15_cst_notes

1. Introduction:

1.1. Relevant Constitutional Provisions

State List Entry – 54 Union List Entry – 92A

Article 269

Empowers the states to levy taxes on Intra-state sales/purchases of goods other than NEWSPAPERS

Authorizes the Central Government to levy tax on inter-state sales / purchases of goods other than NEWSPAPERS

1. Stipulates the power of Central Government levying CST

2. Provides for assignment of CST collection to States

3. Provides for crediting the collection in the Union Territories to the consolidated fund of India.

Note 1:

Article 286 doesn’t allow these states to impose tax on sale/purchase taking placze outside the states or in course of import or export of goods.

Note 2:

Though the levy of tax on Intra-states sales is the prerogative of states, ARTICLE 286 empowers the parliament to impose restriction and conditions on the power of the states to levy tax on sale of the declared goods and on deemed sales under work contract, hire purchase, and lease.

1.2. Objects

CST

The Central Sales Tax Act – 1956

Objects of CST Act

To define inter-State Sale (ISS)

(Sec 3)

To define outside state sale (Sec. 4)

To define Export or Import Sale

(sec. 5)

To Impose tax restriction on intra-state sales of declared goods (sec. 15)

To provide for collection of taxes from companies under

liquidation (sec. 17, 18)

To Declared goods of special importance

(sec. 14)To provide for the levy

(sec. 6, 6A, 8, 8A), collection (sec. 9(1),

9(2), 9(2A)) and distribution 9(3) of CST

MT Educare The Central Sales Tax Act -1956

Q1: Sales are made from Pondicherry to Karaikal / Yanam / Mahe Pondicherry to Chennai.

Can the Pondicherry Union Territory take the taxes collected on both the sales?

Q2: Levy of tax on intra state sales is the prerogative pf states as per Entry 54/State List. Can the central Government interfere with the powers of States in this regard?

Q3: The central government is planning to bring about suitable amendments to CST Act providing for levy of Sales Tax on Inter State sales of Newspapers. Your client, who is already not doing well in Newspaper industry, comes to you with a long drawn face! What will be counseling to him?

2. Provision of CST in brief:

2.1. When Provisions of CST Act are attracted?

There should be a Dealer (sec. 2(b)) He must be a Registered Dealer (Sec. 7) The Dealer must carry on Business (sec. 2(aa)) There must be Sale (sec. 2(g)) The sale must be of Goods (Sec. 2(d)) The sale may be of Declared goods or otherwise (sec. 14 & 15) The sale must be in the course of Inter State Trade or

Commerce (sec. 3) It should not be a Sale Inside a State (sec. 4(2)) The Sale should not take place in the course of Import or Export

(sec. 5) The buyer may or may not be Registered Dealer

2.2. Consequences if these conditions are satisfied:

CST shall be levied It shall be levied on Turnover (sec. 2(j)) It is levied at a Specified rate (sec. 8)

R. Soumyanarayanan FCA. Grad. CWA 2

Test Your Knowledge


It shall be collected only by the Registered Dealer (Sec. 9A) It shall be remitted to the state from which movement of goods

commences It shall be retained by the state in which it is collected (although

it is the revenue of CG) The registered dealer shall submit return and assessment shall

be completed by the assessing authority in the appropriate state.

3. Relevant definitions:

3.1. Dealer (sec. 2(b))

Dealer means any person engaged in the business of

Buying Selling

Supplying

Distributing

He may be

Individual

HUF

Firm

AOP

Company/BC

Co-op Societ

y

Club

Local Authorit

y

He may carry on these businesses

Directly

Indirectly Regularly

Irregularly

He may transact on

Cash Basis Credit Basis

His reward may be

Commission

Any other remuneration

The term includes

Mercantile Agent

Factor Broker

Commission Agent

Del-credere Agent

Auctioneer

Deemed Agents

Every person being agent of a Branch office of Government


Goods


principal (dealer) residing outside state

HO registered outside the state

*Buying, Selling, Supplying or distributing the goods of the principal in his state

Buying, Selling, supplying or Distributing goods (note 1)

* Acting as 1.2.3.

documents4.

payment of sales price5.

collection and payment

Note 1: 1. Government may carry out these for Cash / deferred payment /

commission / remuneration / other valuable consideration.2. Government may carryout these activities directly / indirectly.3. These may/may not be carried out in the course of BUSINESS.4. Government includes

Union Govt. State Govt. Union territory

5. Government excludes

Local bodies

Govt. Companies PSUS

6. Term goods doesn’t include

Surplus, unserviceable old Stores. Waste products

Obsolete machinery or parts / accessories

Note 2:

Commission agents, auctioneers or brokers – do not carry on business on their own account. They only secure orders for their principals. In view of wide definition, they may be held liable to pay tax and Penalty, if principal falls to pay tax and penalty due [Pench valley coal co. vs. State of MP]

Q1: ‘A’ the Auctioner sells the goods of P, the Principal. The Tax Officer goes to P for collection of tax because P is the owner. But P is absconding. Now the Tax Officer goes to A, the Auctioner. The latter refuses to pay tax on the ground that he is not the


Test Your Knowledge


owner! The STO is your good friend. What will be your advice to him?

Q2: The goods of a Maharaja are sold by an Auctioneer. Who will pay tax – Maharaja or Auctioneer?

Q3: A forest officer of the Government of Tamil Nadu sells sandalwood as well as condemned furniture. Is he a dealer?

3.2. Business – Sec 2(aa)

Business includes

Any trade, Commerce or Manufacture

Any Adventure or concern in the nature of trade, commerce or manufacture

Any incidental ancillary or connected transaction

Note:

Element of regularity of transaction need not be present. Even an isolated transaction falls with in the ambit of the term.

Even illegal business falls within the scope of definition.

Element of profit motive may/may not be present.

Q1. The Peshkar of a temple says that he will not pay Sales Tax on the sale of prasadams, since he has no profit motive. As a matter of fact, there is loss only. When there is loss in sales, how can he pay Sales Tax? His contention looks reasonable! What do you say? (Tirumalai Tirupathi Devasthanam), (Arulmigu Dandayuthapani Tirukoil)

Q2. Sai Publication Find is a Trust meant for spreading the message of Saibaba of Shiridi. Through books, pamphalets and other literature, the message of Saibaba is made available to devotees on nominal charge to meet cost. Does this sale of books, pamphalets, booklets, photos, stickers etc. attract sales tax? (Sai Publication Fund)

Q3. Port Trust sells unserviceable and unclaimed articles. Does this attract sales tax? (Board of Trustees of the Port of Madras)

Q4. A bank sells the assets given as security by the borrowers for realisation of loan. Does this attract sales tax? (Canara Bank)

Q5. A company carrying on business sells Tea and Snacks to its employees from its factory canteen. Does this attract sales tax? (Burmah Shell Oil storage and distributing company)



Q6. A coffee plantation with a view to facilitate new plantation clears the forest growth and sells trees, which are cut and sold as firewood. Does this attract sales tax? (Shakthi Estates), (Sri Shanmugam Estate)

3.3. Goods (sec 2(d))

Includes Excludes All materials All Articles All Commodities All other kinds of

moveable Property

News Paper Actionable Claims Stocks, shares or Securities

3.3.1. Classification of Goods:

A)

Example:

You go to a shop and ask for a “tilting type wet grinder”. The shopkeeper does not have the stock. He says he will procure or manufacture. The goods you want to buy are not presently available. They are called FUTURE GOODS.

After a month, the “tilting type wet grinders” you wanted are available for sale in the shop. The shopkeeper has 100 grinders. They are of four colors – red, green, blue, yellow and 25 numbers in each color. You have decided to buy one; but you have not decided about the color. All the 100 grinders, which were originally “FUTURE GOODS”, have now become “UNASCERTAINED GOODS”. The goods are there waiting for your selection.

Your choice is in favour of green color. Now, all the 25 numbers of green variety have become “ASCERTAINED GOODS”. But you want to ensure that the grinder rotates with out any wobbling. So you ask the shopkeeper to run the green color grinders on after another. After trial you choose a wobble free grinder. That grinder has come to the deliverable state. Your final choice is called “ SPECIFIC GOODS”.

B)


Not physically held by seller at the time of contractShould be procured or manufactured

Goods

Future Goods Exiting goods

Specific / Ascertain Goods

Unascertained Goods

Physically held by the seller at the time of contract Identified for delivery to buyer

Physically held by the seller at the time of contract But not identified

Goods

Declared Goods

Other Goods


List of Declared goods

Cereals (paddy, rice, wheat, ragi, barley, etc.)

(Not all cereals; Listed items only)

Coal;

Cotton; cotton fabrics; cotton yarn

Crude Oil;

Hides and skins;

Iron and Steel;

Jute;

Oil Seeds; (Peanut, Til, Castor etc.) Not all oil seeds; Listed items only)

Pulses; (Black Gram, Green Gram etc.) (not all pulses; Listed items only)

Man-made fabrics;

Sugar;

Unmanufactured tobacco;

Woven fabrics of wool

Note: This list is exhaustive

Q1: From the following identify the items that could be considered as goods

1. Newspaper2. Copyright3. Import licenses4. Gas5. Steam6. Electricity (MP Electricity Board)7. Lottery Tickets8. Computer Software available of the shelf9. Computer Software Tailored to a client10. Stock and Shares11. Standing trees forming part of land sold.12. Standing trees sold for being cut and removed (Titaghun Paper Mills)13. House14. Licence issued by government to gather to fish from the lake.15. Licence issued by the government to gather tender leaves from the

forest.16. Mines17. Minerals extracted from the mains18. Cages animals and birds19. Dead animals20. Cash, Currency, Cheque, DD, and negotiable instruments21. Old newspaper sold as scrap (The Hindu vs. The State of Tamilnadu)22. Old newspaper sold as newspaper (Sait Rickaji Furtarnal vs. State of

Andhra Pradesh)23. Illustrated weekly of India (weeklies and magazines) – (Wheeler & Co

Vs. State of Bihar)24. India Today (weeklies and magazines)


Test Your Knowledge


A company floated shares five years back. In floats additional shares now. The company receives a notice from the Sales Tax Officer for the payment of Sales Tax on the new as well as old shares. The MD comes to you with an argument that the levy on the sale of old shares is time barred! Is the right?

Q2: True or False:1.All cereals, pulses and oil seeds are declared goods.2.Dressed hides and skins are declared goods and not raw hides and skins.3.Raw Tobacco is declared goods and not cigarettes. 4.Cloth is declared goods and not clothes (garments)5.Laddus are not declared goods6.Charcoal is not declared goods.

Q3: From the following identify the items that could be considered as declared goods:1. Cotton2. Cotton waste3. Cotton Yarn4. Cotton Yarn Waste5. Paddy/Rise6. Husk7. Jute8. Jute product

3.4. Sale – Sec (2(g))

Essential Elements

Two-parties Buyer and

Seller

Transfer of property

Property should be in

goods

Valuable consideration in Money/Money’s worth

Definitions applies to

Grammatical variations of the Word “Sale”

Cognate expression of the word “sale”

Like plural “sales”; verb “sell”

Any other word having same meaning



Note:

This concept of deemed sales is included here after the insertion of new definition 29A under Article 366 of the constitution through the Constitution (46th amendment) Act, 1982.

Mortgage Pledge Hypothecation Charge creation

1. Immovable property is handed over to the lender as security (title not passed on)

2. It may be Physical handing over or handing documentarily

Movable property is physically handed over to the lender as security (title not passed on)

1. Movable property pledged to lender but possession is not handed over to the lender.

2. Goods continued to be in the hands of borrower.

3. In case of default by the borrower the lender can take over the goods

1. Goods continued to be with the borrower.

2. borrower undertakes not to sell

3. In case of sale, the first charge is to the lender.

Points requiring Attention:

1. Sale vs. agreement to sell

Sale Agreement to sellProperty in goods passes from the seller to buyer for a consideration immediately

Property in goods passes from the seller to buyer for a consideration on future date or subject to fulfillment of certain conditions


Transfer of property in goods – other wise than in

pursuance of a contractExample: Compulsory

transfer of controlled goods sugar cement etc) in

pursuance to Govt. Order.

