1. INTRODUCTION TO CST ACT,1956
 Tax is levied by Central Government but is administered and
collected by State Government.
 Tax is collected from the State from which the movement of
goods start.
 CST is applicable when there is a registered dealer and sale
is in course of inter-state trade or commerce.
 CST is levied on specified rate on turnover of goods which is
determined on the basis of sale price,
 Registered dealer deposit the CST return to the notified
authority in appropriate state in which he is registered.
 Notified authority assesses the liability of registered dealer
and order refund and penalty accordingly.

2. FEATURES OF CST,1956
The salient features of CST Act are as under:-
(1) SCOPE: CST extends to the whole of India.
(2) LEVEID BY CENTRAL GOVERNMENT: CST is levied by central govt.
but it is collected by the state govt. from where the goods have been
sold. IN case of UT, tax is deposited in the consolidated fund of India.
(3) NO EXEMPTION LIMIT: CST is levied on the turnover made in course of
inter-state sale. There is no limit for turnover, as it is normally available
in case of State Sales Tax.
(4) ADMINISTERED BY STATE GOVT.: The CST rules have been framed
by the central govt. but State governments are allowed to adopt such
rules as they deem fit. The rules regarding return, payment of tax,
appeal etc. are not given in CST & as such the rules followed by States
in respect to their Sales Tax Laws, are followed for the purpose of CST
Act.
(5) CONCESSIONAL RATES: Concessional rate(2%) of CST is applicable if
(a) declaration in form C is issued by purchaser who is a registered
dealer;
(b) Certificate in form D is issued by govt. if buyer is govt.

3. (6) SALES ARE EXEMPT: Certain sales are exempt under
CST Act if
(a) Sale is within the state as it subject matter of General
Sales Tax of State.
(b) Subsequent Sale during Inter State movement by
transfer of documents to registered dealer/govt.
(c) Sales or purchase of goods in the course of import or
export .
(7) CATEGORIES OF GOODS: CST Act has divided Goods
into two categories:
(a) Declared Goods or goods of special importance:
States cannot levy tax on these ‘declared goods’ more than 4%
and not more than once.
(b) Other Goods: These goods are subject to CST @10%
or at the rate applicable to such goods inside the appropriate
state, whichever is higher.

4. NEXUS THEORY
Nexus means connection or link.
 With regard to taxation matters (specially sales tax), it was well accepted
theory that in case, any State has a connection with the sale transaction (say
seller or buyer resides in the state), the state is competent to impose tax on
such transaction.
 Meaning thereby, that in case of inter state sale, both states (the state
where seller is situated and the state where buyer is situated) used to levy
tax.
 Thus, each state having a territorial nexus with the sale, used to levy tax,
with the result that the same transaction had to suffer tax in different states
with the associated hardship to trade, resulting into higher burden of tax on
the ultimate consumers.
The Law makers were aware of this problem. Therefore, they
introduced Entry 92A and amended Article 286 of the Constitution of India,
imposing restrictions on State power to levy tax, on the following
transactions:
 Inter state sale/ purchase
 Export sale/purchase
 Import sale/purchase

5. Registration Procedure Under
central sales act (section 7)
There are two types of registration :-
Compulsory registration
• Section 7(1)
Voluntary registration
• Section7(2)

6. Compulsory registration
 under section 6 , dealer is liable to pay
tax in case he is performing an inter state
sale.
Section 7(1) , every dealer who is liable
to pay tax must apply for registration . He
has to register himself with the state sales
tax authorities under the central sales act,
1956
It is generally small amount
The dealer can’t have exemption from
registration

7. Voluntary registration
When a dealer is registered under state sales tax
authorities.
He may voluntary want to register himself under
central sales tax act (authorities).
Dealer may register even though he is not liable
to pay tax.
Generally , this provision is useful incase a dealer
purchases interstate sale and perform sales within
the state.
So that , he may purchase at concessional rates
of tax against Form C.

8. Purchases
(interstate)
Voluntary
registration
(to purchase
at
concessional
rates)
Sales
(within
state)

9. Procedure for registration
Application for registration is to be made in
prescribed Form A with prescribed fees as per
central sales tax (registration and turnover) rules
within 30 days from date when dealer becomes
liable to CST.
APPLIACTION
Within 30 days
IN Prescribed
when dealer
PRESCRIBED fees
liable
FORM A

10. The Application should be duly signed and verified as
provided under law following can sign the application :
Type of dealer Duly signed by
Incase of proprietorship firm the proprietor
In case of partnership firm the partner
In case of HUF the Karta/manager
In case of company the director or principal officer
authorized
In case of government Duly authorized officer

11. Main contents of application form
1) Name of the business
2) Place of the business
3) Address
4) Other places of business inside the state and
outside the state
5) Registration numbers of above
If dealer has places of business in
different states
he has to obtain separate registration in each
state
If dealer has different places of business
in same state
He has to register under one state with
additional places of business on the

12. Security from dealer
As per provision 7 , the registration authority may ask for proper
security from the applicant for the realization of tax due and proper
custody & use of Forms (C,E1 ,E2, F&H etc ) which are supplied by
the sale tax authorities for use of dealer
Additional security can also be demanded
The security should not be more than tax estimated tax liability
Demanding of security is not essential
The security can refunded partially or wholly such security is not
required
Security furnished by dealer is in form of surety bond
Surety become insolvent or dies, the dealer should within thirty
days of occurrence
Informing the authority who is granting the certificate of
registration
Within ninety days of occurrence , must furnish a fresh surety
bond or other security for the same amount of the bond as in
prescribed manner.

