11 February 2011

Central Sales Tax, Rates of Taxes

Central Sales Tax is tax levied on sale of goods and property in course of inter-state trade. i.e. buyer and seller are located in different state and/or goods move from one state to another state.
Central Sales Tax is levi-able under Central Sales Tax Act, 1956; enacted by the Parliament of India in 1956. Entry 92A of List I of Constitution empowers Parliament to enact law relating to “Taxes on the sale and purchase of goods other than newspaper, where such sale or purchase takes place in course of Inter-State trade or commerce”
The Central Sales Tax formulates principles to determine inter-state transaction, i.e. when the sale is in course of interstate trade or commerce, when it is outside the state and when it takes place in course of import or Export.
Tax is levied under the central law but taxes are collected by the state government to the benefit of state government. The central law brings uniformity in taxing principles in case of Inter-state trade and commerce, etc.
Tax is levied and payable on inter-state trade even though no tax is payable in state which is entitle to levy central sales tax.
Tax is levied on sales; and
  for purpose of Central Sales Tax sales apart from goods include;
(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(iii) a delivery of goods on hire-purchase or any system of payment by instalments;
(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
(v) the supply of goods by any unincorporated association of body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(vi) a supply, by way of or as a part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink(whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration,
but does not include a mortgage or hypothecation of or a charge or pledge on goods;
Sales Excluded from turnover for taxability under Central Sales Tax Act
However following transactions are excluded from taxability under central sales tax.
1. Subsequent sales during the movement of goods in transit when supported by necessary declaration like E-1 Forms, E-II, etc.,
2. On sale of finished goods & packing material in course of penultimate sale when supported by declaration like Form-H,
3. Sales made to SEZ developer and SEZ unit when supported by necessary declaration like Form-I,
4. Sales to foreign diplomatic missions, UN, international organisation, etc. when supported by declaration in Form-J,
5. Central sales tax is applicable only to sale in course of interstate trade, imports & exports are not subject to tax under Central Sales Tax Act, hence high seas sales are also exempted from central sales tax.
Sales to dealers registered under sales tax and Government are liable to tax at lower rates. The selling dealer is required to obtain C-Form from purchasing dealer.

Rates of CST w.e.f. 1-6-2008.
1. All sales in interstate trade, to a registered dealer (registered under CST Act) supported will be at concessional rate of 2%, the selling dealer will have to obtain C-Form form purchasing dealer in other state.
2. Sale to dealer not registered under CST will have to be made at rate of sales-tax applicable in state. however were rate of tax is less then 2% in the state i.e 1% or Nil rate then the rate applicable in state will be applicable for sale under CST Act,
3. When dealer has made sale @ 2% against C-Form and C-Form is not received by selling dealer, then selling dealer will have to pay tax at rate applicable in state along with interest on delay payment of tax. Interest will be payable at rate applicable for delay in payment in state laws.
Summary table is given below:
Local Rate of Tax
Rate of tax under CST Act
Supported by C-Form Without C-Form
Declared Goods 2% 4%
Goods generally exempt under local act Nil Nil
1% 1% (No C-Form Required) 1%
4% 2% 4%
5% 2% 5%
12.5% 2% 12.5%
Where State-Government exempts sales notified u/s.80(5) no tax is payable on such sales
Tax at above rate is levied on Sale Price.

CST Act defines sale price is defined as;  ''sale price'' means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged;
Provided that in the case of a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, the sale price of such goods shall be determined in the prescribed manner by making such deduction from the total consideration for the works contract as may be prescribed and such price shall be deemed to be the sale price for the purposes of this clause.