Transfer of property in goods – through “works contract

Lease transactions

Delivery of goods under HP System

Supply of goods by any association to its

members

Supply of foods and drinks

Deemed Sales

Transactions not treated as sale


Note:

Agreement to sell become sale once the stipulated period elapses or the conditions fulfilled

2. Property in goods = Title to goods.3. Possession = Physical holding.4. Relevant event = Transfer of property not possession5. Barter Sales6. Exchange = Sales7. Barter vs. Exchange

Barter ExchangeIt means reciprocal transfer of goods one in consideration for other. The value of goods transferred is not at all considered by the parties

It is sale except for consideration being in kind. The value of goods transferred is very much considered by the parties

8. The transaction to qualify as sales should involve ascertain goods. 9. Sale includes sale of illegal goods 10.

In fructuous sale

“Sale or return basis” - Sale

Unfructified sale Goods lost on transit

Sale is complete only when the buyer accepts goods or intimates is consent to take goods before the specified date

Goods have been sold to the customer but it has not reached him. The buyer rejects the goods

[Metal alloy co]

Goods not reached the buyer. So there is no delivery of goods and therefore no sales

Note:

Receipt of advance will alter the position.

[pieco electronics and electricals]

Note:

Receiving compensation from the insurer will not alter the

position.

[vania silk mills]

11. Works Contract

Sales tax cannot be levied on the full value of the works contract. But only on value of goods actually transferred in execution of works contract. (Builder association of India vs. UOI)

12. Bailment Sales (no transfer of property in goods)


Test Your Knowledge


Q1. On an advertisement by a dealer, “pay Rs. 114 and carry a Kinetic Honda”, a customer takes delivery of the vehicle. The dealer feels that the sale is complete, only when the last installment is received and therefore he will pay tax at that time. The Tax Officer demands tax for the whole price immediately. Who is right? STO or Dealer?

Q2. A contractor obtains ballast from quarries belonging to the railways and supplies them at work sites. Examine the incidence of tax.

Q3. Can sales tax be levied on work contracts and hire purchase transaction

3.5. Registered Dealer (sec. 2(f))

It means a dealer who is registered under section 7

3.6. Appropriate State (sec. 2A)

Place(s) of business (POB) in only one state

POB in more than one state(i.e., different states)

Such state = Appropriate stateEvery such state = Appropriate state,

with respect to place of business situated with in its territory.

Note:

Union territory = State

A dealer has his corporate office in Pondicherry, a Factory in Tamil Nadu, a Depot in Karnataka and branch offices in Kerala and Andhra Pradesh. Determine the appropriate state(s) for this dealer.

3.7. Place of Business (Sec. 2(dd))

POB of AgentWhere dealer carries on business through

Agent

Ware house [go down or other places where a

dealer stores his goods.

Place where the dealer keeps his

books of accounts


Dealer

Test Your Knowledge


During the Durga Puja days (nine days) a dealer in Calcutta kept his books of accounts in his puja room. In the course of a raid, the sales tax Officer entered his puja room. The dealer feels that the action of the Government Official is a trespass into his puja room!. Comment. [Sheonath Prasad Vs. State of Bihar]

4. What is Inter-State Sale? (ISS) (Sec. 3)

Occasions movement of goods from one State to another

Is effected by a transfer of document on title to the goods

during their movement from one state to another

ISS (u/s. 3(a)) ISS (u/s. 3(b))

Also called Endorsement Sale or sale by transfer of Document

of TitleExplanation 1

When movement of goods commence?

When movement of goods terminate?

On delivery of goods to carrier for transmission

When delivery is taken from such carrier

Explanation 2:

If Movement of goods commences and terminate in the same state, then sale ISS, though in the course of such movement goods pass through the territory of any other state

Essentials for sec. 3(a) Sales

1. There should be a sale.2. The transaction should relate to goods3. There should be movement of goods4. The movement should be on account of sales. The movement should not

be a disjointed event. Both the events should be integrally coupled.5. The movement should be from one state to another. (union territory =

State6. The movement should commence in one state and terminate in another

state. Merely passing through the territory of one state is not enough.7. It is immaterial where the buyers and sellers are located. They may be in

the same state. 8. It is not relevant in which state the property of goods passes from seller to

buyer.

1. Indian Oil corporation Vs. UOI


Test Your Knowledge

Sale/Purchase

Important Judicial ruling


Enters into contract for supply of Naphtha to IE- factory in Kanpur

Note:

The cost of pipeline borne by IE ltd.

IOC’s Contention Supreme court RulingMovement from IOC-Factory (Bihar) to IOC-Depot (Kanpur) = Branch Transfer.

Movement from IOC-Depot (Kanpur) to IE Fertilizer factory = Local sale (intra-state sale)

Held that this sale = ISS

Reason:

The movement of goods was in pursuance of contract and with out such movement could not be sold to buyer in UP.

2. Balabhagas Hulaschand vs. State of Orissa.

Note: The Firm inspects, weighs and accepts (if it is to their specification).Firms Contention Supreme court Ruling When goods where booked from Orissa there was an agreement to sell.Sale concluded only at Calcutta.

Therefore this not ISS

Held that this sale = ISSReason:The movement to Orissa to west Bengal was in pursuance of “agreement to sell”(being an essential ingredient for sale)

Essentials for sec. 3(b) Sales

1. There should be movement of goods from one state to another.2. The movement may or may not be in pursuance to contract of sale.3. While the goods are in movement, there should be a sale by transfer of


Indian Oil corporation

Indian explosives Ltd.

Bihar - BarauniKanpur-up

IOC - Depot

IE – Fertilizer Factory

IOC-Factory

Transport raw jute through

Orissa – CuttackPurchase raw

JuteWest – Bengal-

CalcuttaSuppliers of Raw

jute Brokers Firm


document of title.

How sale by transfer of document of title effected? The BUYER TURNED SELLER should not receive goods from the

carrier, instead the goods should be in the custody of the CARRIER. Usually the document of title will be in the name of buyer turned

seller. He shall strike out his name in the document of title and insert the name of the NEW BUYER.

He should advice the carrier to take the goods straight away to the NEW BUYER.

Illustration

Note: Sale of goods by Mr. A to Mr. B = ISS (Sec 3(a)) Sale of goods by Mr. B to Mr. C = ISS (Sec 3(b))

What do we mean by document of Title?

Mode of transport

Document of Title

1. Road2. Sea3. Rail4. Air

Lorry Receipt (LR)

Bill of Lading (BoL)

Rail way Receipt (RR)

Airway Bill (AwB)

1. Deemed Movement


A B

Enters into contract for

sale of goods

MAHARASHTRA

MUMBAIMr. A

(Seller)

BANGALOREMr. B

(Buyer turned seller)

MYSOREMr. C

(New Buyer)

Goods in movement

Document of title

Endorsement of Document of

Title in favour of

Points Requiring Attention


So long as the goods are in the custody of transporter, the goods are deemed to be in movement.

This is a legal fiction. The moment the transporter makes physical delivery of goods to the ultimate buyer the movement ends.

2. Situation of goods Immaterial

The goods may be in Maharashtra or in Karnataka when the endorsement sale is made.

They may not have left Mumbai at all or they may even have reached Bangalore. These facts are immaterial.

3. Endorsement with in the state.

The endorser and the endorsee may be in the same state. Even then the position is same (East India Corporation Vs. State of Tamil Nadu)

4. Is there any restriction on Number of Endorsement Sales?

No, the only condition is the buyer turned Seller (i.e., Endorser) should not have taken delivery of goods from the transporter.

5.

State of Tamil Nadu Vs. Bombay Metal Depot.

Distinguish between Inter-State and Intra-State Sale.


TAMILNADUKERALA

Govt.CHENNAI

BMD

BMD KERALA Govt.Order

Endorsed

DOT

Placed Order

MAHARASHTRA

BOMBAY Supplier

Placed Order

Supplied goods straight

to

Send DOT

Judicial ruling


1. Levy by the Union as per Entry 92-A/List I (Union List) Seventh Schedule to Constitution

Levy by the State as per Entry 54/List II (state List) / Seventh schedule to constitution

2. Governed by CST Act, 1956 Governed by GST Acts of the respective States

3. Sale occasions movement of goods from one State to another

Movement is within the State

4. Levy on sales only. Levy may be on sale or purchase.5. Every sale is taxable. NO free limit. Tax is liable, only if the T.O. exceeds

the prescribed limit.6. Tax law implemented by respective

states and Union Territories.Tax law implemented by the respective States and Union Territories.

7. Collections go to the exchequers of Respective States (in respect of Union Territories money goes to the Consolidated Fund of India`

Collections go to the respective states/Union territories

8. Sale can be made by registered Dealer only

Registration is not necessary up to the prescribed monetary limits. Therefore unregistered dealers may make sales.

9. If the buyers are Registered – Tax at

concessional rate. Unregistered – Tax at higher

rate

No difference in tariff on account of buyer being Registered/Unregistered

10. Declaration in Form C, D, EI, EII, F and H are relevant for enjoying certain tax concessions.

Such declarations are of on relevance.

11. Scope of ‘Sale’ has been expanded and ‘deemed Sale’ concept brought in making use of Art 366 Definition No. 29A

Scope of ‘Sale’ has been expanded and ‘deemed Sale’ concept brought in making use of Art 366 Definition No. 29A

12. Newspapers, shares etc. are not Goods

Same position

Q1. Decide as to whether the following transactions constitute ISS

a. ‘A’ of Chennai sells goods to ‘B’ of Madurai. The goods move from Chennai to Madurai as a result of sale.

b. ‘P’, the Principal at Pondichery sends his goods to his agent ‘A’ at Ahmedabad.

c. M/s Kasturi & Sons sell “The Hindu – Business line” to ICWAI at Calcutta.

d. ‘A’ of Dubai sells goods to ‘B’ of Chandigarh. The goods come to Mumbai by sea and move from Maharashtra (Mumbai) to Punjab (Chandigarh) via Gujarat and Rajasthan by land).

e. ‘A’ of Mumbai sells goods to ‘B’ of Singapore. The movement begins from Maharashtra, passes through Karnataka, Andhra Pradesh, Tamil Nadu and ends at Singapore.

f. ‘A’ of Chennai sells goods to ‘B’ of Cuddalore. The goods move through Pondichery Union Territory.


Test Your Knowledge


g. ‘A’ of Mumbai sells to ‘B’ of Bangalore. ‘B’ takes delivery of goods from the lorry and then sells the goods to ‘C’ of Mysore.

h. ‘J’ of Chennai goes to Hyderabad and buys cultured pearls across the counter at Hyderabad bazaar. The seller knows that the buyer is from Chennai but he does not know whether the buyer is taking the goods to Tamil Nadu.

i. Superstar Rajini goes to Mumbai and buys goods across the counter.

j. Goods sent by VPP to a buyer in Himachal Pradesh

Q2. ‘A’ of Mumbai sold paper to ‘B’ of Chennai [Section 3(a) sale]. By a series of Endorsement Sale under Section 3(b), the goods have been last sold to ‘Y’ in door number 18 downstairs, Street 1, Sivakasi. The consignment is now in the lorry shed in door number 19 next to Y’s premises. ‘Y’ wants to make Endorsement sale to ‘Z’ in door No. 18 (upstairs) can he do?

Q3. Can there be an inter-state sale between two persons in the same state?

6. Pictorial Representation

5. Stock transfer/Branch Transfer/Depot transfer (sec. 6A)


Seller Carrier

Issues Document of Title

Buyer turned Seller

Goods given in Custody of

Sends Document of Title

New Buyer

Endorses the Document of title in favour of

Delivers

good

s o

n p

rod

ucti

on

of

Docu

men

t of

Tit

le

Tamil Nadu

Principal

(consignor)

Kerala

Agent

(consignee)

Sends Goods

Stock Transfer

Tamil Nadu

Factory

Kerala

Depot.