13. Forfeiture of security
The authority
granting the For realizing any
certificate of amount of tax or
penalty payable by
registration may by the dealer
ordered for some
good or sufficient If the dealer is found
cause , forfeit the to have misused any
of the Forms or failed
whole or any part of to have kept them in
proper custody
the security furnished
by a dealer
This order for forfeiture can be issued only after
giving an opportunity of personal hearing to the
dealer .

14. Order demanding security
Additional Appeal to be filled
demanding security With in 30 days of
is appealable service of the order
To be filled
prescribed Form The appellate order
and with prescribed shall be final
authority

15. Certificate of
registration of registration in form ‘B’
Dealer will be issued a certificate
A copy of certificate issued for every place of business in the
state
Certificate of registration must be kept in principal place of
business and copy of the certificates should be kept at each
additional place of business
The certificate can be amended for change name place
,nature
But CoR is non- transferable
In case of lost or destroy of certificate , duplicate is issued
for fees charge Rs. 5
In case of rejection of the certificate by sale tax authority ,
the reasons must be recorded in writing .
However , before rejection , personal hearing should be
given to applicant and opportunity to correct or complete

16. Effective date of
registration do not contain any provision
The CST Act or Rules
indicating the date from which registration certificate
to be effective.
However court judgment clarified that , the date of
registration is effective from the date which application
for registration is made , even if registration is granted
later.
In fact , registration is made after the first inter sate
sales is effected , the registration is effective from the
date first interstate sale i.e. earlier than the date of
application
E.g. :- thus all sales / purchases made when the
application is pending are to be treated as sales made

17. Cancellation of
A )registration THE INITIATIVE OF THE
CANCELLATION AT
ASSESSEEE:
A dealer may apply for cancellation of registration within 6 months
before the year ends if he is not liable to pay any tax
The cancellation of registration from the end of year and can’t be i
the middle of year
B ) SUO MOTTO CANCELLATION BY THE
DEPARTMENT
Sales tax authorities may cancel registration after giving notice if
dealer
 ceased to exist
Has ceased to carry on the business
Has failed to furnish additional security
Has failed to inform the death of surety
Failed to pay tax or penalty payable under the act
Obtained voluntary registration ceases to sales inside the state or

18. Offences and penalties under CST
Act
Central sales tax act provides for penalties
and punishments in respect of certain offences
Further, in respect of offences not provided in
the CST act , provisions of VAT law of the state
where the dealer is carrying on business are
applicable
CST Act provides for three types of
punishments :
(a)Imprisonment &fine
(b)Compounding of offences

19. Section 10 of CST Act provides that punishment up to six
months of simple imprisonment or with fine or both can be
imposed for following offences under CST Act
 Knowingly giving declaration in form C , E-I ,E-II ,H,I or J
which he knows , or has reason to believe , to be false
 Not regarding under CST Act when required to be
registered
 False representation by a registered dealer that the goods
being purchased are covered under his certificate of
registration for concessional rate
 Falsely representing that he is a registered dealer , though
he is not
 Misusing or using for different purpose the goods obtained
under C Form at concessional rate
 Having in possession C forms which are not obtained as
per provisions of the Act
 Collecting any amount representing as Central Sales Tax by
an un-registered dealer or by a registered dealer in

20. Compounding of offences
The offences can be compounded
by Sales Tax Authorities . Such
compounding can be done in respect
of any offence enumerated above , if
provisions are available in state laws
In that case , the proceedings in the
court of law will not be launched .
Means , no imprisonment /fine.

21. Further section 10 A of CST ACT authorities imposition of
penalty in lieu of punishment in respect of offence
regarding
(a)Obtaining goods not included in registration certificate
(b)Purchasing goods representing that he is registered dealer
, tough he is not
(c)Using goods for purposes different than the proposes for
which purchased
 The penalty can be up to one and half time the tax which
would have be
payable.
 The penalty can be imposed by sales tax authority having
jurisdiction over the dealer ‘s place of business . Once
penalty is imposed , prosecution (for imprisonment/ fine) for
same offence shall not be launched
 Besides above , state laws provide for penalties for other
offences like late payment or non- payment of tax , false
declaration of turnover , non- filling or late filling of returns

22. Sale Tax Authorities
Excise and Taxation
Commissioner
Joint Excise and Taxation
Commissioner
Deputy Excise and Taxation
Commissioner
Assistant Excise and Taxation
Commissioner
Excise and Taxation Officer
Excise and Taxation
Inspector

23. POWERS AND FUNCTIONS
OF ASSESSING
AUTHORITIES
Power to demand production of
Account Books
Power to seize the Books
Power to search
Power to seize goods
Reassessment
Power to call for information from
banking companies