Central Sales Tax Act,1956 & CST(R&T) Rules

& CST ( O)Rules, 1957

Presented by :-

Smt. Supriya Jena,

DeputyDirector(Sr.)

Basics of CST

Concept of CST

The concept of Central Sales Tax is closely related to the concept of

taxation in the Constitution. Under the constitution, taxation of sale and

purchase of goods is a State subject except sale or purchase of goods in

the course of inter-state trade.

In respect of inter-state sale or purchase of goods the Sale Tax is levied

under provisions of CST, 1956 and the tax is collected by the State from

which the movement of the goods commenced & the entire proceeds are

retained by the State.

Central Govt has authority to decide the rate of duty on Goods.

Administration, Collection, Appeal, Assessment is done by State Govt and

all revenue are given to state of seller.

It is an Indirect Tax as the burden falls on the consumer. It is levied by

Central Govt on taxable turnover of Inter-state sale of goods made by

registered dealer in ordinary course of business.

CST is applicable only when following conditions are satisfied:-

There should be a Dealer

He should be a Registered Dealer under the CST Act

He must carry on any business

Sale should take place in the course of inter-state trade or commerce

Sale must be of goods defined under CST Act

Definition of Dealer u/s 2 (b)

means any person who carries on the business of buying, selling, supplying

or distributing goods, for cash, or for deferred payment, or for valuable

consideration;& it includes

- Local authority , body corporate, company and other association of

persons etc. which carries on such business.

- Factor ,broker , commission agent who carries on the business for his

principal.

- An auctioneer who carries on the business of selling & auctioning goods

belonging to his principal.

Explanation 1- Every agent of a dealer residing outside the State who buys,

sells, supplies or distributes goods in a State or acts on behalf of such dealer

& every branch or office in a Sate of a firm registered outside that State or a

company/ body corporate, the Principal office or HQRS whereof is outside

that State

When Govt is a Dealer

Explanation 2- Government Departments like railways, post, PWD etc which,

whether or not in the course of business, buys, sells, supplies or distributes

goods, directly or otherwise for cash or for deferred payment or other

valuable consideration shall be a dealer.

EXCEPTION

The exception is sale, supply or distribution of unserviceable or old stores or

waste products or accessories.

PRINCIPLES OF CENTRAL SALES TAX

INTER-STATE SALE

SECTION-3

INTRA-STATE SALE

SECTION- 4

SALE IN COURSE OF IMPORT/EXPORT

SECTION-5

INTER-STATE SALE (SECTION-3)

OCCASIONS THE

MOVEMENT OF GOODS

SEC. 3(a)

EFFECTED BY TRANSFER OF

DOCUMENTS OF TITLE TO THEGOODS

SEC. 3(b)

There are two types of inter-State sales u/s 3.

An inter-State sale contemplated by clause (b) is one, which is effected by

transfer of documents of title to the goods during their movement from one

state to another. Where the property in the goods has passed before the

movement has commenced, sale will evidently not fall with in clause (b).

The dividing line between sale or purchases under section 3(a) and those

under section 3(b) is that in case of 3 (a),the movement of the goods is under

the contract of sale or purchases but in case of 3 (b) the contract comes into

existence after commencement and before termination of the inter-State

movement of the goods. Sale taxable as falling in clause (a) of section 3 will be

excluded from purview of clause (b) of that section.

In other words clause (a) contemplates a sale where under the contract of

sale the goods sold are moved from one state to another.

Clause (b) on the other hand contemplates a sale where the property in the

goods sold passes by transfer of document of title during the movement of the

goods from one state to another.

This means there is a completed sale in pursuance of contract of sale or

purchase whereby goods move from one state to another. A sale occasions

movement of goods when the contract of sale so provides or in other words if

the movement of goods from one state to another is under a covenant or

incident of the contract of sale. A sale can be treated as an inter- state sale if, all

the following conditions are satisfied.

Transaction is a Completed sale.

The contract of sale contains a condition for the movement of goods from

one state to another.

There should be physical movement of good from one state to another/ a

transport of those goods from one State to another as a result or incident of the

contract of sale.

The sale concludes in the state where the goods are sent and that state is

different from the state from where the goods actually moved.

It is not necessary that sale precedes the inter- state movement of goods, sale

can be entered before or after the movement of goods.

It is immaterial in which state the ownership of goods passes from seller to

buyer.

When the sale occasions movement of goods from one

state to another [as per section 3(a)]

Example- A of Bhubaneswar sends goods in his own name to Delhi. At Delhi

goods are sold to different parties by the employees of A. In this case, the

movement of goods is not result of sale or agreement to sell. It is sale which

takes place in Delhi and not subject to central sales tax.