Sends Manufactured

Goods

Depot Transfer


Features:

1. Here there is movement of goods from one state to another.2. But there is no sale.

Tax on Consignment Transfers:

Sec. 6A levies tax even on Inter-state consignment, unless the dealer proves the followings:

5.1. The transaction in question is only a consignment and not a regular sale. [Note: The Onus of Proof lies with the dealer]

5.2. As a proof the dealer must show the “Agency agreement”5.3. The date of agreement should be earlier than the date of

movement of goods5.4. The principal should obtain FORM F declaration from his agent.5.5. Any other proof like “Account Sales” other books of Accounts,

Bank Pass Book, documents of correspondence, etc.,- in support of principal – Agent relationship should be produced to the assessing authority.

Highlights on FORM F

Printed form available for sale in the sales tax office

Agent should get it from his territorial Sales tax officer.

Agent can get this, only if he is a registered dealer.

Agent should furnish particulars of goods received by him from the principal to the sales tax officer – concerned

One copy of FORM F – retained by agent and another copy is sent to principal

The STO will ensure that goods referred to in FORM F suffer tax in the hands of Agent.

In the absence of FORM F, the Principal will suffer CST.


Tamil Nadu

Head

Office

Kerala

Branch

Sends Goods

Branch Transfer


Illustration

DPM’s Contention Legal position

Transfers of paper from AP to DPM Depot (Delhi) = Depot Transfer

Sale by DPM Depot (Delhi) – to Publishing House = Intra-state Sales

Transfer of paper of specific size by DPM (AP) to DPM (Delhi) 0n receipt of order from Publishing house, and

Corresponding sale by Delhi-depot to Publishing House = ISS

Reason:The movement of goods from DPM (AP) to DPM (Delhi) is occasioned by the order placed by the publishing house – Delhi.


Andhra Pradesh

Dalmia Paper

Mills Ltd. (DPM)

(Manufactures

printing paper of

various sizes,

shades and

quality

Delhi

DPM – Depot

(selling Papers of Std. Size, Color and Weight)

Publishing House

(Requires paper of Specific Size, color and weight – not available

with Delhi-Depot)

Transfers Papers of Std.

Size, color and Weight

Places Order

Transfers paper to the Specification of Publishing

House

Sells p

ap

er

to t

he

sp

ecifi

cati

on

s


South India Viscose Ltd. Vs. State of Tamil Nadu

Facts:

Company’s Contention Supreme Court Contention Transfer ISS

Only Depot. Transfer

Sale by Depot = Intra-state Sales

Not stock-Transfer

But ISS

Reason:The movement of goods from Tamil Nadu to Maharashtra is in Pursuance of Contract of Sales

Note:

Constitutional amendment:

Through a new entry 92-B in the union list (46th amendment of 1982) provision has been made for the levy of tax (Consignment tax) on consignment transactions made in the course of Inter-state trade or commerce. But CST Act is yet to be amended in this regard. Thus the new powers remain unutilized by the Parliament.


Govt. Announced

A Scheme

Where by silk Yarn allotted to weavers at concessional rate

Govt.

Weavers

Issued allotment

Cards

Enters into contracts for Supply of Silk

Yarn

Transfers silk Yarn for sale exclusively to Maharashtra Weavers

Sale at Concessional

Rates

Company – Manufacturing Silk Yarn

Factory in Tamil Nadu

Weaversin

Maharashtra

Depot - Maharashtra

Judicial ruling

Test Your Knowledge


Q1. Sales tax authorities are demanding tax on all inter-state movements of goods! Are they right? In case they are not really ISS, what will you do to avoid CST?

Q2. The Principal knows the ultimate buyers. Still he sends them to the agent only. Is it consignment or ISS?

Q3. According to the 46th amendment to the Constitution inter-state consignment is also taxable! According Sales Tax Officer feels he can automatically levy Tax on Inter-State consignments. Does the Constitutional Amendment ibid give him so much power?

6. When is a sale / purchase of goods said to take place outside the state (sec 4)

Sales inside a State (sec. 4(2))

Note:

1. First apply sec 4(2). Find out the state in which the sale has taken place. Then come to sec 4(1). The sale is deemed to take place outside all other states. For Example: If the sale takes place in Tamilnadu, then it is outside Kerala, Karnataka, AP etc.

2. Sale from different states under a single contract

A is a seller at Chennai. B is a buyer. The goods are made available at Chennai, Bangalore, Vijayawada, Delhi etc. The contract is Single but the goods are found in different states. Then the sale from each state is said to take place in the respective states. (Explanation to Sec. 4)

1. What is important is the place where the goods are kept or appropriated at the time of contract of sale and not where the property in goods passes.

2. Where the sale within a state occasions movement of goods from one state to another it becomes ISS and is subjected to CST.

Test your knowledge


Situs of Sale

With respect toSpecific goodsAscertained goods

With respect toFuture goodsUnascertained goods

Where the goods are present at the time of

contract of sale

Where the goods are appropriated as per the

contract for Sale


Test Your Knowledge


You need 20 machines. The dealer has ten machines on hand – 5 in Chennai and 5 in Bangalore. Six numbers were made at Port Blair and delivered as follows:

a. Two number at Calcutta.b. Two at Paradeep.c. Two at Visakapatnam.

The remaining four numbers were made in Mumbai; but delivered at Chennai. Can you list out the States that are competent to levy tax on the sales in question? Indicate the number of machines falling under each State.

7. Sale/Purchase of goods in the course of Import/Export (Sec. (5))7.1. Meaning of Crossing the customs frontiers of India (sec. 2(ab))

It means crossing the limits of Customs area in a customs station in which the imported and exported goods are generally kept pending clearance by the customs officers.

7.2. “Customs station” and “Customs authorities” – have same meaning as it the customs Act 1962.

7.3. “Customs Station” – Sec. 2(13) of customs Act. Customs Port Customs Airport Land customs

station

- for vessels- for Aircraft- For trucks and

other Vehicles

7.4. Custom Authorities will specify the “Customs Area” in the customs station – Where the imported and exported goods are to be kept pending clearance.

7.5. Customs authorities – (sec. 3 of customs Act) Principal Collectors of customs Collectors of customs Collectors of Customs (appeals) Deputy collector of Customs Assistant collector of customs Such other class of officers

7.6. How import takes place?



Cargo is unloaded from the ship and handed over to port trust (custodian)

Importer files BOE before customs authority Customs authority examines the goods He will assess customs duty on such goods The importer shall pay the duty The customs authority will issue the customs clearance order Importer takes the goods out of customs station

Note:

Where the importer doesn’t have money to pay the duty, he may temporary deposit the goods in customs bonded ware houses. The importer will get warehouse receipt. When he gets sufficient money, on filing of BOE & Paying duty, he can get the goods cleared from such warehouses.

7.7. How export takes place?

The exporter brings the goods in to the customs area. The seller (exporter) files shipping bill to the customs authorities The customs authorities assessee the export duty. The exporter pays the export duty. The customs authorities issue “let export” order The goods are loaded into the vessel The exporter gets the Bill of landing from the carrier The exporter sends this BOL to the buyer.

7.8. When customs frontier of India is said to have been crossed?The moment the customs authorities assess the duty payable (import/export), the goods are deemed to have cross the customs frontier.

Note:

What is important – is the assessment of duty and not the payment of duty.

The goods may continue to be on the customs wharf pending payment of duty assessed, for getting the clearance order. Yet the deemed crossing has taken place when the assessment is over.(Mineral and metals trading corporations US State of AP)

7.9. Sale in the course of export (Sec. 5(1))

Straight Sale Endorsement Sale orHigh seas sale

Essentialsi. There must be a sale/purchaseii.Transaction should relate to

goodsiii. The sale should occasion

exportNote: Export & Sale should be an integrated transaction

Essentialsi. Goods should have crossed the customs

frontierii. Buyer turned seller effects the subsequent

saleiii. Sale effected thro’ transfer of document of

title to goods (i.e. endorsement in BOL)iv. Buyer turned seller shouldn’t have

physically handled the goods.

Note:1. What do we mean by export?

Export means taking the goods – Out of India, to a place outside India



Taking goods toCHENNAI PORT BLAIR ≠ Export

2. Importance of destination:Where goods are merely shipped to a foreign country, there being no destination specified, this will not be considered as sale in course of export. (Burmah shell oil storage & distributing company of India Ltd VS CTO) If a company supplies aviation fuel to a foreign going aircraft, at the air port, is not export, since these is no destination of goods in a foreign country. The same logic extends to good and other consumables.

3. Is there any restriction on the number of endorsement sales? No – as long as the goods are not physically handled by the buyer turned sellers.

Q1 ‘A’ dealer in Pune is selling goods to an ONGC Vessel doing offshore oil srilling beyond 12 Nautical Miles (Indian border). He calls it as export sale. The STO contends that it is local sale (Maharashtra GST Act). Who is correct? Dealer or STO?

Q2 X of Mumbai books his goods by air to his branch office at London. Subsequently, he transfers the documents of title to the buyer at Scotland after the goods have crossed the Customers Frontiers of India. Is this a sale in the course of export?

Q3 Aviation fuel is bunkered by aircrafts of IAC (Indian Company) and Lufthansa (Foreign Company) – both flying to Singapore from Meenambakkam. Local Sale? Export sale?

Q4 You are a passenger to Singapore. On your way to board the aircraft, you buy cocacola from a shop in the Customs Area of airport. Will the shop-keeper treat the sale as local sale/export sale?

Q5 X, an Export House of Delhi, first enters into a contract of sale with Y of New York, USA and subsequently purchases these goods from Z of Chennai for the purpose of export to Y of New York. Is the sale by Z to X (last sale before export) be treated as sale in the course of export?

7.10. Sale/Purchase in the course of importStraight sale Endorsement/High seas sale

Essentialsi. There must be a

sale/purchaseii. Transaction should

relate to goodsThe sale/purchase should occasion import

Essentialsi. Goods should not have crossed the customs

frontierii. Buyer turned seller effects the subsequent saleiii.Sale effected thro’ transfer of document of title to

goods (i.e. endorsement in BOL)iv.Buyer turned seller shouldn’t have physically

handled the goods.

Note: Illustration for endorsement sale

X-Delhi Contract of sale

Y-London

Delh Goods Londo = Sale in course of Import


X Y

Z - Chennai

Import sales (deemed)

Test Your Knowledge

Sends BOL

Endorses BOL in favour of


i imported n

MMTC procured iron rods from Japan. The goods reached Paradeep Port. MMTC made endorsement sale to SAIL, by scoring out their name in the Bill of Lading and inserting the name of SAIL. The latter filed Bill of Entry, paid Duty and cleared the goods. The STO levied tax on the sale of MMTC. Was he right?

7.11. Pre-export sale/penultimate sale: Sec.5(3)

Md. Serajuddin Vs State of Orissa – SC Ruling.Sale made by STC = Export sale U/s 5(1)Sale made by serajuddin ≠ Export sale.

It is only sale for the purpose of export & not sale in the course of export.

To nullify this SC ruling – Sub section (3) – was inserted. Now sale immediately preceding the export sale shall also be deemed to be export sales in the following circumstances:

i. There should be an export-order from the foreign buyerii. Thereafter, the exporter should place a local purchase order with a

dealer.iii. Thereafter, the dealer should sell the goods to exporter (either as

intra/inter-state sales).iv. The exporter should then make the sale of same goods to the foreign

buyer.v. There should not be any processing of the goods by exporter.vi. The goods covered by the export order, the local purchase order, the

local sale and the export sale should be one & the same.vii. The export sale should comply with the original export contract and

there should be no diversion of goods to other buyers abroad.


Test Your Knowledge

for black pulse black

Removes black skin & converts pulse into gram


viii.The dealer should obtain proof of export from the exporter. (such as, BOL, shipping bills etc).

ix. The dealer should also obtain Form-H declaration from the exporter.

Highlights of Form – H

Printed form available at the sales tax office. Exporter can obtain this from his jurisdictional STO, provided he is a

registered dealer. Form-H, prima facie proof as to the compliance of conditions U/s 5(3).

