CHAPTER III LEVY AND COLLECTION OF TAX SECTION 6 - Liability to tax on Inter-State sales SECTION 6A - Burden of proof, etc.

, in case of transfer of goods claimed otherwise than by way of sale SECTION 8 - Rates of tax on sales in the course of inter state trade or commerce SECTION 8A - Determination of turnover SECTION 9 - Levy and collection of tax and penalties SECTION 9A - Collection of tax to be only by registered dealers SECTION 9B - Rounding off of tax, etc SEC 8 RATES OF TAX ON SALE IN THE COURSE OF INTER-STATE TRADE OR COMMERCE Sale 1. sale of declared and undeclared goods to central govt. or to a state govt. or to a registered dealer 2. sale of declared goods to unregistered dealer 3. sale of undeclared goods to unregistered dealer (a) if state level VAT rate is nil (b) if state level VAT rate is more than zero 4. sale to manufacturing units in SEZ CST rate 2 % or the state level VAT rate whichever is less Twice the State level VAT rate Remarks If purchaser is govt., it should issue form D and for other registered dealers form C State level VAT rate cannot be more than 4%

Nil 10% or state level VAT rate whichever is higher Nil

SEC 8A- DETERMINATION OF TURNOVER CST is payable on turnover of a period. Rate is determined as per section 8, while turnover is determined as per section 2(j). The turnover shall be the total of sales price of all interstate sales effected during the prescribed period less CST payable, i.e. Taxable Turnover = Or Tax payable = rates of tax x aggregate sales price 100 + tax rate Taxable Turnover = aggregate sales price or gross turnover tax payable It is assumed that aggregate sales price or total sales is inclusive of CST. Therefore, for calculating taxable turnover, backward calculation is made. If the dealer has not charged CST separately in the invoice, the burden is on the dealer to prove that his sale price is inclusive of tax. If he is unable to prove the same, CST will be levied on the net price indicated in the invoice without applying the above formula. This question does not arise if CST is charged separately in invoice. (Section 6A) 100 x aggregate sales price 100 + tax rate

Inclusions in sales price Following items are includible in sales price 1. 2. 3. 4. 5. 6. 7. 8. 9. CST whether or not shown separately in invoice excise duty whether or not cost of packing material and packing charges even if shown separately in the invoice incentive bonus or bonus discount allowed to the distributor or dealer as bonus for additional sales insurance charges if incurred by the seller as per contract for FOR (Free on rail) delivery of goods cost of freight, if the contract is for FOR destination delivery and not shown separately in invoice design charges charged separately but forming part of manufacturing cost compulsory warranty charges imposed on the buyer for the compulsory warranty charges tax paid by the buyer any tax, duty, cess etc paid by the buyer on behalf of the seller. However if it is the duty of buyer to pay the same, such payment need not be included for computation of CST

Exclusions from sales price While computing the CST the following are not included in the sale price 1. 2. 3. 4. 5. 6. 7. 8. freight and transport charges for delivery of goods, provided they shown separately in invoice cost of installation and commissioning if shown separately in the invoice cash discount trade discount deposits for returnable containers transit insurance charges incurred at the request by buyer sales returned within 6 months, if satisfactory evidence is produced goods rejected by buyer without any time limit

Exemptions from CST The following are the exemptions under the specific provisions of CST act 1. subsequent sale by transfer of DTG 2. sales of goods which are generally exempt or chargeable under the local sales tax provisions at lower rates 3. exemption by virtue of a notification 4. sale in the course of import or export 5. sale to manufacturing units in SEZ if following conditions are satisfied a) sale is in the course of IST or commerce by the dealer b) sale is made to a registered dealer c) goods are specified in the CR of the purchaser d) sale is made to the buyer for the purpose of manufacturing, production, processing, assembling or packaging e) such unit should be located in a SEZ f) sale should be supported by a declaration from the buyer in the prescribed form and should be submitted to the concerned tax authority 6. goods sold to any official, consular or diplomatic agent of any foreign diplomatic mission or consulate to India or the UN or any other similar international body

