cannot. Consequently, the benefit of concessional rate of tax is available for sales made to RD only.
f. False. Unregistered dealers cannot collect tax. Only registered dealers can collect tax as per the Act (Sec.9A). Ans.: False. Government subsidy does not constitute amount payable to dealer (by his customer) as a consideration for the sale of goods. Hence it is not includible in sale price.
g. True. Directors who were in office “at any time during the period for which the tax is due” shall be held personally responsible. It does not therefore; matter whether they were holding office in the past/present (Sec.18).
h. False. Appeal should be filed within 45 days from the date on which the order passed by the Assessing Authority is served. However, the Authority may entertain any appeal after the expiry of 45 days but not later than 60 days from the date of service of the order, if it is satisfied that the appellant was prevented by sufficiently cause.
i. True. Where the dealer ceases to exist, his certification of registration will be cancelled by the Assessing Authority.
j. False. As per Sec.2(dd), place of business includes the place of business of an agent where a dealer carries on business through such agent.
k. True. Failure to get registered as required under section 7(1) is a punishable offence, if the dealer has made an inter-state sale. According to section 7(1), every dealer, who is liable to pay tax under the Central Sales Tax Act, is under an obligation to get himself registered under the Central Sales Tax Act. The liability to pay central sales tax arises only when the dealer makes an inter-state sale.
Note: It is also possible to answer that this statement is false giving the explanation that only a dealer who makes an inter-state sale is liable to pay central sales tax and hence is required to get himself registered under section 7(1). Since the question does not mention that the dealer has made an inter-state sale or that the dealer is liable to pay central sales tax, students may assume that the dealer has not made an inter-state sale and is hence not liable to pay central sales tax. Therefore, he need not get himself registered, and consequently penal provisions are not attracted.
l. Refer to Sec.15 (Point b)
m. The admissible deductions in arriving at taxable turnover are - Discount, Cost of installation, Insurance at the request of customer,
n. With a view to resolve inter-State dispute in matters like stock transfer from State to state or levy and collection of tax and penalties. The Central Government shall constitute the ‘Central Sale Tax Appellate Authority’. Section 19 gives details about the constitution, members of the CSTAA and salaries payable to them. However, the CSTAA is yet to be constituted.
o. Refer to Sec.10 - Offences & Penalties.
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