Central Sales Tax Act

16.CENTRAL SALES TAX ACT
BACKGROUND A sale has four ingredients: a. b. c. d. Contract/Bargain for sale. Payment/promise of payment for goods. Delivery of goods Actual passing of the title.

Nexus theory: For the purpose of levying sales tax under General sales tax act, a tate Government can choose any one of the a!ove four events. "his means that t#o states may choose any one of the four ingredients and levy tax on the same transaction. "he result of the nexus $%in&' theory #as the overlapping of taxation and the conse(uential adverse effect on the economy. "he Constitution #as amended, through the ixth Amendment in )*+, to avoid the dou!le taxation. From then tax on is levied !y central government $But collected and &ept !y state government' and tax on -ntra state sales is levied !y state govt. and no tax is levied on import/export sales.

SEC.1
.ame of the Act/ "he Central ales "ax Act, )*+,. "he Act extends to the #hole of -ndia.

OBJECTIVES OF THIS ACT
a. b. c. d. e. "o give out the principles for determining -nter state or 0xport sale or -mport sale. tate ale $' or ale outside a

Provide for the levy, collection and distri!ution of taxes on sale of goods in the course of inter1 tate trade. Declare certain goods to !e of special importance $Called Declared goods'. pecify the restrictions and conditions on state la#s imposing taxes on declared goods. "o provide for collection of tax in the event of li(uidation of a company.

FEATURES OF CST ACT
a. b. "ax. c. d. e. f. g. ec.2 explains #hen the sale of goods #ill !e called an -t explains #hat is an import and export sale. ec.3 explains #hen a sale #ill !e outside all other tates. .ormally C " is charged at a single point, !ut in some cases there can !e multiple point tax on account of su!se(uent sale. Goods for the purpose of C " have !een divided into 1 Declared 4 other Central Sales Tax_1 . -t states that every dealer #ho ma&es an uch dealer, #ho ma&es an -nter tate must !e a registered dealer. ales ales, is lia!le to pay Central

goods. h. i. C " is levia!le from the first rupee of sales made in the course of -nter1 state sale. "he Central ales1tax is levied under this Act !ut it is collected !y the tate Government from #here the goods have !een sold.

CHARGING SECTION
ec.,$)' of C " Act provides that su!5ect to other provisions of the C " Act, every dealer shall !e lia!le to pay tax under this Act on all sale of goods $other than electrical energy' effected !y him in the course of -nter1 tate trade. ec.,$)' is called 6Charging ection7 as it imposes levy on sale of goods on -nter1 tate sale. Analysis of charging sec.:

    

.o tax on sale of ne#spaper8 9hy: 1 .ot goods $ ec.;$d'' .o tax on sale of 0lectricity8 9hy: 1 0xcluded from charging ection ,. .o tax on 0xport/-mport ale8 9hy: 1 "ax for sale only $ ec.,$)''.

.o tax on purchases8 9hy: 1 "ax on sale only $ ec.,$)'' $<' "ax levia!le on all sales: 9hy: 1 "he #ordings in ec.,$)' are such $.o free limit or second sales exemption as in state la#s'. * -t is only in tate la#s cotton, sugar canes etc. are taxed at purchase point.

DEFINITIONS
“GOODS” - 2(d) Includes
All =aterials/ Articles/ Commodities. All @ther &inds of =ova!le Property.

Excludes
.e#s Papers. toc&s 4 hares.

"he main character of goods is =ova!ility. A person sells the standing trees alone i.e. the !uyer is to fell the trees and ta&e them a#ay. >as he sold the goods:/ ?es. A person sells a piece of land along #ith standing trees/crop. >as he sold goods:/ "he property sold is immova!le and hence not goods. >ouse sold is not mova!le and hence it is not goods, !ut house demolished and sold as #aste is mova!le and hence goods. =ines are not goods, !ut minerals extracted from them are goods. 0ven Air and 9ater are goods. Central Sales Tax_2

0ven illegal goods are also goods. Caged animals and !irds are goods. 0ven dead animals are goods. Copy rights, gas, electricity, steam, lottery tic&ets are also goods. "he implication of this definition is that no sales tax #ill !e levied on sale of .e#s papers etc. But if the same ne#s papers are sold as #aste paper, they are treated as goods !ut not as ne#s papers and hence they are taxa!le. E.g.: -f old ne#spaper is sold as ne#spaper, then it is not taxa!le. uppose a Bom!ay !oo& shop sells an old ne#spapers to a researcher in Delhi for As.),+BB, it is not chargea!le to tax. >o#ever, if old ne#spapers are sold as scrap C As.3.+B per &g, it is chargea!le to C ", if it is an inter1 state sale. 9ee&lies and magaDines, la# 5ournals etc. fall under the category of ne#s papers. ale of electricity is also not taxed !ecause of excluding the same from chargea!ility !y charging ec.,$)'. "hus non taxa!ility on electricity 4 ne#s papers is for different reasons. “SALE” - 2(G) -ncludes any transfer of property in goods !y one person to another for cash or for deferred payment or for any other valua!le consideration. -t also includes a transfer of goods on the hire1purchase or other system of payment !y installment !ut does not include a mortgage or hypothecation or pledge of goods. Mortgage: "itle deeds on -mmova!le property is handed over to the lender as security and still title is not passed. Pledge: =ova!le property is physically handed over to the lender $"itle not passed' Hypothecation: =ova!le property is pledged to lender, !ut possession is not handed over to lender. Goods continue to !e in the hands of !orro#er. -n case of default !y the !orro#er, the lender can ta&e over the goods. .o sales in case of !ranch/consignment agent transfer. ales made on sale or return !asis are not sales. ales include !arter sales 4 Credit sales. ale includes re1sale. Auction sale is also sale. Free gifts are not sale. ale may !e of legal or illegal goods. ales made #here in the goods are lost in transit or re5ected !y the !uyer $#ithout receiving them' are not sales. Bailment: -n case of !ailment there is only transfer of property in possession !ut not "ransfer of property in goods. >ence !ailment is not sale. Concept of deemed sales: -t is there under the Article 2,, $0ntry ;*A' of the constitution. Accordingly the follo#ing , types of transactions can !e taxed/ a. "ransfer of property in goods other#ise than in pursuance of a contract $there fore C " is paya!le even if there is compulsory transfer'. Central Sales Tax_3

b. c. d.

"ransfer of property in goods through #or&s contract. "ransfer of property in goods in hire purchase/installment payment system. >ire/"ransfer of right to use goods i.e. lease $i.e. even goods given on hire amounts to sale. .ote that this is a transaction of !ailment and even then this is ta&en as sales'. upply of goods !y any unincorporated association/!ody of persons to the mem!ers $0ven though there are no t#o legal parties to sale'. upply of food and drin& in a hotel.

e. f.

9.e.f. )).+.B;, the definition of sale has also !een amended in C " act to include all the ,. Consignment ax: "hrough a ne# entry *;B a provision has !een made for the levy of tax on consignment sales $Consignment tax' made in the course of inter state trade. But C " act is yet to !e amended in this regard. “APPROPRIATE STATE” - 2(a) a. -n relation to a dealer #ho has one or more places of !usiness situated in the same tate 1 "hat tate. b. -n relation to a dealer #ho has places of !usiness situated in different such tate. “PLACE OF BUSINESS” - 2(dd) tates 1 0very

It Includes:

a. -n any case #here a dealer carries on !usiness through an agent $!y #hatever name called', the place of !usiness of such agent. b. A #arehouse, godo#n or other place #here a dealer stores his goods and c. A place #here a dealer &eeps his !oo&s of account. Issue !: "hy determination of Appropriate #tate is necessary$ a. "he responsi!ility for levy, assessment and collection of Central ales "ax have !een delegated to the tate Government and therefore it !ecomes necessary to identify the appropriate state #hich can levy, assess and collect the Central ales "ax. b. "he persons lia!le to pay Central ales "ax must &no# a!out the state to #hich he has to pay the Central #ales ax. c. "he dealers are re(uired to follo# pro%isions relating to filing of &eturns etc. in accordance #ith the provisions of the respective states. From this angle too it is necessary to identify the appropriate state. d. "he rates of Central #ales ax' depends on the rates of tate ales "ax. e. &ele%ant forms li(e C' ) etc. can !e o!tained from the appropriate state only. Issue *: )oes the +ord state include union territory$: ?es. Issue ,: A dealer has his corporate office in Pondicherry, a factory in Andhra Pradesh, a depot in Earnata&a and !ranch offices in Eerala and =aharashtra. For him all the five states are appropriate states since he has places of !usiness in each of those + states. Central Sales Tax_4

Issue -: A !usiness man &eeps his !oo&s in poo5a room and his goods in a godo#n located at city outs&irts. -n such a case !oth poo5a room 4 godo#n are place of !usiness.

MEANING OF INTER STATE SALE (ISS) - SEC.
A sale of goods shall !e named as $-nter state sale' under the follo#ing situations/

a. -f the sale occasions the movement of goods from one tate to another $ ec.2$a'' $E.g.: F of Delhi sells goods to B of =.P. As per the terms of contract, goods are delivered !y F in Delhi to a transport company and "ransport Company delivers goods to B at -ndore. -n this case, !ecause of the sale, goods have moved from Delhi to -ndore and, therefore, it is inter1 tate sale chargea!le to the central sales tax'. -n other #ords sale is not inter1 tate if movement of goods is not related to contract for sale Or b. -f the sale is effected !y a transfer of documents of title to the goods during their movement from one tate to another. $ ec.2 $!''. $ E.g.: A of Delhi sells goods to B of >ydera!ad, #hile the goods are in transit, B sells the goods !y transfer of documents to C of Bangalore. -n this case there are t#o - 7s. ale !y A to B is under 2$a' and sale !y B to C is under 2$!'.' ,.a/ 0s. ,.1/: -n the former case the movement of goods is under the contract of sale or purchase !ut in the latter the contract comes into existence after commencement and !efore termination of the inter1 tate movement of the goods. Meaning of mo%ement: For this purpose, it should !e noted that movement of goods commences at the time of delivery to a carrier for transportation and terminates at the time #hen delivery is ta&en from such carrier. -n other #ords, so long as the goods are in the custody of the transporter, the goods are deemed to !e in movement. $"hus, if goods are !oo&ed from Guntur to =um!ai !y Aail#ay, movement of goods #ill commence as soon as goods are handed over to rail#ay !oo&ing office at Guntur for transport. "he movement #ill !e deemed to continue even if goods reach =um!ai and are lying in possession of rail#ays. =ovement #ill !e deemed to !e terminated only #hen delivery is ta&en at =um!ai'. "hat is 2)ocument of itle of 3oods4: 9hen the goods are handed over to the carrier/transporter, he hands over a receipt to the seller. "he seller sends the receipt to !uyer. "he !uyer gets delivery of goods on su!mission of the receipt to the carrier/transporter. "he receipt of carrier is 6document of title of goods7. -t generally includes the follo#ing/ Aail#ay receipts $AA' G incase of movement of goods !y rail, %orry receipts $%A' G in case of movement of goods !y road, Air #ay Bill $AB' G in case of movement of goods !y air, Bill of %ading $B%' G in case of movement of goods !y sea. emporary mo%ement through another #tate is not Inter #tate sale: "here could !e instances #here the movement of goods commences and terminates in the same tate !ut during the course of such movement the goods pass through another tate. Any such case #ould not amount to a sale in the course of inter1 tate trade $ E.g. During the course of movement of goods from F $A.P.' to ? $A.P', #e may have to enter into =aharashtra' Is there any restriction on the num1er of 5endorsement sales6$: .o. #ome #pecial Cases:

