Central Sales Tax

TAX ON INTERSTATE SALES

Every dealer is liable to pay tax under the Central Sales Tax Act, on all sales of goods (other than Electrical Energy) effected by him in the course of interstate trade or commerce during the year. The tax is payable if the sale or purchase:

1. Occasions the movement of goods from one State to another, or
2. Is effected by a transfer of documents of title to the goods during their movement from one State to another.

Further, the dealer is liable to pay tax under this Act on sale of taxable goods effected by him in the course of interstate trade or commerce, notwithstanding the turnover limit of sales or purchases for registration and liability for tax has not exceeded under the State Tax Laws of the appropriate State.

No tax is payable under this Act on –

1. Any transaction of sale in the course of export out of the territory of India. [Section 5(1)]
2. Sale in the course of import or sale effected by transfer of document of title to the goods before it crosses the customs frontiers of India popularly known as "High Seas Sale". [Section 5(2)]

3. Sale of goods to exporters for the purpose of complying with pre-existing export order or agreement against Form H. [Section 5(3)]

4. Any subsequent sale, during interstate movement of goods, effected by transfer of documents (i.e., sale in transit) is exempted if the sale is made to a registered dealer, provided the prescribed declarations (Form E-1/E-2) are obtained from the supplier and ‘C’ form from the purchaser of such goods. [Section 6(2)]
5. Interstate sale of goods to any foreign diplomats/ mission/consulates/United Nations, etc. against Form J. [Section 6(3)]
6. Interstate stock transfer of goods against Form ‘F’. [Section 6A]
7. Sale of goods to:
   1. Developer of SEZ;
   2. Unit situated in SEZ against Form ‘I’ [Section 8(6)]
8. Sale of goods to notified persons against Form ‘J’ [Section 8(4)]

SALE INCLUDES DEEMED SALE

The Finance Act, 2002 has substituted the definition of sale under the CST Act. The amended definition is as follows:–

‘2(g) "sale", with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration and includes, –

1. a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
2. a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
3. a delivery of goods on hire-purchase or any system of payment by installments;
4. 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;
5. a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
6. a supply, by way of or as 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 or pledge of or a charge on goods.

REGISTRATION

A single interstate sale of any amount effected by a dealer attracts tax liability under the Central Sales Tax Act and consequential liability for obtaining certificate of registration. The application for registration in Form A shall be made within 30 days from the date on which the first interstate sale is effected. However, the dealers registered under the State Sales Tax Act may get voluntary registration under this Act even without effecting any transaction of interstate sale.

The prescribed authority, to whom the application is made if satisfied that the application is in conformity with the provisions of this Act and Rules made thereunder, shall register the applicant and grant to him a certificate of registration in prescribed form.

RATES OF TAX

Rates of tax on sales in the course of interstate trade or commerce are prescribed by Sec. 8 of the Act. Accordingly, tax is to be charged as follows:

BRANCH TRANSFERS

Transfer of goods from one State to another to one’s own place of business or to his agent’s/principal’s place of business is exempt under section 6A. A declaration in Form ‘F’ must be obtained from the goods receiving branch/HO as the case may be. (Proof of dispatch is no more sufficient proof of Branch Transfer). One single F form can be issued covering all transfers, from one State to another, during a month.

However, it may be noted that this exemption is applicable only in case of stock transfer of goods. Such transfer/s should not be in pursuance of any pre-existing contract of sale.

EXPORT-IMPORT

Transactions of export of goods outside India or import of goods from out of India are exempt from tax. Sales/purchases effected by transfer of documents of title to goods before (in case of import) or after (in case of export) the goods crosses the customs frontiers of India are also exempt u/s. 5 of the Act. Further, sales to exporters selling goods directly to their purchasers in other countries, against prior export orders are also exempt. A declaration, in Form 'H’, is to be obtained by the selling dealer from such exporters.

ISSUE OF 'C’ FORMS

Dealers effecting sales in the course of interstate trade shall obtain a declaration, in Form 'C’, from the purchaser of goods. The department shall issue such forms in triplicate to the purchasing dealer. The purchaser should send two copies to the seller. The original is to be submitted by the selling dealer to the authorities concerned, and the duplicate is to be kept in his record.

The purchasing dealer is required to get these forms from the prescribed authority under his seal and signature. The dealer issuing the forms shall keep a record of forms used by him.

'C’ form declarations can be issued by dealers registered under the Central Sales Tax Act, in respect of those goods only, which are included in the relevant list of their Registration Certificate under the Central Sales Tax Act, for resale, for packing or for use in the manufacture or processing of goods for sale, or for use in mining or for use in telecommunication network or for use in the generation or distribution of electricity or any other form of power.

Earlier, one single C form could be issued for all sales bills of the selling dealer for all the transactions effected during one financial year. However w.e.f. 1st October, 2005, the 'C’ forms are required to be issued one for each calendar quarter.

