central sales tax

1. INDIRECT TAX-LAWS
Central Sales Tax

2. Central sales tax is an indirect
tax which levied by the central
government on the taxable
turnover of inter-state sale of
goods made by a registered
dealer during the prescribed
period in the course of his
business.

3. FEATURES OF CENTRAL SALES TAX
a. central sales is levied on inter state
sales of goods made by registered
dealers.
b. Central sales tax is levied at a
specified rate.
c. Central sales tax is not levied on sales
inside a state. It’s liable for local sales
tax.

4. d. Central sales tax is imposed by the central
government but it is collected by the state in which
movement of goods commences.
e. It’s administered by local sales tax authorities of
each state.
f. Eventhough it’s the revenue of the central
government the tax collected is retained by the state in
which it’s collected. The central government shall not
take central sales tax from states.

5. CENTRAL SALES TAX ACT -1956
Central sales tax Act was passed in the year 1956 to
levy central sales tax on inter sale of goods.
This Act came into force on 5th January, 1957 but
section. 6 of this Act was enforced from 1st July,
1957 and section. 15 was enforced from 1st
October, 1958.

6. Central sales tax Act envisages a single point levy
at the first point of inter-state sale.
Central sales tax Act 1956, makes provisions for
every few procedures and rules. In respect of
provisions like return, assessment, appeals etc.,
provisions of General sales tax law of the state
applies.

7. OBJECTIVES OF CENTRAL SALES TAX ACT, 1956
 Formulating principles for determining when a sale
or purchase of goods takes place in the course of
inter-state trade or commerce or outside a state.
 Formulating principles for determining when a sale
or purchase of goods takes place in the course of
import into or export from India.

8. To declare certain goods to be of special importance
in inter-state traders commerce.
To provide for the levy, collection ad distribution of
taxes on sales of goods in the course of inter-state
trade or commerce.
To specify the restrictions and conditions to which
state law in imposing taxes on the sale or purchases of
such goods of special importance shall be subject.

9. SCOPE OF THE ACT
The Central Sales Tax Act, 1956 deals
with inter-State sales(Sec.3), sale or purchase
of goods taking place outside a State (sec.4),
sale of purchase in the course of export and
import (Sec.5), liability and charge to sales tax
(Sec.6), registration of dealers (Sec.7),
determination of taxable turnover (Sec.8), levy
and collection of tax (Sec.9), offences (Sec.10 to
12), declared goods (Sec.14 and 15).

10. CATEGORIES OF SALES
Inter-State Sale
Intra-State Sale
Sale in the course of import/export, and
Deemed sales

11. It has already been defined that the term ‘Sale’
means any transfer of property in goods by one
person to another for cash or deferred payment
or for any other valuable consideration and
includes a transfer of goods on the hire-purchase
or any other system of payment by installments,
but does not include a mortgage or hypothecation
of, or a charge or pledge on goods.
While tax on inter-state sale is levied by the
Central Government, tax on intra-state sale is
levied by the State Government of the state in
which the sale takes place.

12. INTER-STATE SALE
Sec.3 of the CST Act, 1956 has defined inter-State sale or
purchase as follows;
“A sale or purchase of goods shall be deemed to take place in the
course of inter-State trade or commerce if the sale or purchase.
a) Occasions the movement of goods from one state to another, or
b) Is effected by transfer of documents of title to the goods during
their movement from one State to another”
A careful scrutiny of the above definition would reveal that
inter-state sale should occasion the movement of goods from one
state to another. It can also take place by transfer of documents of
title to the goods during their movement from one state to
another.

13. FEATURES OF INTER -STATE SALE
The important essential or feathers of an inter-state sale are
enumerated below:
o There should be an agreement to sale containing a stipulation
in respect of movement of goods from one state to another.
o There should be physical movements of goods from one state to
another.
o Such movement of goods must be the result of a convent or
incidental to the contract of sale.
o It’s not relevant in which state the property in the goods passes.
o Concluded sale should take place in a State that is different from
the state from which movement of goods.

