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CENTRAL SALES TAX

Bhargav.K

RajdeepFiona

Pradeep.T

Amutha PriyaPreethi

Presented By,

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Introduction

Objects and Basic Scheme of the CST Act

The objects of the Act, as stated in preamble of the CST Act are -

To formulate principles for determining

(a) when a sale or purchase takes place in the course of inter-state trade or commerce

(b) When a sale or purchase takes place outside a State

(c) When a sale or purchase takes place in the course of imports into or export from India

To provide for levy, collection and distribution of taxes on sales of goods in the

course of inter-state trade or commerce

To declare certain goods to be of special importance in inter-State trade or commerce

and specify the restrictions and conditions to which State laws imposing taxes on saleor purchase of such goods of special importance (called as declared goods) shall be

subject.

CST Act imposes the tax on inter state sales and states the principles and restrictions

as per the powers conferred by Constitution.

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Basic scheme of the CST Act

SALES TAX REVENUE TO STATES

TAX COLLECTED IN THE STATE WHERE MOVEMENT OF GOODS

COMMENCES

TAX ON INTER STATE SALE OF GOODS

STATE SALES TAX LAW APPLICABLE IN MANY ASPECTS

CST ACT DEFINES SOME CONCEPTS

DECLARED GOODS

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Inter-State and Intra-State Sale - Entry 92A of List I -

Union List reads : Taxes on the sale and purchase of

goods other than newspapers, where such sale or

purchase takes place in the course of Inter-state trade orcommerce.

NEWSPAPER SPECIFICALLY EXCLUDED

Categories of Sales - (a) Inter-State Sale

(b) Sale during import/export

(c) Intra-State (i.e. within the State) sale

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CENTRAL SALES TAX ACT-1956

CONDITIONS

1) There Should Be A Dealer

2)He Should Be A Registered Dealer3)He Must Carry On Any Business

4)Sale Should Take Place

5)Sale May Be To A Regd Or UnregdBuyer

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6. The Sale Should Be Of Goods.

7. The Sale Can Be Of Also Declared Goods

(Goods Of Specific Importance)8. The Sale Should Take Place In Course Of

Inter State

9. The Sales Should Not Be Within The Same

State.10.The Sale Should Not Be Outside India

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Stock transfer

Movement of goods takes place from one State to

another, but it is not an inter State sales.

In Goodyear India Ltd. v. State of Haryana - (1990) 76STC 71 (SC) (at page 98), it was held that mere

consignment of goods by a manufacturer to his own

branches outside the State does not amount to sale or

disposal as such; the consignment of goods is neither

sale nor a purchase.

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When StockTransfer is treatedas Inter-State sale

Goods are despatched to branch/consignment agent in another State and then these are soldfrom the branch, depot or place of consignment of agent. However, if the movement of goods

is occasioned on account of sale, the movement will be treated as inter-State Sale. One

illustration will make the distinction clear.

Let us assume that Tata Iron and Steel Co. Ltd. (TISCO), manufacturing Steel, has a factory

at Jamshedpur, Bihar. TISCO manufactures Steel of various standard shapes and sizes.

TISCO has a depot at Howrah in West Bengal. Steel plates, rods, billets etc. are sent to its

depot at Howrah. When the goods are sent from Jamshedpur to Howrah, there is inter State

movement, but the movement has not occasioned on account of any covenant or contract for

sale. Hence, it is not an Inter-State sale but a stock transfer. Sale takes place when a

customer approaches TISCO depot at Howrah and takes delivery from Howrah. Here, the sale

by TISCO from its Howrah depot is an Intra-State sale within West Bengal.

However, assume that a buyer from Howrah wants Steel of a particular size and specification,

which is not a standard size and specification and hence is not available in Howrah depot of

TISCO. He approaches TISCO and TISCO manufactures Steel in its Jamshedpur factory in

Bihar as per the specific requirements of the buyer. After manufacture, goods are sent todepot of TISCO at Howrah and goods are sold to the buyer from Howrah depot of TISCO. In

such case, the movement of goods from Jamshedpur, Bihar to Howrah, West Bengal has

occasioned as a necessary incident of contract and hence it is a Inter State sale, even

ifgoods are supplied from depot of TISCO at Howrah and invoice is raised from TISCO,

Howrah.

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DEFINITIONS

DEALER U/S 2(b).

