CENTRAL SALES TAX
Many enterprises in India are in the business of selling,
reselling of computers, various computer parts and software. Some
of them are also providing various services such as installation
and maintenance. These enterprises need to know about sales tax.
Basically sales tax is a tax on sale of goods. The liability to pay sales
tax arises on making sales of goods. In India, the law for levying
sales tax is provided in the Central Sales Tax Act. This act applies
to the whole of India. Also each state in India has it’s own state
sales Tax Act which applies to sales made in that particular state.
For example in Maharastra; Bombay Sales Tax, 1959 is in effect.
The Central
Sales Tax (CST) applies only to inter-state sales (say between
Maharastra and Karnataka). It does not apply to intra-state sales
(within the state of Maharastra) or import or export sales from
India. In this article we will discuss some of the important provisions
of CST Act.
Some
important definitions under CST are:
S/2(aa)
"business" includes - (i) any trade, commerce
or manufacture, or any adventure or concern in the nature of trade,
commerce or manufacture, whether or not such trade, commerce,
manufacture, adventure or concern is carried on with a motive
to make gain or profit and whether or not any gain or profit accrues
from such trade, commerce, manufacture, adventure or concern;
and
(ii)
any transaction in connection with, or incidental or ancillary
to, such trade, commerce, manufacture, adventure or concern;
S/2(b). Dealer
means any person who carries on, whether regularly or otherwise,
the business of buying, selling, supplying or distributing goods,
directly or indirectly, for cash or for deferred payment or for
commission, remuneration or for other valuable consideration and
includes: -
·
A local
authority, body corporate, company, co-operative society or other
society, club, firm, Hindu Undivided Family (HUF) or other Association
of Persons (AOP) which carries on such business.
·
A broker,
commission agent or any other mercantile agent, by whatever name
called and whether of the same description as herein before mentioned
or not, who carries on the business of buying, selling, supplying
or distributing goods belonging to any principal, whether disclosed
or not. An auctioneer who carries on the business of selling or
auctioning goods belonging to any principal, whether disclosed
or not and whether offer of the intending purchaser is accepted
by him or by the principal or by the nominee of the principal.
·
A government,
whether or not in the course of business buys, sells or supplies
or distributes goods, directly or otherwise, for cash or for deferred
payment or for commission, remuneration or other valuable consideration
shall except in relation to any sale, supply or distribution of
surplus, unserviceable or old stores or materials or waste products
or absolute or discarded machinery or parts or accessories thereof
is deemed to be a dealer for the purposes of this Act.
S/2(d)
"goods" includes all materials, articles, commodities
and all other kinds of movable property, but does not include
newspapers, actionable claims, stocks, shares and securities;
S/2(g). Sale
means any transfer of any property or goods from one person to
another for cash or for deferred payment or for any other valuable
consideration and includes the transfer of goods on hire-purchase
or other system of payment by installments but does not include
a mortgage or hypothecation or charge or pledge on goods.
S/2(h). Sale
Price means an amount payable to a dealer as consideration
for the sale of any good less any sum allowed as cash discount
according to the practices normally prevailing in the trade but
inclusive of any sum charged for anything done by the dealer in
respect of goods at the time of or before the delivery thereof.
However, it does not include freight or delivery cost or cost
of installation where such cost is separately charged.
REGISTRATION
AS A DEALER UNDER CST
A
single interstate sale of any amount effected by a dealer attracts
tax liability under the CST and hence then the dealer needs to
apply for registration. The application has to be made within
30 days from the date of first interstate sale. The dealers who
have registered themselves under the State Sales Tax Act can get
registered under CST even without having any interstate sale.
S/9A.
COLLECTION OF TAX TO BE ONLY BY REGISTERED DEALERS. - No person who is not a registered dealer
shall collect in respect of any sale by him of goods in the course
of inter-State trade or commerce any amount by way of tax under
CST Act.
TAX
WHEN PAYABLE U/S 6 OF CST ACT
Section 6
creates a liability for a dealer to pay Sales Tax on all sales
of goods other than sale of electrical energy effected by him
in the course of inter-state trade or commerce during any financial
year.
But
no sales tax can be levied under the CST Act in respect of the
following: -
1.
Inter-state sale of electrical energy.
2.
Sales in the course of Import & Export.
3.
Intra-state sale of goods
4.Sales
made in respect of goods on which sales tax is exempted by a notification
in the Official Gazette, provided all conditions prescribed under
the notification are fulfilled.
5.
Subsequent Sale of goods, which are exempted from sales tax under
the laws of the relevant State or chargeable to tax at a lower
rate, if sold within the state.
6.
Subsequent sale of goods by transfer of documents.
Subsequent
sales
Subsequent
sale refer to all sales of a goods after the first time it has
been sold. Under the CST Act, sales tax is levied at a single
point only (first sale) and no sales tax is payable on subsequent
sales. Subsequent sale shall be exempted from the levy of Central
Sales Tax, if the following conditions are satisfied: -
·
Sales
should be either to the government or a registered dealer.
·
Sale
should be of the same goods during their movement from one state
to another i.e. the goods do not undergo a change in the course
of transport.
·
Sale
should be effected by transfer of documents of title to the goods
such as railway receipt, lorry receipt etc. which are freely transferable
from one dealer to another by endorsement.
·
Subsequent
dealers are required to obtain necessary certificates in the prescribed
form from their vendors. e.g. Form C from non government dealer
and Form D from government.
·
Where
subsequent sale is to a registered dealer other than the government,
the sale should be only of those goods, which are mentioned in
the certificate of the registration of dealer.
Rates of Tax
under CST
|
S.
No.
|
Type
of Sale of goods
|
Against
issue of form type
|
RATE
OF CST
|
|
1.
|
to
Registered Dealer
|
C
|
4%
|
|
2.
|
To
Government or Govt. Department
|
D
|
4%
|
|
3.
|
Declared
Goods
|
Without
C/D form
|
Twice
the rate applicable to Local Sale
|
|
4.
|
Schedule
‘C’ goods
|
Without
C/D form
|
|
|
|
(a)
Where Schedule Rate of Sales Tax is
|
|
|
|
|
i)
Less than 4%
|
|
Such
rate as applicable
|
|
|
ii)
Equal 4%
|
|
4%
|
|
|
iii)
Above 4%
|
|
10%
or Local Rate whichever is higher plus Turnover Tax and
surcharge
|
|
|
(b)
Where by notification u/s 41 rate of Tax including Surcharge
and Turnover Tax if any is
|
Without
C/D form
|
|
|
|
Upto
4% Above 4%
|
|
Such
rate as applicable 10% or local rate whichever is higher
plus Turn Over Tax (TOT) and Surcharge
|
Filing of Returns and payment of taxes.
The sales tax has to be collected by the registered dealer,
who sells the goods in interstate transaction. The tax has to
be paid to the Government treasury, along with a return within
the time as may be prescribed by the State Government in the State
sales tax Act.
© Zarana Khona
2001 email: zarana@indiaitlaw.com