Central Sales Tax_5

a. =/s Easturi 4 ons sold H"he >indu 4 Business lineI from Bom!ay to -CA- at Chennai. "here is sale. "here is inter state movement !ut #hat is sold is not goods $.e#spapers are not goods'. "herefore of goods has not ta&en place. b. A of Du!ai sells goods to B of Chandigarh. "he goods come to =um!ai !y sea and move from =aharashtra $=um!ai' to Pun5a! $Chandigarh'. "here is inter1state movement. "he ending point is in an -ndian state !ut the starting point is in Du!ai $outside -ndia'. "herefore there is no - . J"his is actually import sale falling under ec.+$;'K. c. A of =um!ai sells goods to B of ingapore. "he movement !egins from =aharashtra, passes through Andhra Pradesh and ends at ingapore $outside the state'. "he destination is outside -ndia. J"his is actually 0xport sale falling under ec.+$)'K. d. "hen #toc( ransfer is treated as Inter7#tate sale:

%et us assume that "ata -ron and teel Co. %td. $"- C@', manufacturing teel, has a factory at Lamshedpur, Bihar. "- C@ manufactures teel of various standard shapes and siDes. "- C@ has a depot at >o#rah in 9est Bengal. teel plates, rods, !illets etc. are sent to its depot at >o#rah. 9hen the goods are sent from Lamshedpur to >o#rah, there is inter tate movement, !ut the movement has not occasioned on account of any contract for sale. >ence, it is not an -nter1 tate sale !ut a stoc& transfer. >o#ever, assume that a !uyer from >o#rah #ants teel of a particular siDe and specification, #hich is not a standard siDe and specification and hence is not availa!le in >o#rah depot of "- C@. >e approaches "- C@ and "- C@ manufactures teel in its Lamshedpur factory in Bihar as per the specific re(uirements of the !uyer. After manufacture, goods are sent to depot of "- C@ at >o#rah and goods are sold to the !uyer from >o#rah depot of "- C@. -n such case, the movement of goods from contract and hence it is an - , even if goods are supplied from depot of "- C@ at >o#rah. Criteria: 9hether there exists a contract of sale !efore the movement of goods from >.@. 4 #hether such movement of goods is to comply #ith the existing sales contract. e. )ispatch through depot 7 only for name sa(e: -n some cases, ultimate !uyer of goods is &no#n even !efore goods are dispatched from the factory. -n some cases, goods are dispatched directly to the !uyer. @nly -nvoice is raised !y the depot to sho# it as a stoc& transfer. uch dispatch 5ust cannot !e considered as 6stoc& transfer7. -t has to !e held as 6-nter1 tate ale7. f. 8ocation of 1uyer and seller is immaterial : Can there !e an inter state sale !et#een t#o persons in the same state say Andhra Pradesh:/ ϒ ?es, if the goods move from other state to Andhra Pradesh or from Andhra Pradesh to some other state. "hus, even if !uyer and seller are #ithin the same tate, sale #ill !e inter1state 0.g. the !uyer may have construction site in another tate and may as& seller to dispatch goods directly to the site. ?es, if the seller ma&es a sale !y transfer of documents of title during the course of inter state movement.

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SALE!PURCHASE SAID TO TA"E PLACE OUTSIDE A STATE - SEC.#
1. 9utside state sale 7 #ec.-.!/: 9hen a sale or purchase is said to ta&e place inside a tate, such sale or purchase is deemed to have ta&en place outside all Central Sales Tax_6

other tates. $E.g.: A sale ta&es place inside Andhra Pradesh. -t should !e intra tate sale only. -t should not !e inter1 tate sale. "his sale ta&ing place inside Andhra Pradesh is outside Eerala, Earnata&a, "amilnadu etc. "his sale inside one tate is outside all other tates. "he other tates have no nexus #ith the sale 4 hence they can7t levy tax on such sales'. "he significance of this provision is that as per article ;M, of the constitution a state cannot levy tax on a sale ta&ing place outside the state. *. a. Inside state sale 7 #ec.-.*/: -n the case of #pecific or Ascertained goods, a sale is deemed to ta&e place inside the tate #here such goods are situated at the time #hen the contract of sale is made. "he criterion is #here the goods are at the time of sale contract. $E.g. A has )BB chairs in his shop at Guntur. B #ants to !uy them. A agrees to sell. "hese goods #hich are availa!le #ith the seller at the time of contract for sales are called NAscertained goodsN or specific goods. ince they exist in Andhra Pradesh at the time A and B entered into the contract the sale is deemed to ta&e place inside Andhra Pradesh'. -n the case of :nascertained or ;uture goods, a sale is deemed to ta&e place inside a tate #here such goods are situated at the time of their appropriation to the contract of sale !y the seller or !y the !uyer. "he criterion is #here the goods are at the time of appropriation. Application of #ec.-: First apply 3$;'. Find out the state in #hich the sale has ta&en place. "hen go to 3$)'. "he sale is deemed to ta&e place outside all other sates. . uppose there is a single contract of sale of goods situated at more than one place, it shall !e treated as if there are separate contracts in respect of the goods at each of such places. E.g.: A Businessman of Baroda having the Godo#n in Baroda, Laipur and -ndore. old +,BBB ="7s goods to a Customer of Bom!ay. "he goods #ere supplied in different (uantities from the follo#ing Godo#ns/ From Baroda 1 ),;BB =t7s, From Laipur 1 2,2BB =t7s 4 From -ndore 1 +BB =t7s. -n the a!ove case of ),;BB =t7s #ill !e #ithin1state sale of Gu5arat, 2,2BB =t7s #ill !e #ithin1state sale of Aa5asthan and sale of +BB =t7s #ill !e #ithin1state sale of =P. !"#"re g$$d%& "'a%cer#ai'ed g$$d%& a%cer#ai'ed g$$d% a'd %(ecific g$$d% ?ou go to a shop and as& for a Ntilting type mixerN. "he shop &eeper does not have a stoc&. >e says he #ill procure. "he goods you #ant to !uy are not presently availa!le. "hey are called future goods. After a month, the Ntilting type mixer7sN you #anted are availa!le for sale in the shop. >e has )BB mixer7s. "hey are of four colours 1 red, green, !lue, yello# and ;+ num!ers in each colour. ?ou have decided to !uy one, !ut you have not decided a!out the colour. All the )BB mixer7s, #hich #ere originally Nfuture goodsN have no# !ecome N unascertained goodsN. "he goods are there #aiting for your selection. ?our choice is in favour of green colour. .o#, all the ;+ num!ers of green variety have !ecome N ascertained goodsN. But you #ant to ensure that the mixer rotates #ithout any #o!!ling. o you as& the shop&eeper to run the green colour mixer7s one after another. After trial you choose a #o!!le free mixer. "hat mixer has come to the delivera!le state. ?our final choice is called Nspecific goodsN.

b.

E$PORT OR IMPORT SALE - SEC.%
"he sale shall !e deemed to ta&e place in the course of export or import/ Central Sales Tax_7

a.

ale either occasions export $Called export sale' or sale is effected !y a transfer of documents of title to the goods after the goods have crossed the customs frontiers of -ndia $Called deemed export sale' $ ec.+$)''. ale either occasions import $Called import sale' or sale is effected !y a transfer of documents of title to the goods !efore the goods have crossed the customs frontiers of -ndia $Called deemed import sale' $ ec.+$;''.

b.

0xport 1 =ovement of goods from a place in -ndia to a place outside -ndia. -mport 1 =ovement of goods from a place outside -ndia to a place in -ndia. E.g.4s:
ϒ ϒ

A of Delhi enters into a contract of sale #ith G of Germany and sends the goods out of the territory of -ndia. uch sale is an export sale. A of Delhi sends goods !y ship to his !ranch in Germany. After these goods have crossed the customs frontiers of -ndia, a sells there goods to G of Germany !y transfer of documents. uch sale is a deemed export sale. A of Delhi places an order for import of certain goods #ith G of Germany. G sends the goods to Delhi. uch sale is an import sale. ? imports some goods from %ondon. F of Delhi purchases goods from ? of Delhi, #hile the goods are in transit from %ondon to Delhi, this #ill !e considered as purchase in the course of import. -f these goods are resold !y ? to O, #hile the goods are still in transit/!efore customs clearance, it #ill !e termed as deemed import sale. -f, ho#ever, ? sells these goods after customs clearance, this #ill not !e sale in the course of import. A)) #he ab$*e %a)e% are '$# )iab)e f$r a'+ S#a#e $r Ce'#ra) Sa)e%,#a-.

ϒ ϒ

“CROSSING THE CUSTOMS FRONTIERS OF INDIA” - 2(a&)
=eans crossing the limits of the area of a customs tation in #hich imported goods or export goods are ordinarily &ept !efore clearance !y the customs authorities.

