Get Central Sales Tax Act Notes / ebook:
In previous post we have given Customs Duty Notes and 5 heads of income i.e.
Today we are providing Central Sales Tax ebook / Notes for CA , CMA, CS & for other Taxation students.
Central Sales Tax
Sec.6(1) of Central Sales Tax Act provides that subject to other provisions of the Central Sales Tax Act, every dealer shall be liable to pay tax under this Act on all sale of goods (other than electrical energy) effected by him in the course of Inter-State trade. Sec.6(1) is called ‘Charging Section’ as it imposes levy on sale of goods on Inter-State sale.
Definitions in Central Sales Tax:
“GOODS” – 2(d):
All Materials/ Articles/ Commodities. All Other kinds of Movable Property.
News Papers. Stocks & Shares.
- The main character of goods is Movability.
- A person sells the standing trees alone i.e. the buyer is to fell the trees and take them away. Has he sold the goods?: Yes.
- A person sells a piece of land along with standing trees/crop. Has he sold goods?: The property sold is immovable and hence not goods.
- House sold is not movable and hence it is not goods, but house demolished and sold as waste is movable and hence goods.
- Mines are not goods, but minerals extracted from them are goods.
- Even Air and Water are goods.
- Even illegal goods are also goods.
- Caged animals and birds are goods. Even dead animals are goods.
- Copy rights, gas, electricity, steam, lottery tickets are also goods.
The implication of this definition is that no sales tax will be levied on sale of News papers etc. But if the same news papers are sold as waste paper, they are treated as goods but not as news papers and hence they are taxable.
Sale of electricity is also not taxed because of excluding the same from chargeability by charging Sec.6(1). Thus non taxability on electricity & news papers is for different reasons.
“SALE” – 2(G):
Includes any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration. It also includes a transfer of goods on the hire-purchase or other system of payment by installment but does not include a mortgage or hypothecation or pledge of goods.
“APPROPRIATE STATE” – 2(a):
- In relation to a dealer who has one or more places of business situated in the same State – That State.
- In relation to a dealer who has places of business situated in different States – Every such State.
“PLACE OF BUSINESS” – 2(dd):
- In any case where a dealer carries on business through an agent (by whatever name called), the place of business of such agent.
- A warehouse, godown or other place where a dealer stores his goods and
A place where a dealer keeps his books of account.
MEANING OF INTER STATE SALE (ISS) – SEC.3:
If the sale occasions the movement of goods from one State to another (Sec.3(a)) In other words sale is not inter-State if movement of goods is not related to contract for sale Or
If the sale is effected by a transfer of documents of title to the goods during their movement from one State to another. (Sec.3 (b)).
Meaning of movement:
For this purpose, it should be noted that movement of goods commences at the time of delivery to a carrier for transportation and terminates at the time when delivery is taken from such carrier. In other words, so long as the goods are in the custody of the transporter, the goods are deemed to be in movement.
Document of Title of Goods:
When the goods are handed over to the carrier/transporter, he hands over a receipt to the seller. The seller sends the receipt to buyer. The buyer gets delivery of goods on submission of the receipt to the carrier/transporter. The receipt of carrier is ‘document of title of goods’. It generally includes the following: Railway receipts (RR) – incase of movement of goods by rail, Lorry receipts (LR) – in case of movement of goods by road, Air way Bill (AB) – in case of movement of goods by air, Bill of Lading (BL) – in case of movement of goods by sea.
SALE / PURCHASE SAID TO TAKE PLACE OUTSIDE A STATE – SEC.4:
1) Outside state sale – Sec.4(1): When a sale or purchase is said to take place inside a State, such sale or purchase is deemed to have taken place outside all other States.
2) Inside state sale – Sec.4(2):
In the case of Specific or Ascertained goods, a sale is deemed to take place inside the State where such goods are situated at the time when the contract of sale is made. The criterion is where the goods are at the time of sale contract.
In the case of Unascertained or Future goods, a sale is deemed to take place inside a State where such goods are situated at the time of their appropriation to the contract of sale by the seller or by the buyer. The criterion is where the goods are at the time of appropriation.
Application of Sec.4:
First apply 4(2). Find out the state in which the sale has taken place. Then go to 4(1). The sale is deemed to take place outside all other sates.
3) Suppose there is a single contract of sale of goods situated at more than one place, it shall be treated as if there are separate contracts in respect of the goods at each of such places.
EXPORT OR IMPORT SALE – SEC.5:
The sale shall be deemed to take place in the course of export or import:
- Sale either occasions export (Called export sale) or sale is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India (Called deemed export sale) (Sec.5(1)).
- Sale either occasions import (Called import sale) or sale is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India (Called deemed import sale) (Sec.5(2)).
Export – Movement of goods from a place in India to a place outside India. Import – Movement of goods from a place outside India to a place in India.
“CROSSING THE CUSTOMS FRONTIERS OF INDIA” – 2(ab):
Means crossing the limits of the area of a customs Station in which imported goods or export goods are ordinarily kept before clearance by the customs authorities.
going inside by crossing Customs harbour gate into customs area for exporting some goods and coming outside from the customs area of the imported goods after paying the import duty will be called as crossing of customs frontier of India. This definition is useful for the purpose of Sec.5. As per which sales made by transfer of documents of title (Bill of Lading) before crossing the customs frontier are import sales and sales made after the crossing are export sales.