14. INTRA-STATE SALE
A sale takes place inside Tamilnadu. It should be intra-
state sale only. It should not be inter-state sale. This sale taking
place inside Tamilnadu is outside Kerala, Karnataka, Andhra
Pradesh, etc., Thus sale inside one state is outside all other states.
The other states have no nexus with the sale and hence they cannot
levy tax on such sales.,

15. SALE IN THE COURSE OF IMPORT/EXPORT
The sale is effected by seller and he is not connected with the export
of those goods which actually takes place, it is known as ‘sale for export’. In
this case the seller may not be definite about the goods he sold to the buyer
which are meant for export. The sale is not linked to export.
In the case of sale in the course of export, the seller would be definite
that the goods sold to the buyer are mainly for export. In other words, the
seller and the buyer both have an intention to export, an obligation to export
and there is an actual export goods. In other words, the sale is inextricably
connected to export. The obligation to export may arise from any law,
contract or from the nature of transaction itself.

16. DISTINCTION BETWEEN INTER-STATE & INTRA-STATE
1. This is governed by CST Act, 1. This is governed by respective
1956. State Acts.
2. CST rates are uniform thought 2. State sales tax rates are different
the country. from state to state.
3. For inter-state trade 3. The rates are determined by the
transactions, the rates are levied respective State Government.
by the Central Government.
4. Possibilities are remote to pay 4. There may be necessities to pay
sales tax at more than one stage. sales tax at more than one stage.
5. In this case, CST is levied when 5. In this case local tax is levied
goods move from state to when sale/purchase takes place
another State. within the state.
6. Thoroughly inter-state trade, 6. Under intra-state trade, there is
there is possibility for no possibility for export/import
export/import activities. activities.

17. SECTIONS OF CENTRAL SALES TAX ACT, 1956
The different sections of the central sales tax Act 1956 have been given below;
Section Deals with
Sec.1 Short title, extent and commencement .
Sec.2 Definitions
Sec.3 When is a sale or purchase of goods said to take place in the
course of inter-state trade or commerce.
Sec.4 When is a sale or purchase of goods said to take place outside a
state.
Sec.5 When is a sale or purchase of goods said to take place in the
course of import or export.
Sec.6 Liability to tax on inter-state sales.
Sec.6A Burden of proof etc., in case of transfer of goods claimed
otherwise than by of sale.

18. Sec.7 Registration of dealers.
Sec.8 Rates of tax on sales in the course of inter-state trade or
commerce.
Sec.8A Determination of turnover
Sec.9 Levy and collection of tax and penalties.
Sec.9A Collection of tax to be only by registered
Sec.10 Penalties.
Sec.10A Imposition of penalty in lieu of prosecution
Sec.11 Cognizance of offences.
Sec.12 Indemnity (Legal exemption from penalties)
Sec.13 Power to make rules.
Sec.14 Certain goods to be of special importance in inter-state trade or
commerce (Declared goods)
Sec.15 Restrictions and conditions in regard to tax and sale or purchase
of declared goods with in a state.

19. Sec.16 Definitions.
Sec.17 Company in liquidation
Sec.18 Liability of directors of private company in
liquidation.

20. IMPORTANT DEFINITIONS
1. APPROPRIATE STATE(SEC.2(A)
“Appropriate State” in relation to a dealer means a state in
which a dealer has one or more places of business.
When the dealer has more than one place of business situated
in different states, each of these states will be treated as “appropriate
state”. Only an appropriate state can collect, retain and administer
central sales tax.
In relation to a dealer who has one or more places of business
situated in the same state-that state. That is, if a dealer has one or
more places of business situated in the same or a particular state then
that state is considered, as the “Appropriate State” to him for the tax
purpose.

21. BUSINESS (SEC.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 is carried on with a motive to make Gift
or profit and whether or not any profit or gain accrues from such
trade, commerce, manufacture, adventure or concern and
(ii) Any transaction in connection with or incidental or
ancillary to such Trade, manufacture, adventure or concern.