Note: Instances where processing done by the exporter doesn’t asset Sec 5(3) concessions:

This processing by exporter will not affect the Sec 5(3) concession to dealer.Reason: U/s 15, pulses = Grams (i.e., they are treated as same goods).

Hulling the paddy into rice is processing by exporter. This will not affect the Sec 5(3) concessions to dealer, since U/s 15 paddy = rice (i.e. they are treated as same goods).

Q1 X, an export house of Delhi, first enters into a contract of sale with Y of New York, USA and subsequently purchases these goods from Z of Chennai for the purpose of export to Y of New York.


Dealer Exporter Foreign Buyer

23

Local Purchase Order (01.05.04)

Export Order Date (01.04.04)

4

Local Sale Date (01.06.04)

Export Sale Date (01.07.04)

5

Export Proof + Form – H Declaration

Test Your Knowledge


Is the sale by Z to K (last sale before export) be termed as sale in the course of export?

Q2 From the following identify the sales that could be termed as sales in the course of export

a. E, the Exporter, first procures goods from D, the dealer. Thereafter he finds a foreign buyer ‘F’ and makes export sale.

b. F of USA placed an export order for sandalwood oil with E of India. E obtained sandalwood from D, extracted oil and sold it to E.

c.D sells goods to E, the exporter, for enabling E to sell them to F in London in compliance with the pre-existing contract between E and F, E has some problem in exporting. He sells the goods to K who in turn makes export sales to F to fulfill the Export order of F with E.

d. D sells road roller to E for enabling the latter to execute some works contract in Mauritius. E exports the road roller to Mauritius.

e. D purchases cardamom from a planter and sells it to E. The latter makes export sale to F of Singapore to comply with the pre-existing contract. Cardamom is taxable at the point of purchase under TNGST Act. D is to pay tax on his purchase and not on his sale.

f. D sells goods to E. The latter is to make Export sale to F for complying with some pre-existing export order. The Foreign buyer F breaches the contract. Therefore E makes export sale to another foreign buyer by name K.

g. E has an export order for a bus. He manufactures chassis only. E sends chassis to D. The latter builds body on the chassis. The resultant product is a bus. E makes export sale of bus.

h. Bankatlal has sold goods to Manaklal of neighbouring State, which the latter proposes to sell to parties outside India against orders to be received in future. Subsequently, Manaklal has exported such goods to some overseas parties. Bankatlal claims that it is a sale in the course of export. Discuss

Q3 ‘F’ wants 1000 shoes from ‘E’. The latter places order for 500 numbers on D1 and 500 on D2. (Dealer No. 1 and 2) and is able to export 500 shoes given by D1 to comply with the contract entered into with ‘F’. The remaining 500 shoes given by D2 are delivered to a new foreign buyer. Will D1 and D2 get 5(3) concession?

Q4 F = Foreign buyer, E = Exporter, D = Dealer. E has problem in exporting and hence he sells the goods to E1, who in turn makes export sale of the goods to comply with the original contract with ‘F’. Will ‘D’ derive the benefit of Sec. 5(3)?

Q5 D sells black gram pulse to E. The goods are black in colour (black skin outside and two cotyledons inside). E removes the skin and converts the pulse into gram. (White in colour – 2 cotyledons only) for making export sale. There is a processing in the hands of E. The goods sold by D are not sold as such in the course of export by E. Will D get 5(3) concession?

Q6 D sells paddy to E. The latter hulls the paddy and makes export sale of rice to comply with the pre-existing export order for rice. What D sold is paddy; but what E sold is rice in the course of export. Will D get 5(3) concession?

8. Charging-Section: Sec (6)

8.1. Sales tax law Vs General sales tax law.

Sales tax law Sec 2(i) VS General sales tax law

GST + Other special enactment for levying add in sales tax surcharge on sales tax etc.

GST Act only – (levies basic sales. Example: TNGST Act, APGST Act, KGST Act etc.



8.2. Charging provisions – Sec. 6(1)

CST is a levy on sale & not on goods sold.

The liability for ST is fixed on the seller.

CST is levied always on sales & never on purchases

No CST levied on Inter-state sale of electricity

All sales in a year by a dealer – are taxable (A dealer makes a single ISS for just one rupee in the whole year – Even then he has to pay tax) To the contrary, if the dealer’s turnover in a year < 300000/- no GST levied under TNGST Act.

Multi-point taxation applicable under CST Act (Subject to exceptions)

8.3. No GST; GET CST Leviable (Sec. 6(1A))

CST liability on an ISS cannot be avoided, though such sales if effected within the state would not have attracted GST liability-under the ST law of the appropriate state.

Note: This subsection is classifications in nature.

Need for classification: Sec 9(2) requires the STO of the state govt. to levey, assess,

demand and collect CST as they do in respect of GST. A doubt arises as to whether they could levy CST when GST is not

leviable. It has been held that Sec 9(2) provides only the collection

mechanism and does not in any affect the tax liability under CST. The provisions in GST Act have no impact on CST Act. Thus sub section (1A) is intended to keep thing beyond any

ambiguity in this regard.

8.4. Relaxation with respect to transit sale Sec. 6(2):

The CST Act provides for a single point sales tax levy at the point of first sale. Subsequent sales are exempt to avoid a multiple tax incidence. To avail exemption the following conditions should be satisfied.

First sale should be ISS

The goods should be in the course of movement from one state to another.


Sale

Intra-state sale Import saleExport saleInter-state sale

Other ISS Penultimate sale U/s 5(3) involving inter-

state movement goods

Outside the scope of charging section

Tax is payable on these ISS – “Subject to the

other provisions”



The buyer should become a seller

He should not receive the goods from carrier.

Instead, when the goods are in the custody of the carrier, he should make an endorsement sale.

The document of title is LR/RR/AWB/BL usually it will in the buyers name. he should strike out his name and insert the name of the new buyer.

He should advise the carrier to take the goods straight to the new buyer. The goods should not have been physically handled by him.

He is the first subsequent seller.

He shall obtain E-1 form from his seller. He will obtain C Form or D Form from his buyer. There can be any number of further subsequent sales by transfer of document of title during the movement of goods from one state to another.

The second, third, fourth etc. subsequent sellers shall obtain e-II Forms from their sellers and C-Forms/D-Forms from their buyers.

The concessions of Sec.6(2) will flow only if the sellers buyers are registered dealers/Govt. departments.

The first seller will obtain C-Form/D-Form from his buyer outside the state and pay tax at the concessional rates.

The subsequent sellers will obtain E-I/E-II forms & C-Forms/D-Forms and claim exemption from tax.

If the buyer is govt., then exemption is available with responsible to all goods.

If the buyer is a registered dealer, then exemption is restricted to the goods covered by registration certificate.



Note: C- Form – is applicable – when the buyer is registered dealer.


Is it an ISS?

Buyer=Person notified by CG

u/s 6 (3)

CST is leviable

CST is not leviable

Is there any subsequent

ISS?

CST is not leviable

END

Buyer = person notified by CG u/s 6(3)

Is it ISS referred to u/s

3 (a)

Buyer = GovtOr Registered Dealer

buying sec8(3) goods?

CST is leviable

CST is not leviable

Start

Yes

Yes

Yes

Yes

No

No

No

No

Yes

No

No

Yes


D- Form – is applicable – when the buyer is Govt. dept.

EI/ EII forms are printed forms available for sale with the sales tax officer. These forms go to prove that the subsequent sales have been made during the inter-state movement of goods.

The buyer (being registered dealer) need not give Form –C, if such sales/ purchase of goods is generally exempt from the sales tax under the sales tax law of the appropriate state or subject to tax at a rate less than 4%.

But now after the amendments through the Finance Act 2002, C-Form has become necessary even when the tax rate is less than 4%.

8.5. Sales to certain buyers- Exempted:

CG may by notification in OG exempt (Conditionally/ unconditionally) CST on sales made to the following persons:

a. Officers/ Staff (entitled to diplomatic concession) of: any foreign diplomatic mission. Consulate in India. UN/ any other agents of the above.

b. Consular / diplomatic agents of the above.

Provisions Illustrated (Commencing with ISS)

DEALERS TRANSACTION FORMS RESULT SELLING PRICE

P – Mumbai first seller

First sale u/s. 3(a) made to Q in Bangalore

Issues E 1 Form to Q

Pays S.T. at the concessional rate of 4% based on C/D Forms reed, from Q.

100 + 4 (S.T.) = 104

Q – Bangalore Subsequent seller 1

Subsequent sale u/s. 3(b) made to R of Chennai

Issues E II Form to R Issues C/D Forms to P.

Combines E 1 Form from P and C/D Forms from R and gets exemption.

104 + 0 (S.T.) = 104

R – Chennai Subsequent seller II

Subsequent sale u/s. 3(b) made to S of Madurai

Issues E II Form to S Issues C/D Forms to Q.

Combines E II Form from Q and C/D Forms from S and gets exemption

104 + 0 (S.T) = 104

S – Madurai Subsequent seller III

Subsequent sale u/s. 3(b) made to T of Sivakasi

Issues C/D Forms to R.

Combines E II Form from R and C/D Forms from T and gets exemption

104 + 0 (S.T.) = 104

T – Sivakasi Final Buyer

Ultimate purchase done. Chain breaks.

Issues C/D Forms to S.

Movement terminates. T becomes the final buyer.

104 + 0 (S.T.) = 104. THIS IS PURCHASE PRICE FOR T

Provision Illustrated (Commencing with consignment sale)

DEALERS TRANSACTION FORMS RESULT SELLING PRICEP – Mumbai Principal

Consignment made to Agent Q at Bangalore

Escapes Tax Liability Based on F Form Received from Q the Agent.

No sale at all. No tax. Goods move for the market price sans S.T.

Q – Bangalore Agent & I

First sale u/s. 3(b) made to R of

Issues E I Form to R

Pays S.T. at the concessional rate

100 + 4 (S.T.) = 104



Seller Chennai Issues F Form to P

of 4% based on C/D Forms from R

R – Chennai Subsequent Seller I

Subsequent sale u/s. 3(b) made to S of Madurai

Issues E-II Form to S issues C/D Forms to Q

Combines E II Form from Q and C/D Forms from S and gets exemption

104 + 0 (S.T) = 104

S-Madurai Subsequent Seller II

Subsequent sale u/s. 3(b) made to T of Sivakasi

Issues C/D Forms to R

Combines E II Form from R and C/D Forms from T and gets exemption

104 + 0 (S.T.) = 104

T – Sivakasi Final Buyer

Ultimate purchase done. Chain breaks.

Issues C/D Forms to S.

Movement terminates. T becomes the final buyer.

104 + 0 (S.T.) = 104. THIS IS PURCHASE PRICE FOR T

Q.1. You client makes a single ISS for just Rupee one in a year. Should he pay CST?

Q.2. Under TNGST Act, no tax is payable on second sales and also upto a turnover of Rs. 3 lakhs. Assessing Authority is the same for CST as well as TNGST. Is CST leviable on similar sales in the course of inter-state trade or commerce?

Q.3. Is “Electricity” goods? Are we to pay CST on the inter-State sale of electricity?

Q.4. Under TNGST Act cotton, sugarcane cardamom etc, are taxed at purchase point. What about the position in CST Act?

Q.5. Assume that coconut sold locally to anyone other than that oil mill is exempt. Therefore coconuts sold to Saravanabhavan in Chennai are not taxable. Your client sells coconuts to a hotel in Bangalore. Should he pay CST or not?

Q.6. X of Kolkata sells goods to y of Chennai and delivers the same to Kolkata to MKS transport .The Lorry Receipt was sent to Y by post. While goods were in Transit, Y sells the goods to Z of Vijayawada by making an Endorsement of LR and goods were diverted to Vijayawada. Is the second sale between Y and Z Chargeable to tax?

Q.7. Ram of Tamil Nadu sells goods to Rahim of Kerala. The lorry way bill is endorsed to Abraham of Maharashtra. In Maharashtra, the goods are chargeable to sales tax at 3%. Discuss whether the second sale is exempt from levy of central sales tax. What are the documents to be furnished in this regard?