Procedure for obtaining Declaration Form/s from the Department: As per new procedure, prescribed through Trade Circular No. 4T of 2014, dated 28th January, 2014, issued by the Commissioner of Sales Tax, Maharashtra, all declaration certificates like Form C, F, H, E-1, E-II, etc., shall be issued by the Department with effect from 1st February, 2014 in non editable pdf format. For procedure to be followed kindly refer to instructions given in this regard in the above referred trade circular and on the website: mahavat.gov.in.

Rule 4(19) of Central Sales Tax (Bombay) Rules 1957, inserted vide notification dated 17th February, 2014, provides that where the authority in charge of Central Repository issues such declaration forms/certificates electronically then the dealer (who has applied for such forms) shall take print in triplicate on A-4 size paper of not less than 75 gsm and mark the copies as ‘counterfoil’, ‘original’ and ‘duplicate’. And he shall send the ‘original’ and ‘duplicate’, after due signature, to the other dealer (in whose favour such declaration form/certificate has been issued).

SUBSEQUENT INTERSTATE SALES

For the purposes of S. 6(2), providing for exemption from payment of Central Sales Tax on subsequent interstate sales, certificates in Form ‘E-I’ or ‘E-II’ have to be issued by the selling dealers to the purchasing dealers and Form ‘C’ is to be obtained from purchasing dealer.

PAYMENT OF TAXES

The tax should be collected by the registered dealer, who sells goods in the course of interstate trade or commerce and shall be paid by him into the Government treasury in challan No. MTR 6, before filing return, within the time, as may be prescribed by the State Government in the local Act.

FILING OF RETURNS

A dealer, registered under Central Sales Tax Act, is liable to file periodic returns as per periodicity and due date/s as may be prescribed under the local sales tax (VAT) law.

Note: In the State of Maharashtra, there was an old circular whereby the dealers holding CST registration certificate, but not having any tax liability under the CST Act, during a period, were exempted from filing CST return/s. However, the said circular has been modified through Trade Circular No. 20T of 2014, dated 25th November, 2014. Accordingly, with effect from 1st October, 2014, all those dealers having following types of transactions must file CST returns:-

1. Interstate sale u/s. 3 of CST Act,
2. Goods transferred u/s. 6A (1) of CST Act,
3. Sales outside the State u/s. 4 of CST Act,
4. Export sales u/s. 5(1) and 5(3) of CST Act,
5. Sales in the course of import u/s. 5(2) of CST Act

The dealers, falling under any of the above referred categories, if not filing CST returns, shall be treated as defaulter/s.

OFFENCES AND PENALTIES

Simple imprisonment up to six months or fine or both are provided for the following offences:

1. Furnishing false declarations/certificates;
2. Failure to get registered or to furnish security;
3. False representation, while purchasing goods, that the goods are covered by registration certificate;
4. Not being a registered dealer, False representation about being a registered dealer;
5. Failure, without reasonable excuse, to use goods for the purpose certified in the C form declaration;
6. Collection of Central Sales Tax contrary to S. 9A.

In case of a continuing offence, a daily fine upto Rs. 50,000/- for every day during which offence continues.

Penalty in lieu of prosecution is provided for offences covered by sub-paras (3), (4) and (5) above. Compounding of all offences has been provided. Special provisions have been made for companies in liquidation and personal liability of directors of private limited companies which are wound up.

Further, interests and penalties for late filing/non-filing of return or late payments, etc. are to be governed by the law prevailing in the appropriate State.

DECLARED GOODS

Section 14 covers the following items called ‘declared goods’ which are subject to tax under a State Sales Tax law at a rate not exceeding 5%.

These are: Specific types of cereals (i.e., paddy, wheat, rice, jowar, bajra, maize, etc.), coal including coke in all its forms but excluding charcoal, cotton, cotton fabrics, man-made fabrics and woollen fabrics falling under certain headings in the Schedule to the Central Excise Tariff Act, 1985, cotton yarn, but not including cotton yarn waste, crude oil even when subjected to certain processes, hides and skins, whether in a raw or dressed state, certain types of iron and steel materials, jute, certain types of oilseeds, certain types of pulses and sugar falling under certain sub-headings in the Schedule to the Central Excise Tariff Act, 1985, Aviation Turbine Fuel sold to Turbo-Prop Aircraft and sponge iron.

MANNER IN WHICH ACCOUNTS ARE TO BE KEPT – [Rule 3 of Central Sales Tax (Bombay) Rules, 1957]

The particulars of all sales made by a dealer in the course of interstate trade or commerce shall be entered by him in a separate account, and where a dealer keeps a day book of sales it shall form a separate part or section thereof. The name of the registered dealer, if any, to whom goods have been sold, the number of his certificate of registration under the Act and the serial number of the declaration under sub-section (4) of section 8, if any, obtained from such dealer shall be specified in such account against the entry relating to each sale. The amount of tax payable under the Act in respect of each sale and the net amount of sale price as well as other sums received which do not form part of the sale price shall be entered in separate columns in the said account and the columns shall be totalled for each period for which the turnover of the dealer is determined for the purposes or paying tax under the Act.