A

"he place =ar&N AN is the har!our gate and going in / out through the gate is crossing the Customs frontiers of -ndia. -n the customs la# crossing is rec&oned at the );th Central Sales Tax_8

nautical mile in the sea #hereas in the in C " the crossing is rec&oned in the main land at the har!or gate $-n the a!ove example it is represented !y .A/. "herefore, going inside !y crossing A into customs area for exporting some goods and coming outside from the customs area of the imported goods after paying the import duty #ill !e called as crossing of customs frontier of -ndia. "his definition is useful for the purpose of ec.+. As per #hich sales made !y transfer of documents of title $Bill of %ading' !efore crossing the customs frontier are import sales and sales made after the crossing are export sales. ale of fuel, food, etc., to foreign going vessels/aircrafts going a!road are not export sales !ecause the goods sold do not have a foreign destination. But it is treated as 6local sale7. ale after import is a distinct and normal sale. tate. uch sale may !e -nter1 tate or -ntra1

PRE E$PORT SALE OR PENULTIMATE SALE OR SALE FOR E$PORT - SEC.%( )
(Bac( ground: 0xport is a specialised !usiness and many small units are una!le to export directly. 0xport is often affected through specialised agencies li&e export >ouses etc. uch indirect exports also need exemption from taxes $li&e % ", C "' to ma&e the products competitive. >ence, such penultimate sale !efore export is also deemed to !e in the course of export under ec.+$2'. "o remove this hardship ec.+$2' #as incorporated.' Pro%isions: 0xemption to penultimate sale is availa!le su!5ect to the conditions that the penultimate sale $i.e., last !ut one sale !efore export sale' is/ a. b. c. d. For the purpose of complying #ith export order in relation to export. uch penultimate sale is made after the export order in relation to export. "he same goods #hich are purchased in penultimate sale must !e sold as exports, and "he dealer claiming the !enefit of ec.+$2' should o!tain Form > declaration from the exporter. "he details in form > prove prima facie that conditions of section +$2' have !een fulfilled.

E.g.: A of Delhi receives an order for export of certain goods from G of Germany. "o execute this order, he !uys the goods from B of %udhiana. "he sale !y B to A, #hich is the last sale !efore actual export sale, shall also !e deemed to have ta&en place in the course of export, although B has sold the goods to A in -ndia. "his sale shall therefore, not !e taxa!le under tate ales1tax la# or Central ales1tax la#. 9hat is the !enefit of ec.+$2':/ ec +$2' P +$)' POero tax "hether the follo+ing are eligi1le for the 1enefit of section <.,/$ a. F, the exporter, first procures goods from ?, the local dealer. "hereafter he finds a foreign !uyer O and ma&es export sale. ? #ill not !e eligi!le for+ $2' !enefit !ecause his sale to F #as prior to the receipt of the export order !y F from O. b. A sells goods to B. "he latter is to ma&e export sale to C for complying #ith some pre existing export order. "he foreign !uyer C !reaches the contract. "herefore B ma&es export sale to another !uyer !y name D. A #ill not get +$2' concession !ecause the export sale #as not made to comply #ith Central Sales Tax_9

the original export order #ith C. c. F of Q A placed an export order for sandal#ood oil #ith ? of -ndia. ? o!tained sandal#ood from O, extracted oil and sold it to F. O #ill not get ec.+$2' concession !ecause #hile the export order #as for sandal#ood oil, O sold sandal#ood after the receipt of the order from F. Further the rule called Hthe same goods must !e exportedI has not !een complied. Exceptions to the concept 5#ame goods6: a. A sells !lac& grams to B. "he goods are !lac& in colour $!lac& s&in outside and t#o cotyledons inside.' B removes the s&in and converts the pulse into gram. $9hite in colour 1 ; cotyledons only' for ma&ing export sale. "here is a processing in the hands of B. "he goods sold !y A $i.e. Blac& grams' are not sold in the course of export !y B. 9ill A get +$2' concession: Ans.: ?es, he #ill get it. Qnder ec.)+, Pulses and 3rams are treated as same goods. ec.+$2' concession is availa!le for the sale of pulse !y A. A sells paddy to B. "he latter hulls the paddy and ma&es export sale of rice to comply #ith the pre1existing export order for rice. 9hat A sold is paddy, !ut #hat B sold is rice in the course of export. 9ill A get +$2' concession: Ans.: ?es, >e #ill get it. 9hy: ec.)+ recognises paddy and rice as the same commodity for the purposes of section +$2'. Accordingly A7s sale of paddy is eligi!le for +$2' concession. on #ec.<.,/ 7 Purchase of pac(ing material for export

b.

#pecial issues permissi1le:

a. -f gunny !ags purchased are used as containers for export of certain goods to a foreign country, it is eligi!le for ec.+$2'. "he last purchase preceding the sale occasioning export should !e for complying #ith export order and hence are eligi!le for exemption under section +$2'. b. "he 6!anians7 #ere exported, pac&ed in the polythyne !ags. -t #as held that purchase of polythyne !ags is eligi!le for ec.+$2'. A sale u/s +$2' should !e inter state only. "rue or false:/ False. -t may !e inter state or intra state.

LIABILIT' TO TA$ ON INTER-STATE SALES - SEC.(
CHARGING SEC. - SEC.((1) Aefer to page ;. NO BENEFIT OF E$EMPTION - SEC.((1A) A dealer shall !e lia!le to pay tax under the C " Act on the sale of any goods effected in the course of inter1 tate trade though no tax is levia!le under the local sales tax Act of the appropriate tate if such sale is -ntra state sale. "herefore exemption in the local sales tax la# is irrelevant for the purpose of Central ales "ax Act. E.g.: -n some states, ta&e for e.g. "amilnadu, no %ocal sales tax is levied on sales upto prescri!ed limit $For e.g. it is 2 la&hs in "amilnadu'. But these goods #hich escape tax under local sales tax cannot avoid tax in C " AC". uppose =r.ARs sales turnover under ".G " is less than As.2,BB,BBB. .o tax under ".G " up to a turnover of As.2,BB,BBB. >o#ever C " is paya!le on 2 la&hs also.

Central Sales Tax_10

#ec.=.*/ - Concept of su1se>uent sales in C# : >o#ever exemption is availa!le to the ;nd 4 su!se(uent inter state sale provided such sale is effected !y transfer of documents of title during the movement from one tate to another. he conditions to 1e fulfilled for a%ailing this exemption are as follo+s: a. b. c. d. "here must !e an dealer/Government. !y a registered dealer to another registered

During the movement of such goods from one state to another, a ; nd inter1 tate sale !y transfer of documents of title should ta&e place. uch transfer of documents should !e either to the Government or to a registered dealer other than Government. "he dealer #ho ma&es the first inter state sale should give Form 01- to the purchasing registered dealer /Govt. and o!tain Form C/D as the case may !e, from him. "he registered purchasing dealer, #ho made the su!se(uent sale !y transfer of documents of title, #ill issue Form 01-- to the su!se(uent registered purchasing dealer / Government and must o!tain C/D form from them. imilar procedure #ill !e follo#ed for any su!se(uent sale #hich may ta&e place during the movement of such goods.

e.

f.

E.g.: F of Delhi places an order of )BBB !ales of cotton #ith ? of Bom!ay. ? dispatches the goods and sends rail#ay receipt to F. F sells an identical (uantity of cotton to O of Amritsar. >e endorses the rail#ay receipt $sent !y ?' in favour of O and re1routed the goods to Amritsar. -n this case, if other conditions are satisfied, the sale of goods !y F to O is exempt from the central sales tax. -f, ho#ever, F ta&es delivery of cotton !ales at Delhi and then !oo&s these goods to Amritsar in pursuance to his sale to O, the sale from F to O cannot !e Hsu!se(uent saleI as it is not effected during the movement of goods from one tate to another $it is effected after the movement of goods comes to an end'. he follo+ing declaration forms must 1e issued 1y the %arious dealers: ype of transaction @riginal -nter1 tate ale J ection 2$a'K .ext -nter tate sale !y transfer of documents of title to goods u!se(uent sale u/s. ,$;' in ec.2$!' mode econd su!se(uent sale during same transit Buyer Issues From C Form C Form C Form C #eller Issues From 01 From 01 -From 01 -From 0 G--

-n the a!ove cases, From D #ill !e issued if sale is made to a government. Note: a. Any num1er of times: Any num!er of su!se(uent -nter state sales effected in the course movement of the goods from one state to another !y transfer of documents of title !y one dealer to another shall !e exempt provided the a!ove conditions are fulfilled and relevant forms are o!tained and filed. -nspite of the exemptions availa!le for su!se(uent sale uSs. ,$;', multiple taxation ta&es place in the follo#ing situations
ϒ

b.

u!se(uent sale uSs. , $;' made !y one registered dealer to an unregistered dealer.

Central Sales Tax_11

ϒ

u!se(uent sale made !y the a!ove said unregistered dealer to a registered dealer and a su!se(uent sale !y the latter to another registered dealer and so on.

CONSIGNMENT TA$ - (SEC.(A)
a. Consignment/ stoc& transfer is one of the #ays of avoiding Central ale "ax. >ence, Constitution #as amended #.e.f. ; nd Fe!., )*M2 to ena!le Central Government to levy tax on consignment of goods, !y adding 0ntry .o.*;B in Qnion %ist. >o#ever, so far, tax on consignment of Goods has not !een levied, !y amending C " act. A dealer can claim that he is not lia!le to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one tate to another #as occasioned !y #ay of !ranch transfer, or consignment transfer and not !y #ay of sale. But the !urden of proof for availing such exemption is on the dealer #ho shall !e re(uired to furnish to the assessing authority declaration in the prescri!ed Form F #ith prescri!ed particulars together #ith the evidence of dispatch of such goods. "he assessing authority may ma&e an order, after ma&ing such en(uiry as considered necessary and !eing satisfied that the particulars contained in the declaration furnished are true, to that effect.

b.

c.

"hough entry *;B in the union list empo#ers Government to levy tax on consignment transactions, the C " act is not yet amended. o the consignment transactions are exempted through ec.,A.

SEC.)-REGISTRATION OF DEALERS
“DEALER” - 2(&) =eans any person #ho carries on the !usiness of !uying or selling or supplying or distri!uting goods, for cash or for credit or for commission and includes/ a. A local authority, a company, any co1 operative society or other society, clu!, firm, >indu Qndivided Family or other association of persons #hich carries on such !usiness. b. A !ro&er, commission agent, del1credere agent !y #hatever name called, #ho carries on !usiness of !uying, selling, supplying or distri!uting goods !elonging to any principal #hether disclosed or not 4 c. An auctioneer #ho carries on the !usiness of selling or auctioning goods !elonging to any principal, #hether disclosed or not. Expl.* provides that/ Is go%ernment a dealer$ a. b. Government #hen !uys or sells or supplies or distri!utes goods, for cash or for credit or for commission shall !e deemed to !e a dealer. >o#ever, such Government shall not !e deemed to !e a dealer in relation to any sale, supply or distri!ution of surplus, unservicea!le or old stores or #aste products or o!solete or discarded machinery or parts thereof.