22. CROSSING THE CUSTOMERS FRONTIERS OF INDIA
(SEC.2(AB))
“Crossing the customs frontiers of India”
means crossing the limits of the area of a customs
station in which imported goods are ordinarily
kept before clearance by customs authorities.
For the purpose of this clause “customs
station” and “customs authorities” shall have the
same meanings as in the customs Act, 1962.

23. DEALER (SEC.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
other valuable consideration.
KINDS OF DEALER:
A dealer may be
o a local authority
o A body corporate
o A company
o Any co-operative society or other society
o Club

24. o Firm
o Hindu undivided family
o Other association of persons
o Factor
o Broker
o Commission agent
o Del credere agent
o Any other mercantile agent
o An auctioneer
DECLARED GOODS (SEC.2(C))
“ Declared goods” means goods declared u/s 14 to be of
special importance in inter-state trade or commerce.

25. GOODS (SEC.2(D)
“Goods” include
- all materials
- articles
- commodities
- all other kinds of “movable property”
MOVABLE PROPERTY:
Movable property is a property which may be lifted,
carried, drawn or conveyed or made to change the place or
position in one way or the other.

26. THE WORD “GOODS” DOES NOT INCLUDE:
- News papers
- auctionable claims
- stocks
- securities
- money
REGISTERED DEALER (SEC.2(F))
“Registered dealer” means a dealer who is
registered for inter-state sales tax under Section. 7 of the
central sales tax Act, 1956.

27. SALE (SEC.2(G)
‘Sales’ means any transfer of property is goods by one
person to another for cash or for deferred payment or for any
other valuable consideration.
It includes a transfer of goods on the hire-purchase or
other system of payment by installment. It does not include a
mortgage or hypothecation of or a charge or pledge on goods.
SALE PRICE (SEC.2(H)
“Sale price” means the amount payable to a dealer as
consideration for the sale of any goods less any sum allowed as
cash discount according to the practice normally prevailing in
the trade, but inclusive of any sum charged for anything done by
the dealer in respect of the goods at the time of or before the
delivery there of other than the cost of freight or delivery or the
cost of installation in case where such cost in separately charged.

28. REGISTRATION OF DEALER (SEC.7)
REGISTRATION :
A dealer, liable to pay tax under Central sales tax Act, is
required to seek registration. Registration under Central sales tax Act is
required even if inter-state is of a very small quantum.
The central government has authorized state government to
prescribe state sales tax authorities for the purpose of registration.
Types of Registration:
These are two types of registration. They are
a) Compulsory registration
b) Voluntary registration

29. Registration of dealers
Voluntary Compulsory
Registration Registration

30. COMPULSORY REGISTRATION (SEC.7(1)
Compulsory registration is required if goods are sold
outside the state or if sale is made in inter-state trade or
commerce. There is no initial exemption and registration is
required even if sales are of very small amount.
VOLUNTARY REGISTRATION (SEC.7(2))
A dealer who has registered with state sales tax
authorities may voluntarily apply for registration under
central sales tax Act even if he is not liable to pay central sales
tax. It is called “Voluntary registration”.
It helps a dealer to make purchases in inter-state at a
4% concessional rate (by submitting ‘C’ form). Voluntary
registration is mainly useful when the dealer makes purchase
in inter-state but all his sales are within the state.

31. BENEFITS OF REGISTRATION
The following are the advantages of registration
INTER-STATE PURCHASE AT CONCESSIONAL RATE:
When an unregistered dealer makes inter-state
purchase of goods for resale/manufacturing, he is required to
pay 10% central sales tax. But a registered dealer can make
inter-state purchases at 4% concessional rate.
EXEMPTION ON SUBSEQUENT SALES:
Central sales tax Act provides a single point sales tax at
the point of first inter-state sale. All subsequent sales are exempt
in certain cases to avoid multiple tax incidence.