He Is A Person One Who Is Involved In

The Activities Of Buying ,Selling,Distributing The Goods Directly Or

Indirectly Either For Cash Or For

Deferred Payment ,For Commission

,Brokerage Etc

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continued

Dealer Includes

1)local Authorities ,Co-operative

Societies, A Company,HUF,Association Of Persons,firms..

2)suppliers, Broker, Del Creder

Commissioner,etc

3) An Auctioneer(govt ,Agent,etc)

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In State of Orissa v.Orissa Road Transport Co. Ltd. 1997 AIR

SCW 3489 = 107 STC 204 = (1997)5 SCALE 589 = AIR 1997

SC 3409 (SC 3 member), it was held that occasional sale of

disposable un-serviceable spare parts at yearly interval by a

transport company would make the organisation 'dealer'.

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REGISTERED DEALER SEC7

A PERSON SHOULD REGISTER

HIMSELF U/S7

THE REGISTRATION MAY BE

1)VOLUNTARY REGISTRATION OR

2)COMPULSORY REGISTRATION,

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BUSINESS 2(aa)

BIZ INCLUDES

1)TRADE,COMMERCE ,MFG ANDADVENTURE IN NATURE OF TRADECOMMERCE AND MFG

ANY INCIDENTAL AND ANCILLIARYACTIVITIES RELATED TO MAIN

BUSINESS SHOULD ALSO BECONSIDERED AS BUSINESS

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POINTS TO BE REMEMBERED

THE PROFIT MOTIVE IS NOT

COMPULSORY FOR THE SALES TAX

PURPOSE

THE TAX IS LEVIED ON SALES NOT

ON PROFIT

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Any transaction in connection with or incidental or

ancillary to, the main business would constitute

business, even though the transaction by itself may

not have the characteristics of business as understood

in ordinary parlance - State of Tamilnadu v. Binny

Ltd. - (1982)

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SALE -2(G)

SALE INCLUDES

A TRANSFER OF GOODS FOR MONEY

TRANSFER OF GOODS FOR MONEYS

WORTH

TRANSFER OF GOODS ON AN

AGREEMENT TO PAY ON DEFERRED

SYSTEM HIRE PURCHASE SYSTEM AND

INSTALLMENT SYSTEM .

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SALE MAY BE TO A REGISTERED

BUYER OR UNREGISTERED BUYER.

ELEMENT OF PRICE IS ESSENTIAL. FREE SUPPLY IS NOT SALE.

QUANTITY DISCOUNT IS NOT A

SALE. MORTGAGE IS NOT A SALE.

DEPOT TRANSFER IS NOT A SALE.

POINTS TO BE

REMEMBERED

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GOODS-2(d)

GOODS MEANS ANY ARTICLE ,THING,

COMMODITY,AND WHICH IS

MOVABLE ,HOWEVER GOODS DOES

NOT INCLUDE

NEWSPAPERS,ACTIONABLE

CLAIMS,STOCKS, SHARES,

SECURITIES.

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POINTS TO BE REMEMBERED

NEWS PAPERS

WHEN NEWS PAPERS ARE SOLD AS

NEWSPAPERS EITHER NEW OR OLD,

IS TO BE TREATED AS NOT A

GOODS.

WHEN OLD PAPERS ARE SOLD AS

OLD NEWSPAPERS THEN TO BETREATED AS GOODS.

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DECLARED GOODS SEC2(C)

Declared Goods Includes

Cereals ,Pulses, Coal Including Coke But Not

Charcoal, Cotton Waste , Hand MadeGarments,tobacco, Raw Tobacco, CherootsOf Tobacco ,Jute, Oil Seeds, Cotton InUnmanufactured Form ,Crude

Oil,sugar,khandsare Sugar, Aviation TurbineFuel,refused Tobacco, Cigars ,Hides AndSkins, Woven Fabrics Of Wool.

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POINTS TO BE REMEMBERED

DECLARED GOODS ARE GOODS OF

SPECIAL IMPORTANCE.IF DECLARED

GOODS ARE SOLD THERE ARE

CERTAIN BENEFITS WHICH CAN BE

OBTAINED BY THE DEALER ,WHICH

IS NOT AVAILABLE FOR THE

ORDINARY GOODS.

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GI PIPES ARE DECLARED GOODS - Steel tubes are galvanised to

make the pipe corrosion resistant. After galvanising, it is called

Galvanised iron pipe. Since galvanising does not change the structure

and function, making GI pipe from Steel tubes does not bring a new

commodity into existence and hence GI pipes are declared goods -

GujaratSteel Tubes Ltd.v. State of Kerala (1989)2 CLA 100 (SC) =(1989) 74 STC 176 (SC) = (1989)2 JT 474 (SC).