Issues: a. "he goods of a =ahara5a are sold !y an Auctioneer. 9ho #ill pay tax1 =ahara5a or Auctioneer:/ Auctioneer is the dealer. "ax is paya!le !y the dealer. Central Sales Tax_12

"herefore, the lia!ility to pay tax is on the auctioneer and not on the =ahara5a. b. A forest officer of the Government of Andhra Pradesh sells sandal#ood as #ell as discarded furniture. -s he a dealer:/ >e is a dealer for the sale of sandal#ood only. >e is not a dealer for the sale of condemned furniture. -n order to !e a dealer, o#nership of goods is not essential, as the dealer can !e an agent on !ehalf of the principal for such goods.

c.

“REGISTERED DEALER” - 2(*)
=eans a dealer #ho is registered u/s.T. MANDATOR'!OPTIONAL 1. Compulsory: As per ec.T$)', every dealer lia!le to pay Central ale "ax has to register himself #ith sales tax authority. $As per section ,$)' of C " Act, every dealer effecting sale in the course of -nter tate trade is lia!le to pay C "'. 0. 0oluntary registration: -t can !e applied if the follo#ing t#o conditions are satisfied/ a. b. >e must !e a dealer lia!le to pay tax under the appropriate tate. ales "ax %a# of .

>e is not lia!le to pay tax under the C " Act, i.e. he does not ma&e an -

-t is useful #hen dealer ma&es -nter state purchases !ut all his sales are intra state. BENEFITS OF REGISTRATION a. b. c. d. e. f. Concessional rate of tax on -nter state purchases under cover of C form. 0xemption from payment of tax under ec., $;' $Page ))'. Branch transfer/stoc& transfer is exempt !y su!mitting Form F. Can claim !enefit Q/s +$2' !y issuing > form. .o tax on purchases !y a unit in pecial economic Done. "he dealer can avoid penalty or prosecution proceedings for non1 registration. SECURIT' 1. Purpose: "he security is demanded for ensuring $a' Proper collection of tax paya!le under the Act $!' For the proper custody and use of the forms prescri!ed under the Act. 0. Amount: a. b. . "he registering authority can demand for security not exceeding in the aggregate the tax paya!le for the year on the turnover estimated. Demand can also !e raised for furnishing of security in addition to the security already furnished, for &eeping pace #ith the gro#th of !usiness.

iming: "he security can !e demanded !efore or after granting the registration.

1. Mode of security: "he registering authority may re(uire the dealer to furnish security in any one or more of the follo#ing modes/ $a' Cash $!' Promissory notes $c' Central Sales Tax_13

Post office certificates $d' Post office savings pass !oo& $e' FDA7s of any scheduled !an& $f' urety !ond of a dealer etc. 2. #urety: a. 4 b. c. the !ond. 6. ;orfeiture: a.
ϒ ϒ ϒ

9here the security furnished !y a dealer is in the form of a surety !ond "he surety !ecomes insolvent or dies, the dealer should inform the registration authority #ithin 2B days of the occurrence of the event 4 9ithin *B days furnish a fresh !ond or furnish other security for the amount of

"he ecurity can !e forfeited !y the authority granting the registration/ For realising any amount of tax or penalty paya!le !y the dealer. -f the dealer is found to have misused any of the forms or -f the dealer is found to have failed to &eep them in proper custody. "he dealer shall !e given an opportunity of 1eing heard.

b.
3.

&efund: "he authority granting a certificate of registration may, on application !y the concerned dealer, refund the part or #hole of the security if not re(uired. Appeal: Any person aggrieved !y an order passed !y the registration authority demanding security or forfeiting or refunding security can prefer an appeal against such order #ithin 2B days of the service of order, after furnishing the security. )elay: a. b. "he appellate authority may, for sufficient cause, permit the filing of appeal !elatedly or #ithout furnishing #hole or part of such security. "he order passed !y the appellate authority in any appeal shall !e final. SIGNED B'

4.

5.

Application has to !e signed !y $a' Proprietor of !usiness $!' @ne of the partners in case of !usiness o#ned !y partnership firm $c' Eartha or =anager of >QF $d' Director or principal officer of Company $e' Principal @fficer in case of A@P or $f' @fficer authorised !y Government in case of Government. AMENDMENT OF CERTIFICATE OF REGISTRATION A certificate may !e amended either on the re(uest of the dealer or !y the authority himself after due notice to the dealer. "he amendment is done in the follo#ing circumstances/ a. b. c. d. 9hen there is a change in the name of the !usiness @r 9hen there is a change in the nature of the dealer7s !usiness @r 9hen there is a change in the class or classes of goods @r Change/addition of place of !usiness, #arehouse etc., Central Sales Tax_14

e.

For any other reason. CANCELLATION OF REGISTRATION

1. Cancellation 1y the Assessing Authority 1y its o+n motion: "his can !e done, after giving an opportunity to the dealer, under the follo#ing circumstances/ a. b. c. d. e. f. tate. g. For any other sufficient reason. -f the dealer has ceased to carry on !usiness @r -f the dealer has ceased to exist @r -f the dealer fails to furnish security or additional security #hen as&ed for @r -f the dealer fails to furnish fresh surety !ond #ithin *B days on the death of the surety or his !ecoming insolvent @r -f the dealer fails to pay any tax or penalty paya!le under this Act. -f the dealer ceases to pay tax under the ales "ax la# of the appropriate

0. 0oluntary: a. A registered dealer may apply #ithin , months !efore the end of a year to the authority for the cancellation 4 the authority shall cancel the registration if the dealer is not lia!le to pay tax under this Act. Any such cancellation shall ta&e effect from the end of the year. Aegistration certificate is not transfera!le. EFFECTIVE DATE OF REGISTRATION Compulsory registration is effective from the date of inter state sale if the registration is applied #ithin 2B days of ma&ing the inter state sale. >o#ever, voluntary, registration #ill !e effective from the date of ma&ing the application for registration.

b.

RATES OF TA$ ON ISS - SEC.+
ax &ate

Buyer 1. #ale of declared or undeclared goods to the C.3. or a #.3.: ).). -f % " $ tate sales tax rate' is U 3V. ).;. -f % " Aate is 3V or W 3V. 0. #ale of declared goods or undeclared goods to a registered dealer: ;.). -f % " rate U 3V. ;.;. -f % " rate 3V or W 3V.

;orm

&emar( s

% " Aate $.ote )' 3V

Form D Form D

% " $.ote )' 3V .-% goods or

Form C Form C Form >

,. #E?: undeclared

ale

of

declared

Central Sales Tax_15

Goods to a registered dealer in any 0O. -. #ale to any other person not co%ered 1y !' * and , supra: 3.). ale of declared goods. 1.0. Sa)e $f g$$d% dec)ared g$$d%: 3.;.). -f % " rate is .il. 3.;.;. -f % " rate is W B. Note: 1. -f local sales tax rate is nil, then the central sales tax rate #ill !e Oero. =oreover, Form C or D is also not re(uired. uch a case may also !e covered !y 3.) or 3.;.) ec.M$;' provides that if certain goods are exempt generally from states sales tax, the central sales tax paya!le on such goods #ill !e nil, even if goods are sold to unregistered dealer. “SALES TA$ LA,” - 2(-) =eans any la# for the time !eing in force in any taxes on the sale or purchase of goods. tate #hich provides for the levy of $#her #ha' .il $.ote ;' )BV or % " 1 1 "#ice % " $.ote ;' 1 % " canRt !e W 3V $ ec.)+'

0.

“GENERAL SALES TA$ LA,” =eans the la# for the time !eing in force in any on the sale or purchase of goods generally. tate #hich provides for the levy of tax

#ignificance: -t may !e noted that G " la# refers to the G " acts of the states only, #hereas sales tax la# refers to all the sales tax la#s of states namely Additional sales tax act, urcharge act etc in addition to the general sales tax act. "he difference !et#een ales tax la# and General sales tax la# can !e understood !etter through the follo#ing e(uations/ ales tax la#/ G " actX urcharge actX Additional sales tax act 4 G "/ G " only. E.g.: -f the central sales tax rate is )BV or rate as per sales tax la# $Appropriate state rate' #hich ever is more. Computation of local rate should not !e confined to G " only. "he taxes levia!le under the other act namely the urcharge act, Additional sales tax act should also !e rec&oned. "a&e an example, G " P MV, urcharge C )BV P .MV, Additional sales tax P 2V. "herefore %ocal rate is )).MV, !ut not MV simply.

BENEFIT OF UNCONDITIONAL E$EMPTION - SEC.+(2)
Certain goods en5oy tax exemptions unconditionally under local state la#. "he exemptions may !e total $i.e., Dero tax' or partial $i.e. reduced rate of tax'. "he concession should !e availa!le unconditionally i.e. it should !e en5oya!le generally #ithout any stipulations. "hen the same concession is automatically en5oya!le on also $0ven if the goods are sold to registered dealer or unregistered dealer'. $ E.g. "here is no tax on sale of coconut to anyone inside Andhra Pradesh. "he same concession automatically applies to C ". "his means that in Andhra Pradesh there is no Central Central Sales Tax_16

ales "ax on coconuts. uppose if, the exemption notification is as follo#s/ Coconuts 1 .o tax on sales, other than sales to oil mills. "he exemption is conditional 4 hence the exemption #ill not apply to - '.

CONCESSIONAL RATE FOR SPECIFIED GOODS - SEC.+( )
Follo#ing are the goods specified u/s M$2' in respect of #hich a sale to a registered dealer is lia!le to tax at concessional rates $i.e. 3V or local rate  ', provided that the transactions are covered !y Form C or D/ a. For resale !y him or b. For use !y him in the manufacturing or processing of goods for sale or c. For use in the mining or d. For use in the generation or distri!ution of electricity or any other form of po#er or e. For use in telecommunication net#or& or f. Containers or pac&ing materials used for pac&ing goods specified in the certificate of registration or g. Pac&ing the pac&ing material itself.