Test Your Knowledge

Q.8. Fill up the blanks

Inter-state sale Selling dealer

Purchasing registered dealer/Government

Is it chargeable

under the CST Act?

Conditions for

exemption

Place where CST will be collected

(If conditions fulfilled)

Place where CST will be collected (If conditions not

fulfilled)First sale X of

DelhiY of Jaipur

Second sale (which takes place during movement of goods from Delhi and Jaipur)

Y of Jaipur

Z of Baroda

Third sale (which takes place during goods movement from Jaipur to Baroda)

Z of Baroda

A of Bombay (a Government department)

Fourth sale (which takes place after obtaining delivery of goods at Bombay)

A of Bombay

B of Goa

9. Registration of Dealer (Sec. 7)

i. Applicable to whom:

ii. Application for Registration:

(a) To Whom application should be made: Authority in appropriate state notified by Central Government.(Territorial Sales Tax Authority)

(b) Form of Application : Form ‘A’(c) Time limit for Application :

(d) Separate Registration under Sec. 7 for each appropriate state

Note:

POB(s)

In only one state In more than one state

Only one POB Different POB(s)

Single Application is enough

Separate Registration is required in each state.

Registration

Compulsory Voluntary

Not later than 30 days from the date on which dealer becomes liable for CST

Any time

Has Sales tax law Has no Sales tax law

Compulsory Registration Voluntary Registration

Registration of Dealers

Applicable to every dealer liable to CST

Appropriate state

Applicable toevery dealer liable to pay tax under such lawEvery dealer entitled to get refund or rebate

Any dealer having POB in such state


Principal Place of Business

If the dealer has different POB within one state, he shall name one such POB as principal place of Business.

The application should be submitted to notified authority specified in respect of POB.

PPOB (under CST Act) = PPOB (under GST law)

(e) Application fees : Rs.25 per application - (Paid in the form of court Fee stamp affixed to application)

(f) Registration under GSTlaw – a pre-condition : GST RC is an essential pre-

requisite for getting CST RC(g) IT-PAN – Pre-requisite : IT-PAN- Pre-requisite for getting

CST RC.

(h) Who should sign the application? :

Individual/proprietary concern ProprietorFirm Any partnerHUF KartaCompany Dir/MD/Principal officerAny other association of individuals Principal officer managing the

businessGolf Officer authorized by govt.

(i) Verification of application : The application should be verified by the tax officer in the prescribed manner.

iii. Processing of application by notified authority:

Note:


Notified authority shall give opportunity of being heard + allow correction to the application. (if required)

RejectApplication

Notified authority shall register the dealer

COR - (In form-B) shall be granted to the dealer.

COR - shall be kept at the PPOB (by dealer)Copy of COR – shall be kept at every other POB within the state.

Particulars contained in application – are correct & complete?

Application – fee paid?Conditions regarding

security complied with?

Is the defect made good?

No

YesYes

No


Effective date of registration: Date of application for registration or the date of first ISS (Whichever is earlier)

iv. Contents of RC:a. CST – Registration numberb. Appropriate statec. Principal place of Businessd. Other POBe. Nature of Businessf. Goods in which he can dealg. Purpose of purchaseh. Accounting yeari. Warehouses in the state of registrationj. Validity periodk. Date of registrationl. Sign of notified authority

v. Power to require Security as a pre-condition for registration

Notified authority as a pre-condition for issue of RC, require the dealer to furnish security

It shall be furnished in the prescribed manner + within the prescribed time.

Necessity Proper realisation of CST Proper custody + Use of forms (E-I, E-II,F-form, C-

form) Opportunity of being heard should be given before

requiring security.

vi. Power to require additional Security: At any time which RC is in force, the notified authority may require the

dealer to whom RC was granted to furnish additional security for the aforesaid purpose. It is binding on the dealers to whom RC has been issued. Opportunity of being heard should be given before requiring additional

security. Until he furnishes the additional security, he cannot get the aforesaid

forms.

vii.Quantum of Security/additional security:


Registration

Voluntary Compulsory

Quantum of Estimated CSTSecurity/ < payable on ISS Additional to such dealer Security in the year of Security/ Additional security

Quantum of Estimated CST Security/ < payable for theAdditional year of security/ security additional security.

Yes

Yes

No

No


viii. Execution of fresh surety bond:

Yes

Note: Until he furnishes fresh surety/other security, he cannot get the aforesaid forms.

ix. Forfeiture of security:

x. Duty to make up deficiency:

Due to forfeiture of security, if the security furnished by the dealer is rendered insufficient, he shall make up the deficiency in the prescribed manner + within the prescribed time.

Until, he makes up this deficiency, he cannot get the aforesaid forms.

xi. Refund of excess security:The notified authority, on application of the dealer, may refund the excess security (not required for the purpose of this Act)

xii.Appeal against order requiring security/additional security/forfeiting the security/denying refund of security.


Is security/additional security in the form of a surety bond?

Need to execute fresh-surety bond doesn’t arise.

DoesSurety becomes insolvent or dies?

i) Inform the notified authority about the occurrence of such event (within 30 days)

ii) Furnish fresh surety other security within 90 days.

Security provided will not be forfeited.

Security will be forfeited after giving opportunity

of being heard.

Tax/Penalty payable by dealer?

Aforesaid forms misused by the dealer?

OrAforesaid forms not kept in proper custody?

Yes

Yes

No

No


a. Application should be in the prescribed form + in the prescribed manner.

b. Time limit for application: Within 30 days of the service of the aforesaid order (Extension by appellate authority possible)

c. Application is entertained only on furnishing the security (This requirement may be dispensed with at the instance of appellate authority)

d. Prescribed fees should be paid.e. Order passed by appellate authority is final.

xiii. Amendment of RC: Reasons for amendment:

Name of dealer – changed Place of business – changed Nature of business – changed Class of goods dealt by him – changed Any other reason.

Amendment - On application from the dealer or suomoto (after due notice)

Procedure for Amendment:a. Application to be submitted to the notified authorityb. It should set out the specific matters in respect of which

amendment is required; the reasons therefor.c. The application should be accompanied by the original RC. &

the Copies of RC.d. The prescribed fees shall be paid in the form of court fee

stamps.e. The notified authority, if satisfied, will incorporate the changes

in RC & return them back.f. Opportunity of being heard should be given before amending

RC. Effective date:

Date of application by the dealer. In case of suo-moto amendment – date of amendment.

xiv. RC – Lost, destroyed, defaced, mutilated.If RC is lost, destroyed, defaced or mutilated the dealer may on application to the notified authority and on payment of a fee of Rs. 5/- obtain a duplicate copy of RC.

xv. Cancellation of RC:


Cancellation

Suo-moto On application

Date of application End of the year

Gap < 6m

Note: The notified authority will cancel – unless the dealer is liable

to pay CST.Effective date of Cancellation: The cancellation shall take

effective from the end of the year.

Gap


Sumoto Cancellation Reasons/Grounds

i) Dealer ceases to carry on business.

ii) Dealer ceases to exist.

iii) Dealer fails to furnish additional security.

iv) Dealer fails to furnish fresh surety bond/other security (on the insolvency or death of surety).

v) Dealer fails to make up deficiency on for future of security.

vi) Other sufficient reason.

Duty of Dealer:

The dealer shall immediately surrender to the notified authority the RC & the copies of RC – granted to him. (This is applicable both for sumoto cancellation and for cancellation on application)

Advantages of Voluntary Registration:

Advantages

1. concessional rate of tax on Inter State Purchases (Use of C form)

2. No tax on goods received as agent (Use of F form)

3. No tax on sales U/s. 6(2) (use of E I/ E II and C form)

4. No tax on Sec. 5(3) sale (use of H form)

5. No tax on purchase by a unit in SEZ (use of prescribed form)


Note: In case of Voluntary registration, if the dealer has ceased to be liable to pay

tax under the sales tax law of the appropriate state the RC – may be cancelled. Opportunity of being heard should be given.

Without Voluntary Registration:

Effects

Sales In course Of inter-state Trade.

Purchase price = Sales Consideration + CST (at non-Concessional rates of tax)

Seller Buyer

With Voluntary Registration:

Effects

Sales In course Of inter-state Trade.

Issues form-CPurchase price = Sales price + CST (at concessional rates)

Note: For every subsequent buyers no CST (if it Sec. 3(b) sale)

Seller Buyer


Penalty for violation:

Penalty Rs.5000 + Imprisonment up to 6 months. For continuing default - Rs.50 per day fine. (Only in case of compulsory

registration)

Q1. Your client has H.O in Chennai and 9 branches in Tamil Nadu. He wants CST RC. Does he need one RC or 10 RC’s?

Q2. Your Client has H.O In Chennai and 9 branches–each in a state outside Tamil Nadu. He wants CST RC. Does he need one RC or 10 RC’s?

Q3. Your Client is a CST RC holder. His STO refuses to give him C form. Is the STO right? If So under what Circumstances.

Q4. Your client wants to get registered under CST Act and get the benefit of C form purchase from outside the State. But he does not want to make inter-state sales and pay CST to the Government. Can he do so?

Q5. To-day is 12.12.99. Your client decides today to wind up his business by 31.12.99. He does not want CST RC w.e.f. 1.1.2000. Can you arrange for the cancellation of RC by this year end?

Q6. Discuss whether registration is required in the following cases under section 7 of the CST Act. State the advantages it registration is required-

Name and State of dealer

Purpose of purchasing

goods

State from which goods are purchased

State in which goods are sold

X of Delhi Resale Delhi DelhiY of Delhi Resale Delhi Haryana and

DelhiZ of Delhi Resale Punjab DelhiA of Delhi Resale Punjab RajasthanB of Delhi Manufacture and

saleDelhi Delhi

C of Delhi Manufacture and sale

Delhi Rajasthan and Delhi

D of Delhi Manufacture and sale

Rajasthan Delhi

E of Delhi Manufacture and sale

West Bengal Punjab

10. Rates of tax on sales in the course of Inter-State trade/Commerce.

S.No GovernmentSec.8(1)

Registered dealer-other than government Sec.8(1)

Units located in Special

Economic Zone


Test Your Knowledge

Sale in the course of Inter-State trade to

Government Sec. 8(1) Registered dealer-other than government Sec.8(1)

Units located in Special

Economic Zone


1 Meaning of the term Government:

State Government Departments

Central Government Departments

Sales covered Significance of SEZ

No customs duty on imports made by units in SEZ

No excise duty for products manufactured & exposed by units in SEZ

Units in SEZ are deemed to be outside India for customs/excise purpose.

2 Exclusions: Municipality Municipality

corporation Universities Government

autonomous bodies.

Government Company

Concessional rates applicable only to goods mentioned in RC & not to all goods.

CST = 0%

3 Concessional rate is applicable for sale of any goods.Concessional rate4% or Local rate whichever is lesser. Submission of D FormThe concessional rate is applicable only when the government department gives D Form to the seller.Note: D Form is not sold by sales tax authorities. The concerned government department may type out the D Form, fill it up and send it to the seller.

Concessional rate: 4% or Local rate

(whichever is lesser)Conditions for availing concessional rate:a. Purchase for prescribed purposes

The goods purchased is meant for

Resale Manufacture and

sale Telecommunication

Network Mining Generation and

distribution of electricity and power

Packingb. Submission of C FormConcession rate could be availed only when the buyer (being a registered dealer) gives C Form to the seller.Note: Printed C Forms are available with the jurisdictional sales tax officer. They should be bought and filled up and sent to the seller.

Conditions for

exemption

a. specified

purposes:

Units in SEZ should

have purchased the

goods for the purpose

of

Setting up Operations Maintenance Manufacture Trading Production Processing Assembling Repairing Reconditioning Reengineering Packing

b. The buyer should be a registered dealer


Sales made to a registered

dealer


c. The goods purchased are specified in the RC of the buyer.

d. The buying dealer should give a declaration in Form H to the selling dealer. Form H should be duly countersigned by development commissioner SEZ

Local rate = GST + Surcharge + Additional Sales Tax etc. in the appropriate state of Seller.