CORRUGATED SHEETS - Corrugated iron sheets even after

corrugation are still iron and steel. State ofGujaratv. Shah Veljibhai

Motichand(1969)23 STC 288 (Guj HC) followed inGujaratSmall

Industries Corp v. CST(1999)116 STC 193 (Guj HC DB).

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HR AND CR STEEL STRIPS - In Jindal(India) Ltd. v. Dy CCT(2000)

117 STC 426 (WBTT), it was held that both HR (Hot Rolled) Steel strips

and CR (Cold Rolled) steel strips are one for purposes of declared

goods under CST Act. [The decision was in respect of dispute over

incentive scheme].

SEWING THREAD IS DECLARED GOODS - In State of Tamilnadu v. R

V Krishniah - (1994)92 STC 262 (Mad HC DB), it was held that sewing

thread and cotton yarn are same commodities and hence is liable only

to single point tax - similar decision of Orissa High Court - (1982)51 STC

410 and 411 - contrary decisions in (1976) 37 STC 227 (Ker HC), (1976)

38 STC 11 (All HC) and (1981) 48 STC 460 (Ker HC).

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NO TAX ON CONVERSION OF PULSES - Each of

the pulses whether whole or separated and whether

with or without husk, shall be treated as a single

commodity for purpose of levy of tax under State tax

law i.e. if tax is paid on raw pulses, no further tax is

payable after it is processed [section 15(d)].

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INTER STATE SALE-SEC 3

ONCE THE GOODS ARE TAKEN OUT

OF DEALERS PLACE THEN FINAL

DESTINATION SHOULD BE TAKEN

INTO CONSIDERATION AND NOT THE

ROUTE THROUGH WHICH GOODS

ARE TRANSFERRED.

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EXAMPLES

IN CASE OF DEPOT SALE

HEAD OFFICE------------KARNATAKA

DEPOT OFFICE ----------DELHI IF ORDER IS TAKEN FROM

CUSTOMER IN DELHI AND GOODSARE TRANSFERRED TO DELHI FIRST

AND THEN SALE IS MADE-INTERSTATE SALE

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CONTD.

IF FIRST GOODS ARE TRANSFERRED

TO DELHI DEPOT AND THEN SALE IS

MADE IT IS SALE WITHIN DELHI

AND HENCE INTRA STATE

SALE.THEN NO CST IS APPLICABLE .

BUT FORM F SHOULD BE GIVEN .

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INSPECTION

CUSTOMER FROM DELHI COMES TO

KARNATAKA AND INSPECTS THE

GOODS ,THIS IS INTER STATE SALE,.

IF PURCHASE IS ALSO MADE ALONG

WITH INSPECTION THEN IT IS INTRA

STATE SALE.

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SUBSEQUENT SALE

WHEN THE GOODS ARE IN TRANSIT

THEN IF BUYER RE DIRECTS THE

GOODS TO SOME OTHER

CUSTOMER OF OTHER STATE , IT IS

CALLED AS SUBSEQUENT SALE AND

SHOULD BE TREATED AS INTER

STATE SALE.

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BASIS OF CHARGE

WHEN ALL THESE CONDITIONS ARE

SATISFIED THEN CST WILL BE

LEVIED

AT SPECIFIED RATE ON

TAXABLETURNOVER WHICH WILL BE

BASED ON SALES AND NOT ON

PROFITS.

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SPECIFIED RATES

FOR THE PURPOSE OF SPECIFIED

RATES BUYERS ARE CLASSIFIED

INTO THREE

GOVERNMENT BUYER(FORM D)

REGISTERED BUYER(FORM C)

UN REGISTERED BUYER(NO FORMS)

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For Registered Buyers

LOCAL SALES TAX RATE OR 3%

WHICH EVER IS LESS

IF LST IS NIL CST WILL BE NIL IF LST IS < 4%-THEN CST WILL BE

SAME

IF LST IS >= THAN 4%-THEN CSTWILL BE 3%.

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FOR UNREGISTERED BUYER

Same as LST

Sale to Government willbeequivalent to sale to unregistered

dealer w.e.f. 1-4-2007

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SUBSEQUENT SALE

IF SUBSEQUENT SALE IS MADE TO

REGISTERED AND GOVERNMENT

DEALER IT IS EXEMPTED(E1&E2)

IF SUBSEQUENT SALE IS MADE TO

UNREGISTERED DEALER THEN IT IS

TAXABLE