DECLARATIONS NECESSAR' FOR THE CONCESSIONAL RATE - SEC.+(#)
"he concessional rate Q/s.M$)' is su!5ect to the !uyer giving the seller the follo#ing declarations/ Aegistered Dealer Government C form Declaration D form Declaration C form says !uyer is a registered dealer. D form says !uyer is Government department.

PO,ERS OF THE S.G.TO GRANT REDUCTION!E$EMPTION - SEC.+(%)
"he po#er to levy C " is vested in the Qnion Parliament. "he po#er to grant exemption/reduction is delegated to tate Government through ec.M$+'. he main features of the delegation are as follo+s: a. "he exemption may !e #hole or part. b. "he state governments may put some conditions. c. "he exemption shall !e in pu!lic interest only. d. "he exemption may !e in favour of specified class of goods or specified class of dealers.

UNITS LOCATED IN AN' SPECIAL ECONOMIC .ONE - SEC.+(()/()) 0 (+)
.o C " is paya!le in respect of sales made to a dealer in 0O, if the follo#ing conditions are satisfied/ a. uch goods are for the purpose of manufacture, processing, assem!ling, Central Sales Tax_17

repairing, reconditioning, re1engineering, or for use as trading or pac&ing material or pac&ing accessories in a unit located in any special economic Done. b. c. uch goods should !e of such class or classes of goods as specified in the certificate of registration of the registered dealer. "he selling dealer should o!tain from the !uying dealer in 0O a declaration in form > duly countersigned and certified !y the Development Commissioner, 0O.

CONCEPT OF TURNOVER
“TURNOVER” - 2(1) =eans the aggregate of the sale prices received and receiva!le !y him in respect of sales of any goods in the course of inter1 tate trade made during any prescri!ed period. Eeep in mind that C " is levied on turnover !ut not on sale price. ec.MA spells out the ad5ustments to !e made to compute the turnover. ".@. P Aggregate of the sale prices for a year $say ).3.B; to 2).2.B2' X ad5ustments. SALE PRICE - 2(2) ec.MA

Means:

a. Amount paya!le to a dealer $payment !y the !uyer to seller' b. As consideration for sale of any goods. Excludes: a. Cash discount $"rade discounts are also excluded' b. Freight, delivery and installation cost, if charged separately $i.e. not included in sale price !ut indicated separately in the !ill or i.e. freight merging #ith sale price is includi!le'. c. @ctroi/0ntry "ax. d. Deposits ta&en for returna!le containers. e. -nsurance charges of goods insured at the re(uest of the !uyer. f. ale price does not include Government su!sidies on goods sold at controlled price. Includes:
a. b. c. d. e.

ums charged for anything done !y the seller at the time of or !efore delivery of the goods to the !uyer $0.g. Pac&ing, la!eling, designing etc'. 0xcise duty, Customs duty, sales tax 4 C ". Aoyalty, #arranty charges, etc. are also includa!le in sale price, #hether charged separately or not and #hether recovered along #ith sale price or not. -nsurance charges if goods are insured !y the seller. Charity or Dharmada collected !y the dealer #ill form part of the sale price. 9eightment charges. Central Sales Tax_18

f.

E.g.: "he ale Price can !e determined in the follo#ing manner/ Price of the Goods sold Add: Pac&ing Charges or cost of material Central 0xcise Duty -nsurance Charges $!orn !y eller' 9eighing Charges "ransportation Charges @ther Charges incurred !efore delivery "otal 8ess: "ransportation Charges Cash or @ther Discount ale Price “'EAR” - 2(3) 6?ear7 under the General ales "ax %a# of the Appropriate tate is the year under Central ale "ax %a#. $E.g.: uppose "amilnadu follo#s the RyearR commencing from RPongalR. -n such circumstances, C " year for "amilnadu is RPongal ?earR. -n the a!sence of any such R pecial ?earR in the appropriate state, year means financial year $).3.FF to 2).2.FF'' )2,23B ;,23B ),223 ),BBB ;BB ),;BB ;,BBB ;),3)3 ),;BB ),BT) )*,)32

DETERMINATION OF TA$ABLE TURNOVER - SEC.+A
"he follo#ing deductions are to !e made from the turnover to get taxa!le turnover. &eturns: "he sale price of all goods returned !y the !uyers #ithin a period of , months from the date of delivery shall !e deducti!le #hile calculating taxa!le turnover. -t does not matter #hether the goods have !een returned in the same year or next year. 9hat is relevant is six month period only. >o#ever, deduction is availa!le from the turnover of the period in #hich such sales are originally made. $ E.g.: -f goods sold on Fe!.)B, ;BB2 are returned on Aug. +th, ;BB2, sale price of such goods shall !e deducted from the turnover of the year ;BB;1;BB2 and not of the year ;BB21B3.' &e@ections: .o time limit is applica!le, since no sale at all ta&en place. C.#. . included in sale price: ales tax included in sale price shall !e deducted. "he sales tax amount is arrived at !y using the follo#ing formula/
Aggregatio n of ale prices × Aate of tax )BB + Aate of tax Example: A sells goods F and ?. Goods F are charged C 3V and goods ? $#hich are declared goods' C ;V. "he aggregate sale price, including C. .". of F and ?, is As.3,);,BBB #hich includes As.;,BM,BBB of goods F and As.;,B3,BBB of goods ?. Calculate the turnover of A. All sales are made on su!mission of C/D form !y !uyer.

3oods A: Aggregate sale price Aate of tax C. ." to !e deducted
4 ×2,08,000 4 +100

;,BM,BBB 3V M,BBB ;,BB,BBB

"urnover $Aggregate ale price G C. .".' $;,BM,BBB1M,BBB' Central Sales Tax_19

3oods B: Aggregate sale price Aate of tax C. .". to !e deducted
2 ×2,04,000 2 +100

;,B3,BBB ;V 3,BBB ;,BB,BBB

"urnover $Aggregate sale price G C. .".' $;,B3,BBB13,BBB'

Aggregate "urnover of Goods F and ? $;,BB,BBB X ;,BB,BBB' P 3,BB,BBB.

PROBLEMS
C.No.!. Compute taxa!le turnover and C " paya!le !y a dealer carrying on !usiness in .e# Delhi. ".@. for the year is As.), %a&hs #hich included the follo#ing/ "rade discount -nstallation charges $ ho#n separately' 0xcise duty Freight 4 -nsurance recovered separately in invoices Goods returned #ithin , months of sale $-nclusive C "' 3M,BBB ;+,BBB MB,BBB ,B,BBB 3B,BBB

Buyers have issued C forms for all purposes. Applica!le tax rate is 3V. -nsurance #as made at the re(uest of the !uyer. #ol.: #tep ! 7 urno%er i.e. Aggregate of sale prices .Incl. of C# /: "urnover Le%%: "rade discount -nstallation Freight etc. "urnover ),,BB,BB B 3M,BB B ;+,BB B ,B,BB B

),22,BBB )3,,T,BB B

#tep *: Ad@ustments uDs EA 7 &esults into taxa1le turno%er: "urnover net of sales returns/ )3,,T,BBB G 3B,BBB P )3,;T,BBB. ince this turnover is inclusive of C ", this is to !e excluded to get taxa!le turnover. Taxable Turnover = 14,27,000 × #tep , 7 100 = 13,72,116 100 + 4

ax paya1le: )3,;T,BBB G )2,T;,)), @r )2,T;,)), F 3V.

ax rate: C form received. >ence 3V only. Notes: a. "rade discount is to !e deducted. 0xcise duty is includi!le. >ence ignored Central Sales Tax_20

b. -nstallation, Freight etc., have !een indicated separately. "hey are to !e deducted. c. ales return is #ithin six months. >ence deducti!le. C.No.*. A dealer effected follo+ing sales during the first >uarter of !FFG7FE: a. b. c. d. e. f. g. 2B.,.*T. All sales are . Calculate the turnover and sales tax paya!le if the rate of tax is 3V. -nvoice .o. ))T) dt. ;.3.*T for As.;,,3BB plus tax C 3V. -nvoice .o. ))T; dt. )*.3.*T for As.TB,BBB plus tax C 3V. -nvoice .o. ))T2 dt. ;.+.*T for As.+;,BBB $inclusive of tax'. -nvoice .o. ))T3 dt. 3.,.*T for As.);,;BB plus C " C 3V. -nvoice .o. ))T+ dt. ;+.,.*T for As.;B,BBB plus C " C 3V. Goods #orth ,,)BB $exclusive of tax' against invoice .o.))T3 #ere returned on ;M.,.*T. Goods #orth As. +,;BB $inclusive of tax' sold on ;+.);.*, #ere returned on

C.No.,. =r. Yishal is a dealer. >is sales during the first (uarter of )**T 1 *M $April 1 Lune'/ )ate B+.B3.*T );.B3.*T B+.B+.*T B,.B,.*T ;T.B,.*T a. b. c. In%oice No. ) ; 2 3 + Amount )B,BBB X tax C 3V MB,BBB X tax C 3V ,;,3BB $inclusive of tax' )3,BBB X tax C 3V )M,BBB X tax C 3V

Goods #orth As.T,BBB $0xclusive of tax' against -nvoice .o.3 #ere returned on ;*.B,.*T. Goods #orth As.)2,BBB $inclusive of tax' sold on ;,.);.*, #ere returned on 2B.B,.*T. Goods #orth As.,,+BB $inclusive of tax' sold on ;T.);.*, #ere returned on 2B.B,.*T.

