General Information   >>   Central Sales Tax(CST)

Central Sales Tax Act. 1956

Introduction

        The Central Sales Tax Act, 1956 is an Act of the Parliament to formulate the principles for determining when sale or purchase of goods takes place in the course of inter-State trade or commerce. It provides for levy and collection of tax on such inter-State sales of goods. It also formulates principles for determining when a sales or purchase of goods takes place outside a State or in the course of import into or Export from India. It also specifies and declares certain goods to be of special importance in Inter-State trade and commerce and specifies in relation to them the restrictions and conditions to which the state Sales Tax Laws shall be subject.

Principals for Determining Inter-State Sales

        Section 3 enunciates the principles when a Sale or purchase of goods can be said to have taken place in the course of inter-state-trade or commerce. It provides that a sale or purchase of goods shall be deemed to be an inter-State-sale or purchase if such sale or purchase either:

(a) Occasions the movement of goods from One State to another    (or)

(b) Is effected by transfer of document s of title to the goods during the movement from one State to Another.

        It is provided that if the movement of goods commences and terminates in the same State, it shall not be and inter-State transaction merely because in the course of such movement the goods pass through the territory of another State.

        It is also provided the where the goods are delivered to a carrier or other bailee for transmission, the movement of goods shall be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

        Thus for an inter-State-sale or purchase material fact is movement of goods from One State to another, as a result of sale. Consequently the movement of goods should arise from or have a nexus to the sale. Similarly, inter-state sale also materializes when document of title to the goods are transferred during the movement of goods from one State to another.

Principals for Determining a Sale Outside the State

        Section4 of CST. Act provides that when a sale or purchase of goods is determined to take place inside a State such sale or purchase shall be deemed to have taken place outside all other States. Section 4 also provides that a sale or purchase shall be deemed to take place inside a State if the goods are within the State:

(a) In the case of specific or ascertained goods at the time the contract of sale is made, and

(b) In the case of un ascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer.

Principals for Determining a Sale or Purchase in the Course of Import or Export

        Section 5 of C.S.T. Act, provides that:

        (i) A sale or purchase of goods is deemed to take place in the course of Export only if the Sale or purchase either occasions. Such export or is effected by transfer of documents of title to the goods after the goods have crossed the Custom frontiers of India.

        (ii) A sale or purchase of goods, is deemed to take place in the course of Import of the goods into the territory of India, if the sale or purchase either occasions such Import or is effected by a transfer of documents of title to the goods before the goods have crossed the Customs Frontiers of India.

        (iii) Section 5(3) also provides that the last sale or purchase of any goods proceeding the sale or purchase occasioning the Export shall also be deemed to be in the Course of Export if the last sale or purchase took place after the was for the purpose of complying with agreement or order for or in relation to such Export.

Restriction and Conditions for Levy of Tax Under State Sales Tax Law

        Section 15 provides following restrictions on imposition of tax on the sale or purchase of these Declared Goods:

        (1) Tax under local law shall not exceed 4% and that such tax shall be levied at one stage only.

        (2) Local tax paid inside the state on any Declared Goods, when sold in the course of inter-State-trade and commerce, then the local tax so paid shall be refunded.

Liability to Central Sales Tax

        Central sales tax is levied on inter-state sales. However second or subsequent sale in continuous chain is exempt subject to certain condition.

No tax is payable on export sales or sales out side the State.

Rate of Tax

        (1) Where under the local sales tax law sale or purchase of any goods is exempt tax generally the rate of C.S.T. will be Nil.

        (2) Where on sale or purchase under the local sales tax law, the tax at a rate lower than 4% is payable, the rate of C.S.T. will be the applicable lower rate.

        (3) Where the inter-State sales of goods, not covered under(1) Or (2) above, is effected to Government against from D the rate of C.S.T. will be 4%.

        (4) Where the inter-State sale is effected to a registered dealer against form "C" and the case is not covered by (1), (2) or (3) above, the rate of C.S.T. will be 4%.

        (5) In respect of inter-State sales of "Declared Goods", otherwise than against form "C" or "D" the rate of C.S.T. will be at twice, the rate of tax applicable to the sale or purchase of such goods in the appropriate State.

        (6) Where inter-State sales is not covered by (1) to (5) above, the rate of C.S.T. will be 10% or at the rate applicable to the sale or purchase of such goods inside the appropriate state whichever is higher.

Registration

Compulsory Registration:

        Every dealer effecting an Inter-State sale is liable to pay C.S.T. Such a dealer liable to pay C.S.T. is required to apply for and obtain registration Certificate under Section 7(1) of the C.S.T. Act.

Voluntary Registration:

        A dealer not liable to pay C.S.T. Because he is not effecting inter-State sales may need to obtain registration under Central Sales Tax Act if he is effecting inter-State purchases. For this purpose section 7(2) provides for Voluntary Registration to a dealer if he is holding a Registration Certificate under the local Sales Tax Law.

        The application for Registration is to be made in form A. Court fee stamp of Rs. 25/- is to be affixed on such application registering authority can ask for security before issue of certificate for proper realization of tax or for proper custody of forms.

Returns Payment of Tax, assessment Etc.

        The provisions for filing returns and payment of tax assessments etc. in Local State Act are applicable to a dealer under Central Act.

Important Forms Under CST Act.

Form C:

        A registered dealer effecting an inter-State-purchase of good, either for resale, use in manufacture or processing of goods, for mining, for use in generation and distribution of power or use in packing for sale/resale can issue form C for availing of the benefit of purchasing at a concession rate of tax. This form will have to be obtained by the purchasing registered dealer from the Sales Tax Officer concerned.

Form D:

        A Central or a State government can use this form for inter state purchase to be used for official work.

Form E-1:

        This form is to be issued by the selling dealer who makes the first inter-State sale during movement of goods from one state to another to enable his purchaser to claim the benefit of exemption from C.S.T. on the second inter-State sale effected by him during the movement of goods. This form is required to be obtained from the Sales Tax Officer.

Form E-2:

        This form is required to be issued by the first or the subsequent transferor in a series of inter-State sales during the same continuous movement of goods from one State to another to enable the purchaser to claim benefit of exemption of C.S.T. On second or subsequent sale effected by him. This form is to be obtained from the Sales Tax Officer.

Form F:

        This form is to be issued by the Consignee of goods to the consignor declaring that the goods stated therein has been received by him and are duly accounted for.

Form H:

        This is a Certificate to be issued by an Exporter in respect of purchases of goods effected by him after and in pursuance of an export order and which are sold by him in the course of Export, in order to enable the Seller to claim deduction as goods sold in the course of Export.

Summing Up

        To sum-up, it is needless to say that above are broad out Line of provisions. For interpretation, exact text of the Act may please be looked in to. Though, the C.S.T. Act is a law passed by parliament, it is governed by states and States retains an entire proceeds of tax. In Gujarat, nearly 2.50 lakh dealers are registered under Act and paying yearly Rs.1000/- crore every year.

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