SEC 9 LEVY AND COLLECTION OF TAX AND PENALTIES CST is levied by the govt. of India but tax so levied will be collected by state govt. from where the movement of goods commenced. In the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods, the tax shall be levied and collected in the following manner a) where such subsequent sale has been effected by registered dealer, in the State from which the registered dealer obtained form C and D in connection with the purchase of such goods, and b) where such subsequent sale has been effected by an unregistered dealer, in the State from which such subsequent sale has been effected. SEC 9A COLLECTION OF TAX TO BE ONLY BY REGISTERED DEALERS No person who is not a registered dealer shall collect in respect of any sale by him of goods in the course of Inter-State trade or commerce any amount by way of tax under this Act. The registered dealer has to collect tax in accordance with the provisions and rule of CST act. In other words, tax collections can be made only by the registered dealers. SEC 9B ROUNDING OFF OF TAX, ETC The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise, it shall be ignored. However, this section shall not apply for the purpose or collection by a dealer of any amount by way of tax in respect of IST or commerce. SEC 6 - FORMS FOR DECLARATIONS A dealer has to issue certain declarations in prescribed forms to buyers or seller. These forms are mentioned and explained below: FORM A Application for registration FORM B Certificate of registration 1. FORM C As per section 8, CST on ISS is 2% provided: (a) sale is to a registered dealer and (b) goods are covered in the CR of the purchasing dealer. In other words, the selling dealer can pay 2% CST only when he has received the form C from the buying dealer. This form is in triplicate and can be obtained from the sales tax authority with whom the dealer is registered. One declaration in form C can cover one transaction and one financial year only. Contents a. purchasing dealers sales tax registration number and its validity b. details of goods obtained c. whether goods are required for resale or use in manufacture or processing or use in power generation or use in mining or use in packing d. whether the dealer is registered in the state in which goods are delivered e. name and address of the seller with name of the state

2. FORM D These forms apply to all inter-state purchases made by govt. dept. and there is no restriction as to the type or nature of the goods to be purchased by the govt. The form has to be typed/printed by the govt. dept. which purchases the goods. 3. FORM E-I AND E-II Section 6 states that where a sale of any goods in the course of IST or commerce has either occasioned the movement of such goods from one state to another or has been effected by a transfer of DTG during their movement from one state to another the subsequent sale during such movement effected by a transfer of DTG to (a) govt. or (b) registered dealer is exempt from tax. The second and all subsequent sales are exempt from tax provided the following conditions are satisfied: i. ii. iii. iv. v. the sale must be after the first ISS the sale should take place while the goods are in the course of movement from one state to another the sale should take place by a transfer of DTG the sale must be effected to the registered dealer or govt. the seller dealer produce E-I or E-II form

Subsequent sale during movement of goods by transfer of DTG is exempt from tax, if the subsequent sale is to govt. or a registered dealer. This is subject to condition that such subsequent seller obtains declaration: a) from the selling dealer The selling dealer has to make a declaration in form E-I if it is first sale and E-II form if it is a subsequent sale b) from the purchaser The purchasing dealer has to make a declaration in form C if he is a registered dealer or in form D in case of govt. Contents of form E-I This declaration is in triplicate. The selling dealer has to keep 2 copies and one copy should be given to the purchasing dealer so that he can produce the same to his sales tax authorities. The form contains: a. b. c. d. e. f. g. h. i. j. k. l. name of state and serial no. name of selling dealer name of purchasing dealer and his address name of place and state from which movement of goods commenced name of place and state where goods have been consigned by the signatory invoice no and date description, quantity and value of goods number and date of declaration in form C received from purchasing dealer number and date of RR, LR, AWB, etc a certificate that the signatory is a registered dealer registration no. and state of the signatory i.e. selling dealer certificate that the statements are true to the best of his knowledge and belief.