Calculate the "urnover and the tax paya!le if the rate of tax is 3V. C.No.-. hri Eishore Eumar Bhatt of Lodhpur made in inter1state sale of As.;B,B;,BBB during the previous year relevant to the Assessment ?ear )**M1**. @n examining the !oo&s of accounts, the follo#ing information #as o!tained/ a. "he general tax rates of the appropriate state for the goods sold in the course of intra state trade #ere as under/ $All sales to unregistered !uyers' ale Price $b ' 3,,B,BBB 2,2B,BBB ;,),,BBB ;,,B,BBB ;,B,,BBB +,2B,BBB "ax Aates V )+ )B M 3 2 Generally

Central Sales Tax_21

exempt from sales tax. b. hri Eishore Eumar Bhatt collected sales tax from his customers for inter1state sales in accordance #ith the rates prescri!ed under the sales tax la# of the appropriate state and the tax so collected #as included in the total sales.

c. "he goods taxa!le at the rate of 3V and 2V are declared goods. Determine the taxa!le turnover 4 C " paya!le !y hri Eishore Eumar Bhatt, Qdaipur. C.No.<. Determine the Central ales "ax lia!ility from the follo#ing data #hen a sale is effected from Farida!ad to %uc&no#/ -nvoice .o. Basic Price 0xcise Duty C " "rade Discount Cash Discount Zuantity supplied Zuantity re5ected !y !uyer #ith in 2 days of delivery Zuantity returned !y !uyer after , months of dispatch M2T3 As. 2,BB,BBB ),V As applica!le for 6C7 forms MV ;V )B,BBB &gs ),BBB &gs ),BBB &gs

SEC.4-LEV' AND COLLECTION OF TA$
SEC.4(1) In the case of su1se>uent sales H+hich are not exempt 1y #ec.=.*/I +hich state is authorised to collect C# $ 7 9hen goods are in movement from one state to another and are sold !y transfer of documents, there is no central sales tax lia!ility if certain conditions are satisfied. -f these are not satisfied, then sales tax shall !e collected as follo#s/ a. #u1se>uent sale made 1y &egistered )ealer: "he su!se(uent seller7s appropriate state is the state that is competent to collect tax in respect of the su!se(uent sales made !y them. "he competence of the state to collect tax is determined !y the state in #hich the dealer ma&ing the su!se(uent sale is registered and .@" !y the location of goods at the time of such sale. "he dealer is &no#n and hence the eye is .@" on goods. b. #u1se>uent sale made 1y unregistered dealer: "he situation of goods at the time of su!se(uent sale determines the competence of tax collection !y a state. >ere the tax shall !e collected !y the state #here in the goods are at the time of su!se(uent sale. "he dealer is not &no#n and hence the eye is on goods. Conclusion: 2$a' @r 2$!' sale u!se(uent sale $<' made !y Aegistered dealer u!se(uent sale $<' made !y Qnregistered dealer tate from #hich movement of goods started tate #here he is registered tate #here such goods are located at the time of su!se(uent sale has !een affected

Central Sales Tax_22

* .ot exempt !y ec.,$;' since the conditions given in that sec. are not satisfied. Illustration: A of Chennai sells goods to B of Calcutta. Both are registered dealers. During the course of inter state movement of goods, B ma&es an endorsement sale $su!se(uent sale' !y transfer of documents of title. 9hen B ma&es sale, the goods may !e physically present in Andhra Pradesh or @rissa. "his is not a relevant factor at all. 9hat is relevant is #ho made the sale and #here is he registered. >ere B $ eller' is registered in 9est Bengal. 9hat difference #ill it ma&e if B happens to !e an unregistered dealer: -n this case #e need to find out #here the goods #ere present physically at the time of su!se(uent sale. -f the goods are in Andhra Pradesh, then that Andhra Pradesh Government #ill collect tax. >ere the criterion is the situation of goods. COLLECTION OF TA$ TO BE ONL' B' REGISTERED DEALERS - SEC.4A Any person #ho is not a registered dealer is prohi!ited from collecting any amount !y #ay of tax under the Act in respect of any sale.

SEC.15- OFFENCES 0 PENALTIES
"he offences listed hereunder and committed !y a person #ould !e punisha!le #ith simple imprisonment #hich may extend to , months, or #ith fine or #ith !oth. "he offenses are/ a. Furnishing an incorrect certificate or declaration under the follo#ing provisions/ ec.,$;' ec.,A ec.M$3' ec.M$M' u!se(uent sale Consignment sale $C/D' 0O

b. ;ailure to get registration or failure to furnish security. c. Being a registered dealer, representing falsely #hen purchasing any goods, that such goods are co%ered 1y his certificate of registration. d. .ot !eing a registered dealer, falsely representing that he is a registered dealer. e. After purchasing any goods for specific purposes stipulated :Ds.E.,/, failure to ma&e use of the goods for any such purpose. f. Being in possession of any form prescri!ed for the purpose of o1tained in accordance #ith the provisions of the Act or Aules. ec.M$3' 1ut not

g. Collection of any amount !y #ay of tax #ithout !eing a registered dealer or in violation of the provisions of the Act or Aules.

SEC.1# - DECLARED GOODS
"he follo#ing goods are declared as goods of special importance in inter1 tate trade/ Cereals $paddy, rice, #heat, ragi, !arley.' Coal. Cotton, Cotton fa!rics, Cotton yarn Crude oil @il seeds $Peanut, "il, Castor'. Pulses $Blac& Gram, Green Gram' =an1made fa!rics ugar

Central Sales Tax_23

>ides and s&ins $Both ra# 4 Dressed'. -ron and steel. Lute.

"o!acco and its products 9oven fa!rics of #ool

ec.)3 of the act gives a list of such goods and ec.)+ gives restrictions on po#er of the state to tax such goods. All cereals, pulses and oil seeds are declared goods. "/F:/ False8 @nly specified items. Cotton is declared goods[ !ut not cotton #aste. Cotton yarn is declared goods, !ut not cotton yarn #aste. Paddy is declared goods[ Aice is declared goods[ >us& is not declared goods. Lute is declared goods[ and not 5ute products. -t has !een held that steel includes stain less steel and hence stainless steel tu!es and stainless #ires are also declared goods. @nly 9heat is declared goods 4 #heat products li&e #heat flour are not declared goods. Cloth is declared goods and not clothes $garments'. %addus are not declared goods. "/F:/ "rue8 $%addus' ugar is declared goods 4 not s#eets

RESTRICTIONS AND CONDITIONS IN REGARD TO TA$ ON SALE OR PURCHASE OF DECLARED GOODS ,ITHIN A STATE - SEC.1%
0very sales tax la# of state shall !e su!5ect to the follo#ing conditions in so far as it levies tax on the sale or purchase of the a!ove mentioned declared goods a. "he rate of tax shall not exceed 3V. b. 9here tax is levied under the state la# for sale or purchase of any declared goods inside that state and such goods are sold in the course of inter1 tate trade for #hich tax under this Act has !een paid, the tax levied under tate la# shall !e refunded to the person ma&ing such inter1 tate sale. $"he refund shall not !e granted unless -nter1state sales tax has !een actually paid'. c. #et off tax paid on paddy: 9here tax has !een levied under state la# in respect of the sale or purchase of paddy inside that state, the tax levia!le on rice resulted out of such paddy shall !e reduced !y the amount of tax levied on such paddy. $Aice tax P Aice tax 1 Paddy tax. "his is 5ust li&e Cenvat credit.' Note: he a1atement in tariff is permissi1le under the follo+ing t+o conditions:
ϒ ϒ ϒ

Paddy should have !een procured inside the state $% " is suffered'. "he rice hulled out of such paddy should !e sold inside the same state $% " is suffered'. -n other #ords, the concession is not availa!le if paddy has !een !ought from outside the state or if the rice hulled from the locally !ought paddy has !een sold interstate i.e. purchase of paddy 4 sale of rice !oth should !e intra state only.

d. 0ach of the pulses referred to in ec.)3, shall !e treated as a single commodity for levy of tax under the tate la# 4 for ec.+$2'. -f tax is paid on ra# pulses, no further Central Sales Tax_24

tax is paya!le after it is processed. e. For the purposes of ec.+$2', paddy and rice are treated as the same commodity.

IMPOSITION OF PENALT' IN LIEU OF PROSECUTION - SEC.1OA
Any person purchasing goods #ho has committed the offence of misrepresenting that he is a registered dealer or that the goods are covered !y his certificate of registration or not using the goods for the specified purpose, shall !e imposed #ith a penalty of/ )eclared goods: Penalty P ) \ F Dou!le local rate. 9ther than )eclared goods: Penalty P ) \ F )BV or local rate #hichever is more 6 7 .o prosecution shall !e instituted u/s.)B in respect of the same facts on #hich a penalty has !een imposed under this section. Note: .o dou!t the dealer commits the said offences for saving the tax difference !et#een H#ith C Form rateI and H9ithout C Form rateI. "he penalty C )+BV $=ax.' is not to !e #or&ed out on this difference. "his penalty is )+BV of the #ithout C form rate. Also penalty is addition to sales tax.

DUTIES AND LIABILITIES OF LI6UIDATOR -SEC.1)
a. Intimation of appointment: 0very person #ho is the li(uidator or receiver of any company shall #ithin 2B days after his appointment, intimate the same to the appropriate authority. b. Intimation 1y authority: "he appropriate authority shall notify to the li(uidator #ithin 2 months from the date of receipt of notice deposit the amount #hich in his opinion #ould !e sufficient to provide for any tax due !y the company. c. "he li(uidator shall not dispose any assets of the company until he has received a intimation !y the authority. @nce the amount is notified it shall !e set aside !efore the disposal of assets. d. >o#ever, the li(uidator can dispose the assets/
ϒ ϒ ϒ ϒ

-n compliance #ith any order of a court. For the payment of tax under this act. For payment to secured creditors #ho ran& in priority over Government de!ts. For meeting reasona!le costs and expenses of #inding up.

e. -f the li(uidator fails to gi%e the notice or fails to set aside the amount notified he shall !e personally lia!le for the payment of the tax #hich the company #ould !e lia!le to pay. 9here an amount #as notified, lia!ility #ould !e restricted to notified amount. f. 9here there is more than one li>uidator then they are lia!le 5ointly and severally. .ote/ "his sec. is similar to ec.)TM of -."ax act.

LIABILIT' OF DIRECTORS OF PVT. CO.IN LI6UIDATION - SEC.1+
Central Sales Tax_25

a. b.

9hen a private company is #ound up 4 any tax assessed on the company cannot !e recovered, "hen every person #ho #as a director of the private company at any time during the period for #hich tax is due shall !e 5ointly and severally lia!le for the payment of such tax. >o#ever, if he proves that the non payment is not !ecause of his negligence or !reach of duty in relation to the affairs of the company, no such lia!ility #ould arise.

c.

Note: "his sec. is similar to ec.)T* of -."ax act. Issue: All Directors of Private Company $present 4 past, Full time, part time or =anaging director' are personally lia!le for any tax due under the C " Act. "/F:/ "rue. Directors #ho #ere in office Hat any time during the period for #hich the tax is dueI shall !e held personally responsi!le.