Sale of fuel, food, etc., to foreign going vessels/aircrafts going abroad are not export sales because the goods sold do not have a foreign destination. But it is treated as ‘local sale’.
Sale after import is a distinct and normal sale. Such sale may be Inter-State or Intra-State.
CONSIGNMENT TAX – (SEC.6A):
- Consignment/ stock transfer is one of the ways of avoiding Central Sale Tax. Hence, Constitution was amended w.e.f. 2nd, 1983 to enable Central Government to levy tax on consignment of goods, by adding Entry No.92B in Union List. However, so far, tax on consignment of Goods has not been levied, by amending Central Sales Tax act.
- A dealer can claim that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by way of branch transfer, or consignment transfer and not by way of sale. But the burden of proof for availing such exemption is on the dealer who shall be required to furnish to the assessing authority declaration in the prescribed Form F with prescribed particulars together with the evidence of dispatch of such goods.
3. The assessing authority may make an order, after making such enquiry as considered necessary and being satisfied that the particulars contained in the declaration furnished are true, to that effect
Though entry 92B in the union list empowers Government to levy tax on consignment transactions, the Central Sales Tax act is not yet amended. So the consignment transactions are exempted through Sec.6A.
“REGISTERED DEALER” – 2(f):
MANDATORY / OPTIONAL:
Compulsory: As per Sec.7(1), every dealer liable to pay Central Sale Tax has to register himself with sales tax authority. (As per section 6(1) of Central Sales Tax Act, every dealer effecting sale in the course of Inter State trade is liable to pay CST).
Voluntary registration: It can be applied if the following two conditions are satisfied
a) He must be a dealer liable to pay tax under the Sales Tax Law of appropriate State.
b) He is not liable to pay tax under the Central Sales Tax Act, i.e. he does not make an ISS.
It is useful when dealer makes Inter state purchases but all his sales are intra state.
BENEFITS OF REGISTRATION:
- Concessional rate of tax on Inter state purchases under cover of C form.
- Exemption from payment of tax under Sec.6 (2) (Page 11).
- Branch transfer/stock transfer is exempt by submitting Form F.
- Can claim benefit U/s 5(3) by issuing H form.
- No tax on purchases by a unit in Special economic zone.
- The dealer can avoid penalty or prosecution proceedings for non-registration.
RATES OF TAX ON ISS – SEC.8:
|1. Sale of declared or undeclared goods to the C.G. or a S.G.: 1.1. If LST (State sales tax rate) is < 4%.1.2. If LST Rate is 4% or > 4%.2. Sale of declared goods or undeclared goods to a registered dealer: 2.1. If LST rate < 4%.
2.2. If LST rate 4% or > 4%.
3. SEZ: Sale of declared goods or undeclared
Goods to a registered dealer in any SEZ.
4. Sale to any other person not covered by
1, 2 and 3 supra:
4.1. Sale of declared goods.
4.2. Sale of goods other than declared goods:
4.2.1. If LST rate is Nil.
4.2.2. If LST rate is > 0.
|LST Rate(Note 1)4%LST
Twice LST (Note 2)
Nil (Note 2)
10% or LST á
| Form DForm DForm C
LST can’t be > 4%
- If local sales tax rate is nil, then the central sales tax rate will be Zero. Moreover, Form C or D is also not required. Such a case may also be covered by 4.1 or 4.2.1
- 8(2) provides that if certain goods are exempt generally from states sales tax, the central sales tax payable on such goods will be nil, even if goods are sold to unregistered dealer.
“TURNOVER” – 2(j):
Means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade made during any prescribed period. Keep in mind that Central Sales Tax is levied on turnover but not on sale price.
Sec.8A spells out the adjustments to be made to compute the turnover.
T.O. = Aggregate of the sale prices for a year (say 1.4.02 to 31.3.03) + Sec.8A adjustments.
SALE PRICE – 2(h):
- Amount payable to a dealer (payment by the buyer to seller)
- As consideration for sale of any goods.
- Cash discount (Trade discounts are also excluded)
- Freight, delivery and installation cost, if charged separately (i.e. not included in sale price but indicated separately in the bill or i.e. freight merging with sale price is includible).
- Octroi/Entry Tax.
- Deposits taken for returnable containers.
- Insurance charges of goods insured at the request of the buyer.
- Sale price does not include Government subsidies on goods sold at controlled price.
- Sums charged for anything done by the seller at the time of or before delivery of the goods to the buyer (E.g. Packing, labeling, designing etc).
- Excise duty, Customs duty, sales tax & Central Sales Tax.
- Royalty, warranty charges, etc. are also includable in sale price, whether charged separately or not and whether recovered along with sale price or not.
Insurance charges if goods are insured by the seller
“YEAR” – 2(k):
‘Year’ under the General Sales Tax Law of the Appropriate State is the year under Central Sale Tax Law.
DETERMINATION OF TAXABLE TURNOVER – SEC.8A:
The sale price of all goods returned by the buyers within a period of 6 months from the date of delivery shall be deductible while calculating taxable turnover. It does not matter whether the goods have been returned in the same year or next year. What is relevant is six month period only. However, deduction is available from the turnover of the period in which such sales are originally made.