Contents of form E-II This declaration is in triplicate, two copies are kept by the dealer selling the goods in subsequent sale and one copy is handed over to the purchasing dealer for being produced to this sales tax authorities. This declaration contains: (Same as contents of form E-I and include the following) m. certificate that the selling dealer who is a subsequent seller has purchased the DTG during their movement from one state to another state against E-I or E-II certificate n. certificate that the dealer from whom the DTG are purchased has certified that he has paid CST due or he will pay CST due or no tax is payable as the sale is exempt from tax in respect of goods detailed in the declaration 4. FORM F When a dealer wants to claim that the inter-state movement of goods is not a sale but on consignment basis or to branch transfer, he is required to produce proof to the sale tax authorities. For this purpose, he can produce a declaration in form F received from consignment agent or branch officer in another state. But the submission of form F is not mandatory 5. FORM G If form C is lost while it is in the custody of the purchasing dealer or in transit to the selling dealer, he has to submit an indemnity bond in form G to the sales tax authority of the state from which form C was obtained. In case it is lost, while in custody of the selling dealer, he has to furnish the indemnity bond to the sales tax authority of his state. 6. FORM H In case of penultimate sale, the actual exporter has to issue a certificate to the penultimate seller in form H. The blank H forms are to be obtained from sales tax authority by the final exporter. 7. FORM I It represents form for claiming CST exemption in case of sale of goods to manufacturing units in SEZ 8. FORM J It represents the form of Certificate for claiming exemption for sale of goods to any official, consular or diplomatic agent of any foreign diplomatic mission or consulate to India or the UN or any other similar international body. SUMMARY FEATURES OF CST 1. Nature It is an indirect tax. It is a tax on sale of goods. But the seller charges the same from the consumer along with the price of goods. The seller shifts the burden of tax to the consumer or buyer 2. Scope The CST extends to whole of India including the state of Jammu & Kashmir and union territories 3. Levied by central govt. The CST is levied by the central govt. but it is collected by the state govt. from where the goods have been sold. In case of union territories, the tax collected is deposited in the consolidated fund of India

4. 5.

6. 7. 8.

Cause of levy CST is levied on all ISS of goods effected by a dealer. There is no exemption limit of sales, as it is normally available in case of state sales tax Administration The CST is administered by the state govt. through its state sales tax authorities. Although, the CST rules have been framed by the central govt., the state govt. are allowed to adopt such rules as it may deem fit. The rules regarding return, payment of tax, appeal, etc are not given in CST and as such the rules followed by states in respect to the sales tax laws, are applicable for purpose of CST act. Concessional rates CST will be levied at concessional rate if the purchaser is govt. and it produces certificate in form D to seller. For any other purchaser, if he is a registered Dealer and issues declaration in form C to the seller. Sales exempt from CST Since sales within a state is subject to local sales tax, it is exempt from CST. Also, sale or purchase of goods in the course of import or export is not subject to CST. ISS of goods or subsequent sale through transfer of DTG is subject to CST. Categories of goods CST act has divided goods into two categories: i. Declared goods or goods of special importance States cannot levy tax on these goods more than 4% and not more than once ii. Other goods These goods are subject to CST @ 10% or at the rate applicable to such goods inside the appropriate state, whichever is higher

Summary Determination of taxable turnover 1. gross turnover or gross inter-state sales including value of goods transferred to other places of business or agents or principals outside the state otherwise by way of sale 2. Deduct: a. turnover of goods sold outside the state u/s 4 b. turnover of goods sold in the course of export out of India u/s 5 c. turnover of goods sold within the state u/s 4 d. value of goods transferred to other places of business or agents or principals outside the state otherwise than by way of sale u/s 6A 3. Balance (1)- (2) turnover of goods sold in the course of IST or commerce 4. Deduct: a. turnover of goods unconditionally exempt under a state VAT act sold in the course of IST or commerce b. turnover of goods purchased and sold by transfer of DTG thereto on which exemption is allowed u/s 6(2) 5. Taxable turnover = (3) (4) Goods stated u/s 8(3) for concessional rates 1. 2. 3. 4. 5. purchasing goods for resale for use by him in the manufacture of processing of goods for resale goods in mining goods in generation or distribution of electricity or any other form of power containers or other materials used for the packing of goods for sale __ _ xx x .

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