AUTHORIT' TO SETTLE DISPUTES RELATED TO ISS
CENTRAL SALES TA$ APPELLATE AUTHORIT' - SEC.14 For the purpose of settling inter1state disputes falling under ec.,A/*, the C.G. shall constitute an authority called Hthe Central ales "ax Appellate AuthorityI. APPEALS - SEC.25 "ime limit for preferring the appeal is 3+ days from the date of service of assessment order. -t can !e extended up to ,B days at the discretion of the Authority. PROCEDURE ON RECEIPT OF APPLICATION - SEC.21 a. records. b. c. appeal. d. "he Authority shall communicate its orders to the appellant as #ell as assessing officer. PO,ERS OF THE AUTHORIT' - SEC.22 a. b. Authority shall have the po#ers of a court li&e enforcing attendance of persons, compelling production of records etc. "he proceedings of the Authority shall !e deemed to !e 5udicial proceedings. PROCEDURE FOR AUTHORIT' - SEC.2 "he Authority shall regulate its o#n procedure. AUTHORIT' FOR ADVANCE RULINGS TO ACT AS APPELATE AUTHORIT' - SEC.2# "he appellate authority is to !e constituted !y the Central Government. "ill then the Advance Auling Authority shall !e as&ed to function in its place. Central Sales Tax_26 "he Authority may allo# or re5ect the appeal. "he Authority shall try to give 5udgement #ithin , months of the receipt of Authority shall send a copy of appeal to the assessing officer 4 can call for

TRANSFER OF PROCEEDINGS - SEC.2% After this Authority is formed all cases pending in or to !e ta&en to the appellate forum in the tates/Qnion territories shall also stand transferred to this Authority. APPLICABILIT' OF ORDER PASSED - SEC.2( "he orders passed !y this Authority are !inding on the assessing authorities or other authorities under the G " la#s of the tates / Qnion "erritories

FORMS PRESCRIBED UNDER THE CST
;orm A B C ) Nature and Purpose "his Form is prescri!ed for application to get registered u/s.T. Certificate of registration shall !e issued !y the Authority in this Form. "his is a Form of Declaration to !e furnished !y registered dealer to the selling dealer to indicate that the goods are covered !y his certificate of registration. -n inter1state sale Form C entitles concessional rate of tax. Form D is a certificate to !e issued !y the Government #hich ma&es the purchases to the selling dealer to !e eligi!le for concessional rate of tax. "his Form is a certificate to !e issued u/s., !y the selling dealer #ho first moved the goods in the case of sale covered !y sec.2 $a' $or' !y the dealer #ho ma&es the first inter1state sale during the movement of the goods from one tate to another in the case of a sale falling uls.2$!'. "his helps to avoid levy of central sales tax for su!se(uent transfers. Certificate in Form 01-- has to !e issued !y the first or su!se(uent transferor $or' !y the second or su!se(uent transferor, as the case may !e, to avoid levy of central sales tax on such transfer. Form to !e issued !y the transferee in cases of !ranch transfer of goods. Form of -ndemnity Bond re(uired for certain purposes. Goods exported are exempt from C ". Goods are often exported !y export houses. "he export houses purchase these goods from manufactures in -ndia. -n order to encourage exports, such penultimate sale is also exempt from sale tax. -n order to prove that the sale is a penultimate sale, the ultimate exporter has to issue a certificate in form H>I to the seller. Form to !e issued !y the !uyer, a unit in pecial 0conomic Oone $ 0O' to the selling dealer, duly countersigned and certified !y the Development Commissioner, 0O, for ena!ling the latter to get the !enefit of ection M$,'.

E7I

E7II ; 3 H 61%# Ca%e7

H 60'd Ca%e7

SOME IMPORTANT THEOR' 6UESTIONS FROM THE PAST E$AM PAPERS
C.No.!.5)ocument of title of goods6 in the context of C# Ans.: Aefer to page + of this material. C.No.*. )istinguish inter state sale and intra state sale. Inter #tate #ale Governed !y C " Act, )*+,. ale occasions movement of Goods from one state to another. Intra #tate #ale Governed !y G " Acts of the states. =ovement is #ithin the state. Act' !F<=.

Central Sales Tax_27

%evy on sales only. 0very sale is taxa!le. .o free limit. ale can !e made !y Aegistered Dealer only. -f the !uyers are Aegistered 1 "ax at lo# rate @r Qnregistered 1 "ax at higher rate. Declaration in Form C, D, 0 -, 0 --, F and > are needed for en5oying tax concessions.

%evy may !e on sale or purchase, "ax is lia!le, only if the ".@ exceeds the prescri!ed limit. Aegistration is not necessary up o the prescri!ed monetary limits. "herefore, unregistered dealers may ma&e sales. .o difference in tariff on account of !uyer !eing registered / Qnregistered. uch declarations are of no relevance.

C.No.,. A foreign 1ound aircraft lands at the Mum1ai International Airport. It purchases fuel. "hat is the nature of this purchase$ "hich tax +ill 1e le%ied on such purchase of fuel$ Justify your ans+er Ans.: ince there is no foreign destination this #ill not !e treated as export sale. $Burmah hell @il torage v. C"@'. -f fuel is supplied from =um!ai -nternational airport it #ill !e treated as sale #ithin =aharashtra and tate ales "ax as per =aharashtra ales "ax Act and rules #ill !e paya!le . C.No.-. "hen is stoc( transfer treated as 2Inter7#tate #ale6 under C# !F<=$ Act'

Ans.: Goods are dispatched to !ranch/ consignment agent in another state and then sold from the !ranch, depot or place of consignment agent. -n such a situation, if the movement of goods is occasioned on account of sale, the movement #ill !e treated as 6inter1state sale7. "hus, if movement of goods is on account of some existing contract or arrangement, the movement of goods #ill !e treated as 6inter1state sale7. C.No.<. )ifference 1et+een sale in the course of export K sale for export$ Ans.: ale in the course of export 1 +$)' and sale for export 1 +$2'. C.No.=. 9n +hom does the onus of pro%ing that the mo%ement of goods +as other+ise than 1y +ay of sale shall lie$ Ho+ can the same 1e discharged$ Ans.: @n the dealer. 9rite the provisions of ec.,A. C.No.G. &am of amil Nadu sold goods to &ahim of Lerala. he lorry +ay 1ill is endorsed to A1raham of Maharashtra. In Maharashtra' the goods are chargea1le to #ale tax at ,M. )iscuss +hether the second sale is exempt from le%y of Central #ales tax. "hat are the documents to 1e furnished in this regard$ Ans.: Aefer to ec.,$;'. C.No.E. Ban(atlal has sold goods to Mana(lal of neigh1ouring #tate' +hich the latter proposes to sell to parties outside India against orders to 1e recei%ed in future. #u1se>uently' Mana(lal has exported such goods to some o%erseas parties. Ban(atlal claims that it is a sale in the course of export )iscuss. Ans.: At the time of his sale to =ana&lal, the latter $exporter' should !e in possession of Central Sales Tax_28

an export order from the foreign !uyer. But =ana&lal has secured export order only after he procurement of goods. "herefore, Ban&atlal7s claim is not in order i.e. he is not eligi!le to get the !enefit of ec.+$2'. C.No.F. )iscuss +hether the follo+ing items +ill form part of 5#ale Price6: a. b. c. 0xcise Duty. Pac&ing =aterials. Aeturna!le Containers.

Ans.: According to C " Act, H ale priceI means any amount paya!le to a dealer as consideration for the sale of any goods. a. b. c. -t also includes the taxes li&e excise duty. -t also includes any sum charged for anything done !y the dealer in respect of the goods at the time of or !efore delivery of such goods li&e pac&ing expenses. -n the case of returna!le containers, the o#nership vests #ith the dealer and does not pass on to the purchaser. "he containers are re(uired to !e returned to the dealer. "he definition of H ale priceI does not include cost of returna!le containers.

C.No.!N. #tate gi%ing reasons +hether the follo+ing #ales are Inter7 state or Intrastate: A manufacturer in Andhra Pradesh supplies goods to his appointed agents outside the #tate against their orders. Ans.: "hough the goods are sent to the agents, since the dispatches are against pre existing orders, the !uyers are &no#n. >ence the sales are Hinter state salesI only. C.No.!!. he Central 3o%ernment can 1ecome a dealer' 1ut the #tate 3o%ernment cannot67 Is the statement correct$ 3i%e reasons. Ans.: "he statement is not correct. -n the C " act, the #ord used is HGovtI and not HCentral Govt.I .o distinction is sought to !e made !et#een central Govt. and tate Govt. >ence every Govt. !e it Central or tate !uying /selling goods #ill !e deemed to !e a dealer. C.No.!*. #tate the rele%ance of the expression 5exempt from tax6 under #ales ax 8a+ of appropriate #tate. Ans.: "he expression has !een ta&en from ec.M$;' as sho#n !elo#/ -f local sales tax rate is nil, then the central sales tax rate #ill !e Oero. ec.M$;' has !een amended to provided that if certain goods are exempt generally from states sales tax, the central sales tax paya!le on such goods #ill !e nil, even if goods are sold to unregistered dealer. "his is the relevance in Central %a#. C.No.!,.Mr. 2A4 of Madras sends his consignment of goods to his 1ranch at Bangalore' +ithout any prior contract of sale' +hen the goods are in transit' Mr. 2B4 of Bangalore 1ought the rail+ay receipt .&&/ from A4s 1ranch office. )oes this amount to sale$ Ans.: According to ec. 2$!' of the C " act, if during the course of movement of goods from one state to another state, the title is passed !y transfer of document, such a sale Central Sales Tax_29

is inter1 state sale. -n the given case, the Aail#ay receipt, #hich is a document of a title as per la#, is handed over to B #hile the goods are in transit from one state to another state. "herefore, the transaction amounts to inter1 state sale. C.No.!-. A sale of goods shall 1e deemed to ta(e place in the course of export of goods out of the territory of India only if the sale occasions such export. "hat is the exception to this rule$ Explain its significance. Ans.: 9rite a!out ec.+$2'. C.No.!<. Explain 1riefly +ith reasons if C# situations: a. b. c. d. e. f. g. h. i. 8. 9. ). :. '. Ans.: a. Qnder the Central ales "a Act, only mova!le property falls #ithin the scope of goods. ale of land and !uilding is outside the purvie# and therefore not lia!le to sales tax. ale of shares and securities is specifically excluded form the definition of HGoodsI and therefore C " is not chargea!le on such transactions. H9or&s ContractI has !een !rought under HDeemed chargea!le to C " #.e.f. )).+.;BB;. aleI. >ence ale of land and !uildings. ale of shares and securities. Yalue of goods transferred in #or&s contract. "ransfer of property in goods #ithout consideration. "ransfer of goods !y #ay of =ortgage, hypothecation of goods. A transaction of hire purchase. Cost of installing a plant. Future goods. Goods transferred in -ndia !ut exported su!se(uently. Goods exempt from tax in one state !ut sold outside the tate. A company carrying on !usiness sells tea and snac&s to its employees from its factory canteen. A coffee plantation #ith a vie# to facilitate ne# plantation clears the forest gro#th and sells trees, #hich are cut and sold as fire#ood. A contractor o!tains !allast from (uarries !elonging to the rail#ays and supplies them at #or& sites. 9hat are deemed sales: can 1e charged in follo+ing

b. c. d.