When the sale occasions movement of goods from one

state to another[as per section 3(a)]

Example- Regd Dealer A in Odisha purchases Readymade garments worth

1,00,000/- @5% VAT & effects sale @ 1,30,000/- to a regd Dealer “ B” of

Kolkata against “C” declaration Form.

A will pay VAT (input tax) of 5000/- in Odisha & will collect CST @ 2% on

1,30,000/- ( i.e.2600/-) [ u/s 8 (1) of the CST Act]

His ITC will be limited to the extent CST is paid ( i.e. 2600/-) and ITC of

2400/- will lapse. As per sec20(3) proviso (d)

If B is an unregd dealer or if B is unable to give “C” Form to A, A will collect

CST @ 5% [ at the applicable rate in Odisha u/s 8(2) of the CST Act] i.e. 6500/-

He will get ITC of 5000/- under VAT return. He will pay CST of 6500/- under

CST return. [ Annexure II of VAT-201]

One “C” Form covers all sale transactions made in a quarter. But where the

delivery of goods is spread over to different quarters in a FY or of different FY,

separate forms are required. [u/r 12(1)of CST (R&T) Rules]

If A purchases goods from outside the State against “C” Form , he can not

take any ITC.

Inter-State sale Transaction u/s 3(a)

Purchase against C Form

A regd dealer can purchase from outside the State against “C” Form & can

avail concessional rate of tax @2% on such purchase. [ u/s 8(1) & 8 (4) of CST

Act]

He can obtain Form from his sales tax authority on payment of 21/-. Now e-

form is applicable. He will file an application in Annexure G.

He will give “original” & “Duplicate” copies to the Seller & will retain the

Counterfoil. The seller will hand over Original to the assessing authority.

The purchaser in Odisha shall maintain a Register in Form V & he shall show

the utilisation account of C Form in Form V-1 to his sales tax authority. [u/r 6

of CST (O) Rules]

Sale against C Form

A regd dealer can sell against C Form. While filing returns for the month/qtr

ending 30th

June,30th

Sept, 31st

Dec & 31st

March, he will submit a Statement &

Forms received from the Purchasers for the transactions made in the Qtr

preceding the Qtr for which the Return is filed [ u/r 7A of CST (O) rules]

.

Inter-State sale Transaction u/s 3(a)

A regd dealer claims that he is not liable to pay CST on the ground that

movement of goods from one state to another was occasioned by reason of

transfer of such goods by him to any other place of his business or to his

agent or Principal, & not by reason of sale, the burden of proving so shall be

on such dealer

The dealer to whom the goods are transferred (Transferee) will furnish a

F Form to the sender of goods. A single form will cover transactions made

during a calender month.

The Transferee/receiver of goods can obtain F from his sales tax authority

on payment of 21/-. Now e- form is applicable.

.

Stock transfer/ Branch transfer of Goods u/s 6A

He will give “original” & “Duplicate” copies to the Transferor/Sender & will

retain the Counterfoil. The sender will hand over Original to the assessing

authority alongwith a Statement in Form C within 3 months from the end

of period to which the declaration relates. [ u/r 12 of CST(R&T) Rules & u/r

6C of CST(O) Rules].

The Receiver in Odisha shall maintain a Register ( accounts of such

Form) in Form V C. [u/r 6C of CST (O) Rules]. He will file an application in

Annexure H for Form F

While filing returns for the month/qtr ending 30th

June,30th

Sept, 31st

Dec & 31st

March, the transferee/receiver will submit a Statement & Forms

received for the transactions made in the Qtr preceding the Qtr for which

the Return is filed [ u/r 7A of CST (O) rules].

Stock transfer/ Branch transfer of Goods u/s 6A

Implication of ITC in case of stock transfer of goods

A regd dealer in Odisha purchases furnitures within Odisha & effects Stock

transfer of the same to its branch in Kolkatta.

Purchase Price = 100,000/- VAT @ 13.5%= 13,500/- ( Input Tax). He has

paid at the time of purchase.

He will not pay any CST on such transfer.

He will be entitled to ITC ( 13,500- 4000/-) = 9,500/-

because excess of 4% will be allowed as ITC u/s 20(3)(e)

Information will be given in Annexure I in VAT-201.

If goods purchased are sent on Stock transfer partially, ITC shall be allowed

proportionately

Stock transfer/ Branch transfer of Goods u/s 6A

Transit Sale ( subsequent sale)-

Basic requirements are:-

The first requirement of a transit/subsequent sale is that there must be a

relative prior sale which had either occasioned movement of goods or was

effected by the transfer of documents of title to goods

There must be movement of goods from one State to another before any

contract of sale or agreement to sell have been made.

Such transfer of title documents must take place while the goods are still in

movement or transit

A Document of title to goods, bears internal evidence of ownership of goods

by holder of document.