Summary

Local rate

Declared goods Other goodsLess than or equal to 4%

More than 4% Less than or equal to 4%

Above 4% but 10% or less

More than 10%


Sale of Goods

Exempted under the sales tax law of the appropriate state

Not exempted under the sales tax law of the appropriate state.

Blanket ExemptionExemption in specified circumstances

under specified conditions

Tax rate = NILNo concession available

Goods sold

Declared goods Other than declared goods

Tax rate = Local rate * 2 Tax rate = Local rate or 10% (whichever is higher)

Sale in the course of Inter-State Trade to others

Sale made to other than Govt. Department

Sales made to Unregistered Dealer

Sales made to Registered Dealer

Goods sold not covered by the RC of Buyer


CST with C Form/D Form

CST = Local rate

CST = 4% CST = Local rate

CST = 4% CST = 4%

CST without C Form/D Form

CST = Local rate * 2

CST = Local rate * 2

CST = 10% CST = 10% CST = Local rate.

Power of State/Government to exempt CST Sec. 8(5)

1. The State Government have been empowered to grant exemption form levy of tax on ISS.

2. The exemption may be whole/part (i.e the tax may be nil or tax may be at a lower rate)

3. The State/Government may prescribe conditions also if they so desire.

4. The exemption shall be in public interest only.

5. The exemption may be in favour of specified goods or specified dealers.

6. The entire exercise is at the discretion of State Government.

7. This concession is available only on producing C Form/D Form.

Q1. X, a dealer in Delhi, makes inter-state sale of goods (other than declared goods) to the following:-

Buyer

Local tax rate under the Delhi Sales Tax Act

Y NilZ 1.5%A 3%B 4%C 6%D 9%E 11%

What is the central sales tax rate if-

a. The buyers are registered dealers and issue C Form:b. The buyers are Government departments and issue D Form; andc. The buyers are not registered dealer and goods are not declared

goods.

Q2. Determine the rate of tax applicable and fill up the blanks from the following information.

- Please see below the Table [as in the question paper] with the answer duly filled in.

- For guidance, read Tax Table below Section 8(5).

PRODUCTSA B C D E F G

Local S.T. Rate 0% 2% 4% 6% 8% 10% 12%

1. Sales to Government2. Sales to Regd. Dealers (Specified


Test Your Knowledge


goods)3. Declared Goods sold to unregistered dealers4. Undeclared Goods sold to Unregistered dealers

Q3. Your client want to sell locally Sugar, Cigarette and Textiles. He seeks your advice for the rate of tax he has to change on his sales. What will be your answer if he wishes effects inter-state sales? Will your answer change if he decides to sell sweets, garments and Cigarette?

(Hint) sec. 8(2)(c)

11. Determination of Turnover

11.1. Meaning of Turnover (sec. 2(j))

It means aggregate of sales price received and receivable by a dealer in respect of sale of any goods in the course of inter-state trade during the year.

It shall be determined in accordance with the provision of this act and rules made there under.

11.2. Sale Price (sec. 2(h))

It means the amount to a dealer as a consideration for a sale of any goods.

It excludes Cash discount as per normal trade practice. It also excludes Freight, delivery and installation cost if separately

charged. It includes any sum charged for anything done by the dealer in

respect of goods at the time of or before delivery of goods to the buyer.

Q1. Determine whether the following items could be included in computing the sales price

Sl. No.

Items To be included

To be excluded

1. Cash discount2. Trade discount (Radian Industries of India),

(Kerala Rubber and Allied products)3. Quantity discount (Advani Oerlikom)4. Excise duty (Hindustan Sugar Mills Ltd. Vs.

State of Rajasthan)5. Customs duty6. Sales tax7. Royalty8. Octroi duty9. Dharmada (Standard Match Industries Vs. State

of Tamil Nadu)10. Weighment charges relating to sale (Rai

Bharath Das and Brothers Vs. CST)11. Freight delivery and installation (Shaw Wallace

& Co. Vs. State of Tamil Nadu)12. Packing charges (Rai Bharath Das and Brothers

Vs. CST) (Commissioner of Sales Tax Vs.


Test Your Knowledge


Prabhath Marketing Company)13. Insurance charges to cover the risk of seller14. Insurance charges for covering the risk of buyer

at the request of the buyer15. Indemnity/Guarantee charges to indemnify the

buyer from incurring loss in transit16. Subsidy from government for selling the goods

at controlled price which is less than the cost.17. Incentive bonus for additional sale18. Deposits for returnable containers19. Cost of returnable containers (Dyer Meakin

Breweries), (Britania Biscuits Company)20. Interest in service charges incase of hire

purchases (Jaya Bharath Credit and Investment Co.)

Q2. The respect of goods which are exempt from tax can the cost of packing materials be charged to tax? (Premier Breweries vs. State of Karala) (T. Nagarajan & Brothers), (Chettiar Industrial Corporation).

11.3. Year (sec. 2(k)) This term is used in relation to dealer. It means the year applicable to the dealer under the GST law

of the appropriate State. If no such year is applicable it means financial year. All states follow financial year only. Hence Year is financial year

under CST.

11.4. Determination of turnover (Sec. 8A)S.No. Particulars Amoun

t1. Turnover(including CST) xxx2. Less: CST

(1) x Tax Rate/100+Tax Rate xxx3. Less: sales returns xxx4. Less: Other deductions (prescribed by Central Government) xxx5. Turnover for the purpose of this Act xxx

11.5. Conditions for deducting – Sales Returna) The sales returns should relate to the sales originally made

during the period for which the turnover is to be determinedb) The goods should be returned to the dealer within a period of

six months from the date of delivery to the buyer.c) There should be satisfactory evidence in the books of the

dealer for the return of goods i.e. the returned goods should have been entered into the stock account.

d) There should be monetary adjustment in support of sales return i.e. the money received from the buyer should be returned.

Note:

The sales return can take place even outside the turnover period. In respect of sales made during the later part of the year, returns are possible in the next year only.

Q1.SI T.O Date Of Date of Refund of Treatmen Reason


Test Your Knowledge


No Period sale Sales Return

Money t s

1 1997-98 01.01.97 31.05.97 Made2 1997-98 01.05.98 30.06.98 Made3 1997-98 01.05.97 31.07.97 Not Made4 1997-98 01.05.97 31.12.97 Made5 1997-98 01.03.98 30.06.98 Made6 1997-98 01.05.97 31.08.97 Made

Q2. The T.O period is 1998-99. Date of sale is 1.12.98. Date of Return is 30.4.99. Returned within six months. But returned next year i.e., not in 98-99. Is the deduction from turnover permissible towards sales Returns?

Q3. The T.O period is 1998-99. Date of sale is 1.2.98. Date of return is 31.5.98. Return within six months. Returned during 98-99. Can the dealer claim deduction under sales Returns?

Q1. Total interstate sale for the financial year 2003-04 of X Ltd. Is Rs. 1,50,70,000, which consists of the following:

Q2.Rs.

4% CST Sales 91,50,0002% CST sales 59,20,000

Out of the goods sold for Rs. 1,50,000 on 16.07.2003 that were liable to CST @ 4%, goods worth Rs. 50,000 were returned on 12.12.2003 and goods worth Rs. 1,20,000 were returned on 01.02.2004. A buyer to whom goods worth Rs. 55,000 carrying 2% CST was dispatched on 16.04.2004. Compute the taxable turnover and tax liability of X Ltd., since all the relevant forms have been received.

Q3. From the following details, compute CST payable by a dealer carrying on business in New Delhi:-

T.O. for the year is Rs. 16,00,000, which included the following:-

Rs.Trade commission for which Credit Notes have to be issued separately 48,000Installation charges 25,000Excise Duty 80,000Freight, Insurance and transport charges recovered separately in invoices.

60,000

Goods returned by dealers within six months of sale, but after the end of the financial year

40,000

CST Not given

Buyers have issued C Forms for all purchases.

Q4. Mr. X reported sales turnover of Rs. 36,20,000. This includes the following:

(i) Excise duty Rs. 3,00,000; and


Problems on CST


(ii) Deposit for returnable containers and packages Rs. 5,00,000

Sales tax was not included separately in the sales invoice. Compute tax liability under the CST Act, assuming the rate of tax @ 4%.

Q5. Mr. Vishal is a dealer. His sales during the first quarter of 1997-98 (April – June) are as under:-

Date Invoice No. Amount05.04.97 1 10,000 + tax @ 4%12.04.97 2 80,000 + tax @ 4%05.05.97 3 62,400(inclusive of tax)06.06.97 4 14,000 + tax @ 4%27.06.97 5 18,000 + tax @ 4%

Goods worth Rs. 7,000 (Exclusive of tax) against Invoice No. 4 were returned on 29.06.97.Goods worth Rs. 13,000 (inclusive of tax) sold on 26.12.96 were returned on 30.06.97.Goods worth Rs. 6,500 (inclusive of tax) sold on 27.12.96 were returned on 30.06.97.All the above sales were made in the course of inter-state trade.Calculate the Turnover and the tax payable if the rate of tax is 4%.

Q6. A dealer effected the following sales during the first quarter of 1997-98 (April to June):-

Invoice No. Date Value1171 02.04.97 26,400 + tax @ 4%1172 19.04.97 70,000 + tax @ 4%1173 02.05.97 52,000 (inclusive of tax)1174 04.06.97 12,200 + tax 4%1175 25.06.97 20,000 + tax @ 4%

Goods worth Rs. 6,100 (exclusive of Tax) against Invoice No. 1174 were returned on 28.06.97.Goods worth Rs. 5,200 (Inclusive of tax) sold on 25.12.96 were returned on 30.06.97.Calculate the TO and ST payable if the rate of tax is 4%.

Q7. Mr. A reports his turnover at Rs. 52,00,000 for the year ended 31.03.2003. Also he reported that goods sold in March, 2003 have been returned by the customers to the value of Rs. 5,20,000 in May 2003. He has not charged tax separately in the sale invoices. Assuming the tax rate @ 4% compute his tax liability under the Sales Tax Act.

Q8.(i) M/s Snow White Ltd., Mumbai sells iron rods to M/s. Hyderabad ltd., in

Vijayawada, both of them are registered dealers for a value of Rs. 10,00,000 inclusive Central Sales Tax @ 4%. The local sales tax on iron rods in Mumbai is 3%. Ascertain the Central Sales Tax Payable.

(ii) If Hyderabad Ltd. were unable to submit form ‘C’, being a unregistered dealer, what will be the Central Sales Tax liability, if the local sales tax rate is 12%?

Q9. M/s. Joshuree Brothers, Mumbai, Maharashtra, are dealing in two products A and B. The gross inter-state sales are Rs. 5 lakhs and Rs. 3 lakhs respectively during the financial year 1998-99. No CST was charged in the invoice. If sold within Maharashtra, the rates of sales tax are 6% and 5% on products A and B respectively. Product B is declared goods included



under Sec. 14 of the CST Act. The other details in respect of the financial year 1998-99 are as follows:-

(i) M/s Joshuree Brothers imports product A from Japan, stocks it and then sell it from its Godown.

(ii) Product A worth Rs. 1 lakh was returned by the customer in March 99 as this was in excess of his requirements. Product A has been sold to him in June 98.

(iii) Product A worth Rs. 0.5 lakhs was imported; but was sold by transfer of documents to a buyer in New Delhi before it was cleared from Customs. Customs duty was paid by the buyer from New Delhi.

(iv) C Form was received in respect of the balance sale of product A.(v) Out of total sale of product B, Sales of Rs. 1 lakh were inclusive

of packing charges Rs. 5,000; transport charges Rs. 3,000; and transit insurance Rs. 3,500. The charges were shown separately in the invoice. D Form was received in respect of these sales. These goods were purchased by M/s. Joshuree Brothers from a manufacturer in Mumbai for Rs. 7,500 which included Maharashtra sales tax of Rs. 5,500.

