Q-Base : Central Sales Tax (CST) Meaning & Basics' @ Tally.ERP 9

'Central Sales Tax (CST) Meaning & Basics' @ Tally.ERP 9

Sales Tax is a tax levied on the sale of goods. In India, the law for levying sales tax is provided in the Central SalesTax Act of 1956 which applies to the entire country. Generally, the CST Act does not deal with intra-state or import or export sales. However, with respect to certaindeclared goods such as oil seeds, sugar, pulses, crude oil etc., the CST Act imposes restrictions on the powers of state governments to levy sales tax even in the case of intra-state sales. Accordingly, sales can broadly be classified into three categories. ‡       Intra-State sales, i.e, sales within the state. ‡       Sales during import and export. ‡       Inter-State sales. The Act also provides for the levy, collection and distribution of taxes on sale of goods in the course of inter-state trade or commerce. Basics of Central Sales Tax (CST) It is important to understand the meaning of certain terms used in the CST Act.

Inter-State Sale Inter-state sale is deemed to take place if there is: (i) Movement of goods from one state to another or (ii) Transfer of documents of title to the goods during their movement from one State to another. The above two modes are mutually exclusive. Declared Goods Declared Goods means goods declared under Section 14 to be of special importance in inter- state trade orcommerce. Some of the important items are cereals, iron and steel, jute, oil seeds, pulses, man-made fabrics etc. Registration under CST Act Every dealer who carries out the inter-state sales is liable to pay Central Sales Tax. As per the CST Act, every dealer who carries out inter-state sales has to be registered with the Sales Tax Authority. Intermediaries like agents and transporters are not required to be registered, since they do not affect sales. Registered dealers can purchase goods at concessional rates by issuing the C Form. Rate of Central Sales Tax Different rates are prescribed depending upon the nature of inter-state sale such as: a. Sale to registered dealers. b. Sale to unregistered dealers. (i) Sale of declared goods to unregistered dealers. (ii) Sale of goods other than declared goods to unregistered dealers. CST rates to various categories are discussed below: a. Sale to Registered Dealers Sale to registered dealer is @ 4% or sales tax rate for sale within the State, whichever is lower, if the goods areeligible and are specified in the Registration Certificate issued to the purchasing dealer. The  Purchasing dealer has to submit the declaration in the prescribed C Form to the selling dealer. b. Sale to Unregistered Dealers The rate is twice the rate applicable to sale or purchase of such goods within the State with regard to declared goods. In case of goods other than declared goods, the rate applicable for sale within the state or 10%, whichever is higher. The purchaser is not required to give any declaration as he is not a registered dealer

Forms for Declarations under CST Scheme A registered dealer has to issue certain declarations in prescribed forms to buyers/ sellers. The Dealer has to issuedeclarations in the forms such as C, E-I, E-II, F and H which are printed and supplied by the Sales Tax Authorities. These forms are generally in triplicate

Form C

As per CST Act, sales tax on inter-state sales is 4% or sales tax rate for sale within the state, whichever is lower, isapplicable, when the sale is made to a registered dealer and the goods are covered in the registration certificate of the purchasing dealer. Otherwise, the tax is higher, i.e

10% or tax leviable on sale of goods inside the state, whichever is higher. This concessional rate is applicable only if the purchasing dealer submits a declaration in prescribed C Form.

One C Form covers all the transactions in a whole financial year, irrespective of the total amount or value of transactions during the year. However, for transactions exceeding one financial year separate C Form is required for each financial year.

FormsE1and E2

According to Section 6(2) of the CST Act, only the first inter-state sale is taxable and the subse- quent sale during movement of goods by transfer of documents is exempt from tax, if the purchas- ing dealer is a registered dealer.

Usually, the transfer of a document refers to the document of title to goods which is endorsed and transferred in favour of the purchaser and is duly signed by the endorser. The document can be further transferred by subsequent endorsements

The subsequent sellers have to obtain a declaration in C Form from the dealers who sold them the goods. Theselling dealer has to make a declaration in E1 Form  in case of the first sale and E2 Form in case of subsequentsales.

Form F

Under CST Act, F Form  is used for Branch transfers and Consignment transfers. Goods when transferred from one place to another under the same principal, is known as Branch Transfer and when it is transferred to agents, it is termed as Consignment Sale. Here the dealer has to furnish a declaration in F Form received from the consignment agent or branch office in another state to prove that the interstate movement of goods is not a sale.

One F Form covers all transactions in one month, irrespective of the number of transactions and the total amount.

Form H 

A sale during the course of export is exempt from CST and also the penultimate sale is deemed to be in course of exempt from CST under the CST Act. The dealer exporting the goods must have documents in proof of export such as an airway bill, bill of lading, shipping bill, customs docu- ments, bank certificate etc. However, if the penultimate seller is not having any proof evidencing that the sale is exempt, the actual exporter is required to issue a certificate in H Form to the penultimate seller.

Form I

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations, duties and tariffs.

Under the CST Act, supplies made by a registered dealer to a unit in the Special Economic Zone (SEZ) will not be subject to CST, provided such unit furnishes a declaration in I Form