H alesI means transfer of property for cash or deferred payment or for any other valua!le consideration. 9here is transfer of property in goods #ithout consideration, it does not amount to sale #ithin the meaning of the definition under the Act and therefore C " is not attracted. "he definition of sale specifically excludes mortgage, hypothecation of Central Sales Tax_30

e.

goods, charge or pledge on goods. Conse(uently #hen there is transfer !y #ay of mortgage, C " cannot !e charged. f. g. h. i. 8. 9. ince >ire purchase is also deemed to !e sale under C " Act, levia!le on the full value of the goods. .". is

Cost of installation #hich is not included in the sale price !ut charged separately is not lia!le to sales tax. -t is taxa!le, if merge in sale price. Future goods are taxa!le in the state in #hich they are appropriated. $9rite relevant part of ec.3' -f the conditions of paya!le. $9rite ec.+$2''. ec. +$2' are not satisfied then tax !ecomes

-f exemption under G " is conditional, then tax is levia!le under C ". $9rite ec.M$;''. ection 2 of the C " Act clearly indicates the nature of transaction #hich can !e regarded as inter1 state sale. "ea and snac&s sold to employees in a factory canteen does not fall #ithin the purvie# of inter1 state transaction and therefore not fall #ithin the purvie# of inter1 state transaction and therefore not eligi!le to C ". "axa!ility under the C " Act can arise only #hen there is movement of goods from one state to another. According to the definition of HGoodsI u/s. ;$d', all materials, articles, commodities and other &inds of mova!le property are covered !ut actiona!le claims, stoc&s, shares and securities are excluded. -n the given case, the trees are cut and sold as fire #ood. Fire #ood is a mova!le property and hence lia!le to tax. ales tax gets attracted only if there is a sale #ithin the meaning ec.; $g' of the C " Act. -n the given case, (uarries !elong to the rail#ays. "he contractor merely o!tains !allast $Ballast means small stones !inding the rail#ay trac& to the earth' from the (uarries and supplies them at #or& sites. "he contractor neither has any title to the goods nor there is any transfer of property in goods in the given case. "herefore, it is a mere #o&s contract and no sale is involved. "he (uestion of levy of sales tax does not arise. $But as per the latest amended definition of sale it includes #or&s contract also'. Aefer to sales definition. ax on sale 1y 0PP.

).

:.

'.

C.No.!=. 8ia1ility to Central #ales a. b. c.

-n YPP sale there is no document of title li&e %A, AA etc. "herefore, sale u/s. 2$!' is not possi!le in respect of goods sold !y YPP. -f the inter state movement in on account of consignment, then lia!ility is to !e in accordance #ith ec. ,A. -f the consignee accepts the YPP, then the sale in completed. -f he re5ects the parcel, then the sale has not ta&en place at all. "herefore tax lia!ility does not arise.

C.No.!G. "hat are the different declaration forms used in Central #ales ax$ #tate +hen and +hat purpose they are to 1e used$ .1riefly in *D, sentences/. Please refer #rite up on C " Forms $%at Para of theory material'.

Central Sales Tax_31

C.No.!E. A sells his land along +ith the standing crops and trees for &s.*N la(hs. #ales ax 9fficer +ants to assess for #ales ax the %alue of standing crops and trees. Comment. Ans.: 9hat is sold is land along #ith standing crops and trees. "he sale does not pertain to the latter alone. 9hat is sold is land !ut not trees etc. "hey are not goods and hence do not attract sales tax. C.No.!F. A of Lol(ata sells goods to B of Chennai and deli%ers the same at Lol(ata to ML# ransport. he lorry receipt +as sent to B 1y post. "hile goods +ere in transit' B sells the goods to ? of 3untur. Is the second sale chargea1le to tax$ Ans.: .ormally, the endorsement sale u/s. 2$!' made !y ? to O is assessa!le to tax. But if the conditions given in ec.,$;' are satisfied such sale is exempted from tax. C.No.*N. ) of )elhi comes to Hydera1ad and purchased certain chemicals and transported them in his o+n name to )elhi. Is the sale chargea1le to C# $ Ans.: "he sale !y the >ydera!ad dealer to D has not occasioned the movement of goods from >ydera!ad to Delhi. "he movement is su!se(uent to sale and not attri!uta!le to sale. "he sale is a local sale. >ence it is not chargea!le to C ". C.No.*!. "hen is a duplicate certificate of &egistration issued and ho+$ Ans.: -f the Aegistration Certificate $AC' is lost, destroyed, defaced or mutilated, the dealer may as& for a duplicate copy of the AC on payment of As.+. C.No.**. Can tax 1e le%ied on the sale of imported goods lying on the +harf$ Ans.: ale made after the goods have crossed the customs frontiers of -ndia is not import sale. -f the assessment of duty !y the customs officer is over, the goods are deemed to have crossed the customs frontiers of -ndia. >ence tax can !e levied on the sales made after the customs assessment is over. C.No.*,. Comment on the follo+ing: a. A certificate of registration once granted cannot !e amended. b. Prosecution shall not lie in respect of an offence under certain circumstances. c. ABC %td. is located in special economic Done. -t #ants to &no# the concessions or !enefits under the C " Act. Advice. d. >o# does a dealer prima facie discharge the !urden of proof that he is not lia!le to tax in the course of -nter1state ale: e. "here is no !enefit for a person to purchase the Goods from a registered dealer. f. Both registered and unregistered dealers can collect tax under C ". g. All Directors of Private Company $present 4 past' are personally lia!le for any tax due under the C " Act.

Central Sales Tax_32

h. Appeal against an order passed !y the registration authority must !e filed #ithin *B days of the service or order to the Appellate Authority. i. 9here the dealer !eing a proprietor dies1the certificate or registration #ill !e cancelled. 8. 6Place of !usiness7 does not include place of !usiness of the agent. 9. A dealer #ho does not get himself registered is lia!le for penalty. ). Aefund of local tax in respect of declared goods. :. Admissi!le deductions in arriving at taxa!le turnover. '. Central ales "ax Appellate Authority $C "AA'. $. tate the acts and omissions for #hich penalty could !e levied under the C " Act.

Ans.: a. Aefer to Hamendment of certificate of registrationI. b. Aefer to Himposition of penalty in lieu of prosecutionI. c. Aefer to Hunits located in any special economic DoneI. d. Aefer to ec.,A. e. @nly Aegistered Dealers $AD' can ma&e inter state sales. Qnregistered Dealer $QAD' cannot ma&e inter state sales. Aegistration is compulsory u/s.T$)'. -n the circumstances, the (uestion of comparison !et#een AD and QAD as a seller does not arise. "here is ho#ever, difference !et#een sales to AD and QAD. "he former can give C form !ut the latter cannot. Conse(uently, the !enefit of concessional rate of tax is availa!le for sales made to AD only. f. False. Qnregistered dealers cannot collect tax. @nly registered dealers can collect tax as per the Act $ ec.*A'. Ans./ False. Government su!sidy does not constitute amount paya!le to dealer $!y his customer' as a consideration for the sale of goods. >ence it is not includi!le in sale price. g. "rue. Directors #ho #ere in office Hat any time during the period for #hich the tax is dueI shall !e held personally responsi!le. -t does not therefore[ matter #hether they #ere holding office in the past/present $ ec.)M'. h. False. Appeal should !e filed #ithin 3+ days from the date on #hich the order passed !y the Assessing Authority is served. >o#ever, the Authority may entertain any appeal after the expiry of 3+ days !ut not later than ,B days from the date of service of the order, if it is satisfied that the appellant #as prevented !y sufficiently cause. i. "rue. 9here the dealer ceases to exist, his certification of registration #ill !e cancelled !y the Assessing Authority. 8. False. As per ec.;$dd', place of !usiness includes the place of !usiness of an agent #here a dealer carries on !usiness through such agent. 9. "rue. Failure to get registered as re(uired under section T$)' is a punisha!le offence, if the dealer has made an inter1state sale. According to section T$)', every dealer, #ho is lia!le to pay tax under the Central ales "ax Act, is under an o!ligation to get himself registered under the Central ales "ax Act. "he lia!ility to pay central sales tax arises only #hen the dealer ma&es an inter1state sale. Note: -t is also possi!le to ans#er that this statement is false giving the explanation that only a dealer #ho ma&es an inter1state sale is lia!le to pay central sales tax and hence is re(uired to get himself registered under section T$)'. ince the (uestion does not mention that the dealer has made an inter1state sale or that the dealer is lia!le to pay central sales tax, students may assume that the dealer has not made an

Central Sales Tax_33

inter1state sale and is hence not lia!le to pay central sales tax. "herefore, he need not get himself registered, and conse(uently penal provisions are not attracted. ). Aefer to ec.)+ $Point !' :. "he admissi!le deductions in arriving at taxa!le turnover are 1 Discount, Cost of installation, -nsurance at the re(uest of customer, ale tax inclusively charged, Freight and delivery charges separately charged, Government su!sidy. '. 9ith a vie# to resolve inter1 tate dispute in matters li&e stoc& transfer from tate to state or levy and collection of tax and penalties. "he Central Government shall constitute the 6Central ale "ax Appellate Authority7. ection )* gives details a!out the constitution, mem!ers of the C "AA and salaries paya!le to them. >o#ever, the C "AA is yet to !e constituted. $. Aefer to ec.)B 1 @ffences 4 Penalties.

Central Sales Tax_34