32. EFFECTS ON NON-REGISTRATION:
If a dealer does not get himself registered, he would
be subject to penalty under section. 10 of central sales tax
Act., 1956. The defaulters is punishable.
a) With simple imprisonment which extend upto 6 months or
b) With fine or
c) With both imprisonment and fine.
In case of continuing default, he is punishable with a
fine of Rs.50 per day till the default continues.

33. PROCEDURE FOR REGISTRATION
The following is the procedure for registration under
Central sales tax Act, 1956.
Procedure
To be followed by the To be followed by the
applicant registering authority.
PROCEDURE TO BE FOLLOWED BY THE APPLICANT:
A dealer, who wants to get himself registered under the
Central sales tax Act is required to take the following steps.1
1. Making application for registration
2. 2. Supplying adequate information
3. Paying fees for registration 4. Signing the application
5. Furnishing security for registration

34. MAKING APPLICATION FOR REGISTRATION :
Application for registration should be made by a
dealer who is seeking registration, in prescribed form ‘A’ as
per Central sales tax (Registration and turnover) rules. It
should be made to the notified authority.
TIME LIMIT:
For compulsory registration Within 30 days from
the date when dealer becomes
Liable to CST.
For Voluntary registration at any time.

35. SUPPLYING ADEQUATE INFORMATION :
The applicant should provide adequate information in the
application form such as
• The places of business within the state and in other
states.
• The date in which the business was started and the
date in which the first inter-state sale took place.
• Details about inter-state purchases.
• Accounting period to be followed.
PAYING FEES FOR REGISTRATION:
In order to get registration under the Central Sales tax
Act, the applicant should pay application fee of Rs. 25/- in the
form of court fee stamps.

36. SIGNING THE APPLICATION:
The application should be signed by the proprietor of the
business.
If the applicant is by Application should be signed by
• Partnership firm Any one of the partner
• Hindu Undivided family (HUF) Karta
• Association of persons Principal Officer
• Company Director/Principal Officer
• Government Authorized officer

37. FURNISHING SECURITY FOR REGISTRATION :
Before granting registration, the registering
authority may demand security from the applicant. The
applicant should furnish the demanded security.
FROM OF SECURITY:
• Surety bonds
• Government securities
• Cash deposit
NUMBER OF REGISTRATION:
• When a dealer has more than one places of business with in a
state, only one registration is required.
• Additional places of business are endorsed on the certificate.
• If a dealer has places of business in different states, he has to
obtain separate registration in each state.

38. PROCEDURE TO BE FOLLOWED BY THE
REGISTERING AUTHORITY:
• Verifying the application
• Granting of registration
• Issuing certificate of registration.
VERIFYING THE APPLICATION:
Before granting registration, the registration authority
should verify whether
• The application has been made as per the provisions of the Act.
• The registration fee has been paid
• The information given in the application are true
• The demanded security has been furnished.
GRANTING OF REGISTRATION:
After verifying the application, the notified authority
may grant registration. If the authority is not satisfied, the
application may be rejected.

39. ISSUING CERTIFICATE OF REGISTRATION:
When the sales tax authority is satisfied that the
application is in conformity with the provisions of the central
sales tax Act, it shall grant certificate of registration to the dealer
in form ‘B’ specifying the class or classes of goods which may be
purchased at the concessional rate of tax.
If the certificate is lost, the notified authority will issue a
duplicate certificate after getting Rs. 5 in the form of court fee
stamps.

40. CANCELLATION OF REGISTRATION:
The notified authority may cancel the certificate of
registration issued to the dealer when,
• The business of the dealer comes to an end
• The dealer has ceased to exit
• The dealer commits default in furnishing the security as
required.
• The dealer fails to pay any tax or penalty payable under the
Act.
• The dealer misuses his registration to evade tax.
• The registering authority discovers any errors in the
certificate
• The dealer requests the authority to cancel the certificate
(after paying all dues).
Before cancelling the registration, due notice must be given to
the dealer.