You are requested to work out the turnover and the CST liability for the yea 1998-99 will M/s. Joshuree Brothers be able to obtain any refund by tax paid on purchases? If so, how much?

Q10. Geet Pvt. Ltd, Chandigarh, made the following transactions in inter-state sale/purchases:-(i) Goods sold to a Government Department in Maharashtra Rs.

5,50,000.(ii) Goods sold to a trader in Himachal Pradesh Rs. 5,00,000(iii) Goods purchased when they were in transit from Rajasthan to

Haryana and sold during the movement of the goods to a manufacturer in Haryana by transfer of documents Rs. 2,50,000.

(iv) Goods exported directly Rs. 1,20,000.(v) Goods exported through agent Rs. 1,00,000, the agent being

paid commission (a), 1%.(vi) Goods sold to an exporting agency in New Delhi which in turn

exported the goods Rs. 1,50,000.Sales tax on the goods is 4%, if sold within the territory of Chandigarh.

What are the sales tax declaration forms obtainable from each of the above buyers?

What will be the sales tax rate applicable in each case, if the-(a) Required declaration is obtained(b) Required declaration is not obtained.

Q11. Sumita Garments, Goa had inter-state sale of their product ‘Z’ for the year April 1999 to March 2000 of Rs. 17,50,000 (inclusive of Sales Tax). The rate of CST was 5%. Goods worth Rs. 1,50,000 sold in January 2000 were returned by a buyer in May, 2000, as they were in excess of his requirement. Goods worth Rs. 1,30,000 despatched in May 1998 were rejected by the buyer and sent back in March 2000. Find out the taxable turnover (T.O.) if ‘C’ Form was received from all buyers. What will be the taxable turnover (T.O.) if goods worth Rs. 1,50,000 (mentioned above) sold in January, 2000 were returned by the buyer in August, 2000.

Q12. Determine the CST liability from the following data when sale is effected from Faridabad to Lucknow.

Invoice No. 00 708 374Basic Price Rs. 3,00,000



Excise Duty 16% ad valoremCST As applicable under ‘C’

FormTrade Discount 8%Cash Discount 2%Quantity supplied 10,000 kgsQuantity returned by the buyer within 3 days of dispatch

1,000 kgs

Quantity returned by the buyer after six months of dispatch

1,000 kgs

Q13. Calculate the CST payable from the following data:

Invoice No. Date Rs.1011 01.04.2001 1,78,967 (inclusive of CST 4%)1012 02.04.2001 1,87,697 (Exclusive of CST @ 4%)1013 03.04.2001 1,75,000 (inclusive of ST @ 10%)1014 04.04.2001 2,50,000 (exclusive of ST @ 8%)50% of goods sold on 1.4.01 on inter-state trade was rejected and returned on 31.3.02.

20% of goods sold on 4.4.01 on local sale was returned on 30.6.01.

30% of goods sold on 2.4.01 on inter-state trade returned on 2.6.01.

10% of goods sold on 3.4.01 on local sale was rejected on 3.10.01.

Goods of value Rs.1,50,000 stock transferred from Bangalore to Indore on 5.4.01 excludes CST element o 4%

Export of goods worth 10 million yens to Japan on 6.4.01 of which 50% were rejected and returned on 1.11.02 (1 yen = Re. 0.35).

Export through Canalising Agency for value of 100 Thousand dollars (Export order with Canalising Agency) (1 dollar = Rs. 48).

Purchased goods for Rs. 3,00,000 from the market on 9.1.01 and exported to Singapore on 14.1.01 to the Agent for further sale (The goods attracted local ST of 10%).

Give reasons for inclusion/non-inclusion of the above.

Q14. During 2003-04, the gross inter-state sales made by X Ltd. of Ajmer is Rs. 47,86,000. Although the central sales tax is not shown separately, the following information is available from the records of the company-

a. The company sells machinery which makes copper wire rods. If it is sold in the Rajashthan State, sales tax rate is 7 per cent (plus additional tax @ 10% of sales tax)

b. Information regarding sales with and without C Form is as follows:-

Inter-state sale with C Form

Inter-State sale without C Form

Gross sales 29,50,000 18,36,000It includes the followingExcise duty 12,75,000 4,10,000Freight (not being shown separately) 37,000 48,000Freight (shown separately) 70,000 17,000



Packing charges 15,210 19,700Cost of installation (shown separately) 92,000 1,06,000Insurance charges to cover the risk of the seller

10,500 15,200

Insurance charges for covering the risk of buyer at the request of the buyer

15,000 84,000

The following items have not been deducted to calculate gross sales turnoverTrade discount (given by way of credit note on March 31, 2004)

18,000 20,000

Goods returned within 6 months 2,00,000 1,00,000Incentive bonus for additional sale 25,000 20,000

(i) Ascertain the sales turnover and central sales tax payable.(ii) Ascertain the amount of CST on the assumption the local sales

tax in Rajasthan in respect of machinery for copper wire rods is 3 per cent.

Q15. The manufacturer usually bills as follows:

Assessable Value of goods

100

Excise Duty 40% 40%Sales Price 140Sales tax @ 10% 14Total 154

The ED was permitted to be paid by the buyer. So he billed as follows:Sales price 100ST @ 10% 10Total 110

He argues that he can charge ST on his actual sale price only. Is he correct?

12. Section – 9 Levy and collection of CST12.1. Who levies CST payable by a dealer under the Act?

– CG (Sec. 9(1))12.2. Where the tax so levied is collected? – Sec 9(1)


Collected in a State where he is registered or where

he is supposed to be registered (i.e. appropriate

state)

Collected in a state where such subsequent sale has been effected

Collected in a State where the movement of goods

commences

First ISS Subsequent ISS

ISS

ISS–U/S 3(a) ISS–U/S 3(b)

C Form / D Form obtained from buyer E-I / E-II form obtained from

Seller

These forms not obtained

CST exempted U/s 6(2)

Sale effected by Registered Dealer

Sale effected by unregistered Dealer


12.3. Assessment/re-assessment/collection/enforcementThe sales tax authorities of the appropriate state shall on behalf of the CG.

Assess Reassess Collect Enforce

Payment of tax including interest and penalty payable by dealer

The relevant provision of GST Law of the appropriate state, including provision relating to returns, provisional assessment, advance tax, Appeals, revision, References, Penalties, Charging of interest, compounding of offence etc. shall apply accordingly.



12.4. Assigning collections

GST goes to State Government. Who takes CST – UNION or STATES?

13. Sec.9A: Collection of tax to be made only by Registered Dealers.

14. Sec.9B: Rounding off of taxes etc.

Note: The dealer shall not make such roundings in his invoice.


Collection of Taxes, penalties Etc.

Made in States Made in Union Territories

Assigned to respective StatesGoes to consolidated fund of India

Amount

Payable by the dealer

Refund due to the dealer

Tax Interest FinePenalty Any other sum

Rounded off to the nearest rupee

Dealers

Registered Unregistered

Can collect CST in respect of ISS effected by them in accordance with this Act/rules made under this Act

Cannot collect CST in respect of ISS effected by them

Test Your Knowledge


STO can round off tax due. Can a dealer do so while billing?

15. Sec.10 Penalties and sec 10A imposition of penalty in lieu of prosecution

S.No

Offences Punishment U/s.10

Penalty in lieu of

Prosecution U/s 10A

Whether mens rea

is required

1 Furnishing false certificate/declaration under Sec.6(2), 6A(1),

8(4), 8(8)-i.e. form E-I, E-II, F, C, D, and SEZ form

Simple Imprisonment (maximum) 6 month with or without fine.

Non-possible Yes

2 Failure to get registration u/s.7

“ Non-possible No

3 Failure to furnish security as required u/s.7

“ Non-possible No

4 Representing falsely that goods purchased are

covered by his (dealer’s) certificate of registration

“Possible

Yes

5. Falsely representing as registered dealer (when purchase goods in the course of interest state

trade.

“ Possible Yes

6. Not using the goods for specific purpose

stipulated under sec. 8(3) or 8(6),

“ Possible NO

7. Wrongly obtaining and possessing Form C, D, H

“ Non-possible No

8. Collection of CST without being a registered dealer.

“ Non-possible No

9 Collection of CST in violation of provisions of

Act or Rules.

“ Non-possible NO

Note: Quantum of penalty under sec. 10A less than or equal to 1.5 X CST levied under sec. 8(2)

No prosecution shall be instituted u/s. 10 in respect of the same facts on which a penalty has been imposed under this section


Sec. 10A penalty (max) = 1.5 X 2 X Local rate

Goods

Declared Others

Sec. 10A penalty (max) = 1.5 X (Local rate or 10% whichever

higher)

Test Your Knowledge

Test Your Knowledge


Normal CST rate = 10%Concessional Rate = 4%False declaration made to enjoy the concessional rate.10A penalty is leviable @ 1.5 timesTherefore penalty levied = (10 – 4 ) X 1.5 = 9%. Is it ok?

P of Chennai sells foreign Liquor to Q of Bangalore. The rate of tax for local sale is 70%. Q is not able to furnish C Form. Therefore, P charged ST @ 10%. Is it OK?

16. Cognizance of Offencea. No Court shall take cognizance of any offence

punishable under this act or the rules except with the previous sanction of the Government within the local limit of whose jurisdiction the offence has been committed. No court inferior to that of a presidency magistrate of First Class shall try any such offence.

b. All offences punishable under this Act shall be cognizable and bailable.

17. Indemnity (sec. 12)

No suit, prosecution or other legal proceeding shall lie against any officer of the Government for any thing which is done or intended to be done in good faith under this Act or rules. The law offers protection to the Tax Officer.

18. Power to make rules (sec. 13)

Rules

Framed by CG Framed by SG Prescribed in state sales tax laws

Section 13(1) authorizes CG to make rules for different purposes

Section 13(2) authorizes SG to make rules. These rules should not inconsistence with the CST Act and the Rules made by CG there under

Sec. 9(2) provides that all provisions of local sales tax law of each state shall be applicable to dealer under CST in that state.

Illustrative list of purposes

Illustrative list of purposes

Such rule should relate to

a. Procedure relating to registration

b. Manner of declaration U/s 88

c. Determination of turnover

d. Cancellation of registration

e. Production of

a.of dealers

b.the list

c.furnishing of security or additional security

d.prescribed form to dealers

e.manner of

a. returnsb. assess

mentc. Advanc

e payment of taxes

d. Imposition of tax liability on transferee of business

e. Recovery of tax from third parties

f. Appeals



certificate of declaration

f. Enumeration of goods

g. Fees payable in respect of applications

h. Functioning of CST appellate Authority

keeping book of accounts by registered dealer

f.information of stock of goods, purchases, sales and deliveries made by a dealer

g.books of accounts

h.seizure of books

i.whom declaration forms should be obtained

j.obtaining these forms

k.keeping custody of these Forms by a dealer

l.use of such Forms

m.manner in which appeal can be preferred

n.hearing appeal

o.filing appeal

g. Reviewh. Revisio

ni. Rebatej. Penaltie

sk. Interestl. Compou

nding of offences

m. Treatment of documents furnished by a dealer as confidential

Note: 1.

powers Central Sales Tax (Registration and turnover) rules, 1957 was framed by the Central Government

2.the CG shall be laid before both the Houses of parliament. Any modification to the rules brought about by the Parliament will have prospective effect. Past cases cannot be reopened. (sec. 13(2))

Note:

Penalty for contravention of rules Rs. 5000/- + Rs. 50 for every day of continuing default

19. Tax restrictions on Declared Goods Under GST

Through this section the Parliament imposes certain tax restriction on Intra-States Sales or purchases of Declared Goods



a. Restriction on GST Rate

GST Rate (Declared goods) <= 4 %Note: Earlier Declared Goods were Single Point Goods. Now there made Multi-Point Goods

b. GST sale followed by CST sale – reimbursement of GST borne

Conditions to be fulfilled for reimbursement of GST The transactions should involve declared goods GST should have been levied for sale or purchase inside the

state Subsequently, the same goods should be sold in the course of

inter state trade CST on such ISS should have been paid

If these conditions are fulfilled the dealer effecting ISS can get the GST borne on such goods reimbursed.