SALE BY TRANSFER OF DOCUMENTS OF TITLE OF GOODS [as U/s 3(b) & u/r

6(2).

The sale of goods Act,1930 defines “document of title to goods” Some of the

examples are Lorry Receipt (LR) in case of transport by road; Railway receipt

(RR) in case of transport by rail, bill of Lading (BL)in case of transport by sea,

Airway bill (AWB) in case of transport by air.

Where a sale in course of interstate trade has either occasioned the movement

of such goods from one sate to another or has been effected by a transfer of

documents of titles to such goods during their movement from one sate to

another, any subsequent sale during such movement effected by a transfer of

documents of titles to such goods to a regd dealer shall be exempt from CST.

The dealer effecting such subsequent sale will furnish a certificate in E-I Form

to the authority.[ u/r 12(4) of CST ( R&T) Rules ]

Transit Sale u/s 3(b) & 6(2).

Example:-

X of Delhi sends goods to Y of Bhubaneswar. The Railway Receipt is sent by

post to Y. While the goods are in transit Y sells goods by transfer of documents

of title to goods (RR) to Z of Bombay. In this case sale was effected by transfer

of/endorsing the documents of title to goods (Railway Receipt) to the buyer

when the goods were in movements from Delhi to BBSR.

X is the 1st

seller of goods & Y is the 2nd

seller. X will collect CST @2% from Y.

The sale transaction between Y & Z will be tax exempt

X will give E I certificate to Y & will receive C Form from Y

Z will give C Form to Y

Y will submit E-I Form received from X & C Form received from Z to the

assessing authority within 3 months.

While filing returns for the month/qtr ending 30th

June,30th

Sept, 31st

Dec &

31st

March, Y will submit a Statement & Forms received for the transactions

made in the Qtr preceding the Qtr for which the Return is filed [ u/r 7A of CST

(O) rules]

Transit Sale u/s 3(b) & 6(2).

Example :-A transferred goods to his depot.Goods were sold from the depot to

the buyers in Delhi.

Comments

Transfer from Punjab to depot in Delhi is purely a stock transfer ,therefore

no sales tax on the same

Sale from depot to customers is a local sale and termed as sale inside state

of Delhi. As the sale is inside the state of Delhi, it automatically becomes

outside all other states.

INTRA STATE SALE u/s 4

As per section 4 (1) when a sale or purchase is inside a state

As per section 4 (2) such sale or purchase shall be deemed to have taken

place outside all other States

Sale inside a state as per section 4 (2) means –

1. In case of specific goods or ascertained, if goods are within the state at

the time of the contract of sale is made.

2. In case of unascertained or future goods, if goods are within the state,

at the time of their appropriation to the contract.

Example :-A transferred goods to his depot

Goods were sold from the depot to the buyers in Delhi

Comments

Transfer from Punjab to depot in Delhi is purely a stock transfer ,therefore

no sales tax on the same

Sale from depot to customers is a local sale and termed as sale inside state

of Delhi. As the sale is inside the state of Delhi, it automatically becomes

outside all other states.

INTRA STATE SALE u/s 4

As per section 4 (1) when a sale or purchase is inside a state

As per section 4 (2) such sale or purchase shall be deemed to have taken

place outside all other States

Sale inside a state as per section 4 (2) means –

1. In case of specific goods or ascertained, if goods are within the state at

the time of the contract of sale is made.

2. In case of unascertained or future goods, if goods are within the state,

at the time of their appropriation to the contract.

U/s 7(1) of the CST Act - When a dealer in Odisha effects interstate sale for any

amount, he is liable to pay CST & is required to obtain RC both [compulsory

regn under the VAT Act u/s 10(4)] & u/s 7(1) of CST Act

U/s 7(2) of the CST Act - When a dealer in Odisha is liable to pay VAT even if

he does not effect interstate sale, he is required to obtain RC compulsorily

under the VAT Act u/s 10(4) & may obtain RC u/s 7(2) of CST Act

Application for regn u/s 7(2) shall be made within 30 days & application u/s

7(1) can be made at any time, in Form A prescribed under CST (R&T) Rules

[u/r 3]

R.C. Shall be issued in Form B prescribed under CST (R&T) Rules & will bear

TIN issued under VAT Act.

Before grant of RC he is required to pay security equivalent to tax payable

for a year [ u/s 7(2A) & u/r 3(2) of CST (o) rules]

RC can be cancelled if his liability has ceased or he has failed to pay

security or additional security or tax/ penalty or his liability under VAT Act

has ceased if he has taken RC u/s 7(2) [ u/s 7(4)(b) of CST Act]

Penalty of 1& ½ times for failure to be registered u/s 10(aa) read with

sec10A

Registration u/s 7 of CST Act read with rules 3 to 8 of CST (R&T) Rules

Return u/r 7 of CST(O) Rules

Return shall be accompanied by-

receipt or e-Challan from Govt. Treasury

or Crossed Demand Draft drawn on any Scheduled Bank

or Banker‟s cheque issued by a Scheduled Bank

through e-payment at some scheduled Banks like SBI, ICICI, AXIS, UCO,

PNB etc

Regular Return

The Monthly dealers under the VAT Act & Rules will file monthly CST return

& Quarterly dealers under the VAT Act & Rules will file Quarterly CST return

within 21 days from the end of the month/ Quarter [ U/r 7 CST (o) Rules]

The Return is in Form I under CST (o) Rules

Revised Return

Revised return in case of omission or error within 3 months from the end of

the tax period to which the original return relates.

Annual Return

All Registered Dealers shall file Annual Return for the year in within 6 months

from the end of a year

Statement of Declaration Forms & certificates u/r 7A of CST (O) Rules

Every dealer while filing returns for the month/qtr ending 30th

June,30th

Sept,

31st

Dec & 31st

March, will submit a Statement & Forms ( C form, F form, E-I/E-II

certificate, H Form, I Form J form) received from the Purchasers/transferee for

the transactions made in the Qtr preceding the Qtr for which the Return is filed

The Statement shall be submitted in duplicate, a receipted copy will be

returned to the dealer

Return Defaults

1. Levy of Interest for delayed payment or non-payment of tax [u/r 8 of

CST (O) rules]

Interest is 1% of such tax or differential tax or full tax respectively, per month

from due date of Return to date of payment or date of assessment order,

whichever is earlier.

Such interest shall be paid at the time of making payment of tax or the date

specified in demand notice as per the order of assessment whichever is earlier

2. Levy of Penalty [u/r 8A (1) of CST (O) rules]

When a registered dealer fails to pay tax due & interest along with Original/

revised, he may be directed to pay in addition to such tax & interest, a penalty

@ 2% per month on the tax & interest, from the date it had become due to the

date of its payment or order of assessment whichever is earlier, after issuing a

show cause Notice in form Form III

In case of failure to explain or respond, penalty shall be imposed & Demand

notice shall be issued in FormVII

3. Levy of Daily Penalty [ U/r 8A(2) of CST (O) rules ]

When a registered dealer fails to furnish return & pay full tax as per

original return /Revised, he maybe issued with a show-cause Notice in Form III

In case of failure to respond or compliance he may be directed to pay , in

addition to tax, interest, penalty, another penalty of 100/- rupees per day

subject to a maximum of 10,000/- rupees [U/s 34(3)]

3. Example of Annexure II of VAT-201 slide56 /Return

Where CST payable is less than Input tax

P.P = 100,000/- VAT @ 13.5%= 13,500/- ( Input Tax)

Inter-state sale is made

S.P. = 1,50,000/-

CST @2% against Form „C‟ = 3000/- ( CST collected)

ITC creditable = 3000/-

10,500/- shall be reversed as per sl No. 5 of Annexure II

Sec. 6 (2) of CST Act says when goods are in movement from one state to other in pursuance a

contract of sale, then any subsequent sale effected by transfer of documents during such movement

shall be exempt from CST. The first requirement of a subsequent sale under section 6(2) is that it

must have a relative prior sale “in the course of inter-state trade or commerce” which had (a) either

occasioned the movement of such goods from one state to another, or (b) was effected by transfer of

document of title of such goods during their movement from one state to another. In other words, a

movement of the goods in pursuance to a prior sale is the first pre-requisite of a „subsequent sale‟

contemplated by section 6(2) for enjoyment of exemption. e.g. 1.) A of Delhi Orders B of Haryana

to sell and dispatch to Delhi 50 bags of black paper. B dispatches the goods and send the railway

receipt to A. In the mean time, A had sold identical quantity of same goods to C of Delhi. Instead of

himself taking delivery of goods from railway and then delivering those goods to C at Delhi, A

transfer to C the railway receipt which was sent to him by B. The sale by A to C is an inter-state sale

because it was effected by a transfer of document of title, viz. railway receipt. If C is registered

dealer, the sale from A to C may enjoy exemption from tax on fulfillment of other conditions of

section 6(2), e.g. The production by A of prescribed certificate and/ or declaration etc. The dealer

had entered into a contract with a supplier in the same state and had furnished „C‟ form to the

supplier and directed him to deliver the goods to the petitioner‟s customer in another State. It had

obtained forms E1 forms its supplier and C form from customer state. Under section 6(2), the

second sale so effected by the petitioner was to be exempted and the petitioner was entitled to that

exemption as in respect of those transactions, form E1 from the supplier and C forms from customer

had been produced. - See more at: http://taxguru.in/goods-and-service-tax/subsequent-sale-sale-

transit-cst-act-1956.html#sthash.tieYWhly.dpuf