Position in respect to Other than Declared goods

Position in respect to Other than Declared goods

c. GST Rice tax = GST Rice tax – GST paddy tax

Where GST is levied in respect of Sale or Purchase of Paddy inside the State, the GST leviable on Rice procured out of such Paddy shall be reduced by the amount of GST on Paddy

Conditions for availing this abatement in tariff:1. Paddy should have been procured inside the state.2. It should have suffered GST3. The Rice hulled out of such Paddy should be sold

inside the same state (GST is suffered)Summary:


A B CIntra-State Sale Inter-State Sale

TNGST ACT Sec. 3(a) CST ACT

Madurai Chennai Bangalore

100+4(GST)=104 104+4(CST)=108

A B CIntra-State Sale Inter-State Sale

TNGST ACT Sec. 3(a) CST ACT

Madurai Chennai Bangalore

100+4(GST)=104 104+4(CST)=108

CST CollectedGST Reimbursed by Sales Tax Officer at Chennai

Result: 104+4(CST) =108

(-) GST reimbursed = (4) 104

Result:Goods reach @ 104

and not @ 108


Paddy Rice Abatement Available?

1. Brought from outside the State 1. Sold Inter-State No2. Bought from outside the State 2. Sold Locally NO3. Bought Locally 3. Sold Inter-State NO4. Bought Locally 4. Sold Locally YES

d. Paddy = RiceFor the purpose of sec. 5(3) paddy is equal to rice.

The advantage of this treatment is that the dealer selling paddy to an exporter making export sale of rice becomes eligible for the pre export sale concession Under section 5(3)

e. Pulses

Each of the pulses referred to in Sec. 14 whether whole or separated and whether with or without husk, shall be treated as a single commodity for levy of tax under the State Law.

All the four forms are treated as one. Hence, if a dealer buys pulse locally, converts it into gram (whole, split etc) and sells the latter, such sales will be treated as second sales (No tax). For the same reason, pulse sold to an exporter of gram qualifies for concession under section 5(3).

Q1. A dealer buys declared goods locally and sells them inter-state. His purchase suffers GST and sale suffers CST. Can he have any relief?

Q2. A of Madurai sells black gram pulse to B of Trichy. B removes the husk and sells black gram to C of Chennai. A has already charged tax @ 4%. What is the tax chargeable by B on his sales?

20. Company in Liquidation (Sec. 17)

20.1. Intimation by Liquidator

Where a company being wound up and liquidator is appointed, he shall give a notice of his appointment to the assessment officer. This should be done with in thirty days of his appointment.

20.2. Communication of Tax dues by Assessment officer


= ==

Pulse of Black Gram (Covered

by Skin)

Gram (Whole) of Black Gram

(Skin removed)

Gram (Split) of Black Gram (with skin)

Gram (Split) of Black Gram

(without skin)

Test Your Knowledge


The assessment officer shall with in 3 months from the date of receipt of notice shall notify to the liquidator the amount of tax payable by the company

20.3. Duty of Liquidator

The liquidator shall not part with any of the assets of the company or the properties in his hands until he has been notified by the appropriate authority. Once the amount is notified it shall be set aside before any such parting of assets.

However, the liquidator can part with assets or properties-

In compliance with any order of a court; or For the payment of tax under this Act; For payment to secured creditors whose debts rank in

priority over Government debts; For meeting reasonable costs and expenses of winding up

20.4. Liability of Liquidator

If the Liquidator fails to give the notice or fails to set aside the amount notified he shall be personally liable for the payment of the tax which the company would be liable to pay. Where the amount was notified, such liability would be restricted to the notified amount

Where there are more liquidators than one, the obligations and liabilities attached to the liquidator shall attach to all the liquidators jointly and severally.

21. Liability of directors of private company in Liquidation (Sec. 18)

When a private company is wound up and any tax assessed on the company cannot be recovered, then every person who was a director of the private company at any time during the period for which tax is due shall be jointly and severally liable for the payment of such tax.

However, if he proves that non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, no such liability would arise.

22. Central sales tax appellate Authority (sec. 19)

22.1. Constitution

For the purpose settling inter state disputes falling under section 6A read with section 9, the Central Government shall constitute an authority called “the Central Sales Tax Appellate Authority”. Such a constitution shall be notified in the Official Gazette of the Central Government.

22.2. Composition of the Authority

Three members (including Chairman) are appointed by the Central Government



i. Chairman

Retired Judge of Supreme Court or retired chief Justice of a High Court

ii. Member Indian Legal Service Officer – Rank of Additional Secretary to Government of India

iii. Member State Government Officer – not below the rank of Secretary or Central Government officer not below the rank of Addl. Secretary with expertise in sales tax matters.

22.3. Terms of appointment

The salaries and allowances payable to the Chairman/members and their conditions of service shall be prescribed by CG

22.4. Administrative staff

Administrative staff to the Authority shall also be provided by the CG.

23. Appeals (Sec.20)

23.1. Subject matter of Appeal

This chapter applies to appeals filed by the aggrieved dealer against an order of the Assessing Officer under section 6A read with section 9.

The dispute shall pertain to sale of goods effected in the course of inter-state trade or commerce. That means the point under issue is whether the transaction is “sale” or “stock transfer” and not valuation, validity of forms like Form C, D, F etc. and things like that.

23.2. When appeal could be preferred

If the claim made by the dealer under section 6A (Branch Transfer) and under section 9 (Penal provisions as in GST) is rejected by the assessing authority, then the dealer can straightaway appeal to the Authority. He need not pass through the usual appellate fora Under CST Act. This is because of the wording “Notwithstanding anything contained in the GST Laws” in this section. The authority shall adjudicate the appeal

23.3. Time Limit for AppealTime limit for preferring the appeal is 45 days from the date of service of assessment order. (Upto 60 days at the discretion of the Authority)

23.4. Application fees

Application in quadruplicate. FEE Rs. 5000/-

24. Procedure on receipt of Application (sec. 21)

24.1. Copy to Assessing Officer



Authority shall send a copy of appeal to the assessing officer concerned as well as to each SG concerned and also call for from them all relevant records for perusal and early return.

24.2. Decision by Appellate Authority

The Authority shall adjudicate and take a decision on the appeal. The Authority may allow or reject the appeal. Rejection shall be after offering the “hearing procedure” to both the appellant and the State Government. Reasons for rejection or acceptance of appeal must be recorded by the Authority

24.3. Time limit for Appellate Order

The Authority shall try to pronounce its orders in writing within six months of the receipt of appeal

24.4. Communication by appellate Authority

The Authority shall communicate its orders to the appellant as well as the assessing officer

25. Powers of the Authority (sec. 22)

25.1. Powers of Civil Court

Authority shall have the powers of a court under C.P.C, 1908 in enforcing attendance of persons, compelling production of records, issuing commissions for the examination of witnesses, reception of evidence on affidavits and any other matter.

25.2. Judicial proceedings

The proceedings of the Authority shall be deemed to be judicial proceedings.

26. Procedure for Authority (sec. 23)

The authority shall regulate its own procedure, in all matters including stay of recovery of any demand arising out of its orders.

27. Authority for advance Rulings to function as Authority under this Act (Sec. 24)

The Central Sales Tax Appellate Authority is to be constituted by the Central Government. Till such constitution, the Authority for advance Ruling (Section 245-O of the Income tax Act) shall be functioning in its place.

After this Authority is formed, cases pending with the other Authority shall stand transferred to this Authority

28. Transfer of proceedings

After this Authority is formed all cases pending in (or to be taken to) the appellate for a in the States/Union Territories shall also stand transferred to this Authority.

29. Applicability of order passed



The orders passed by this Authority are binding on the assessing authorities or other authorities under the GST laws of the States/Union Territories.

True or False

1. Both registered and unregistered dealers can collect tax under CST.

2. Cost of freight separately charged in the invoice shall be deducted from sale price.

3. Subsidy given by Government to manufacturers to compensate cost of production will form part of sale price.

4. All Directors of Private Company (present and past) are personally liable for any tax due under the CST Act.

5. Indian Railways which sells unclaimed/uncollected good is a dealer.

6. “Goods” include share and securities7. When goods are sent by VPP, the sale is said to take place in

the state from where the parcel is sent.8. Electricity supplied will not come within the meaning of

‘Goods’ under CST Act.9. The supply of Aviation Spirit by a petroleum dealer from his

depots at an Airport in India to an aircraft proceeding abroad is an export out of India eligible for exemption under CST.

10. In rest of declared goods, CST can exceed 4% for sales to Government.

11. Weighment charges charged separately from buyers will not form part of sale price.

12. To avail concession in CST, in respect of sales to registered dealers, ‘Form D’ is to be furnished by the dealer.

13. Charity or Dharmada collected by dealer will not form part of sale price.

14. Packing charges realised by the dealer was an integral part of sale price.

15. Sale of bundles of old newspapers as waste papers are exempt.

16. There is no benefit for a person to purchase goods from a registered dealer.

Match the following

SN Item A Item B1. Form A Declaration received by the dealer from the exporter for getting

the benefit u/s 5(3).2. Form B This is form of indemnity bond, meant to indemnify Government

against possible loss in case of misuse of lost C/EI/EII/F declaration forms.

3. Form C Consignment transactions shall also be treated as sales and subject to tax if not supported inter alia by Form F declaration from the Agent.

4. Form D Subsequent sales U/s 3(b) shall be exempt from tax if supported by EI/II form declarations from the previous sellers and C Form/D Form declarations from the buyers. EI/II forms are proof for sufferance of tax.


Introspection


5. Form EI/II If the buyer is a Government department, then this is the declaration form prescribed to avail the concessional rate of tax.

6. Form F If declaration in this form is given by the purchasing dealer then the selling dealer shall charge tax at concessional rate.

6. Form G Certificate of registration is given by the department in this form.7. Form H Application for registration as a dealer under CST Act shall be

made in this form.

Write short notes on

1. Penalty made sale of Export

2. Dealer

3. Place of Business

4. Future goods

5. Business

6. Liability to CST on Sale by VPP

7. Refund of sales tax – conditions to be fulfilled (hint Sec. 8A, Sec. 15)

8. Rate of tax leviable in the course of Inter-state sales

9. Compulsory and Voluntary registration

10. Exclusion of freight and trade discount from sale price

11. Exemption from CST of Second and Subsequent sales

12. Suo-moto cancellation of Registration

13. Crossing the Custom Frontiers of India

14. Year

15. Duties of Liquidator of a company under CST Act

16. Sale in the course of Export

17. Sales tax laws

18. Objects of CST Act

19. Rates of tax in case of sale to Govt.

20. Deemed dealer

21. Appropriate State

22. Stock transfer and its treatment under Inter-state sale

23. Declared Goods

24. Deemed sales

25. Completed sales in course of inter-state sales

26. Cancellation of Registration at dealers request

Highlights of Forms Under CST

Form

Purpose Obtained from Used by

A Application for Registration

Freely available Dealer who registers under the CST Act

B Certificate of Registration

Sales Tax Authority Dealer

C Form for claiming concessional rate of tax in the course of inter state sale

Sales Tax Authority of the Dealer who purchases the goods

Issued by the Purchaser, during inter-state sale.

D Self-Declaration by Government

Self-Declaration Issued by Govt., during inter-state purchase

E-I Original inter state sale Sales Tax Authority Issued by Seller during



u/s. 3(1) of the dealer who sells goods

movement of goods

E-II Inter state sale by transfer of documents of title to goods

Sales Tax Authority of the dealer who sells goods

Issued by seller on Sub-sequent sale U/s 6(2)

F Transfer other than by sale of goods

Sales Tax Authority of the dealer who receives goods

Issued by Agent to principal

G Indemnity Bond Self-Declaration Dealer

H Form for penultimate sale for Export

Sales Tax Authority of the Export House

Issued by Exporter to the dealer making penultimate sale for export.


15_cst_notes

Documents