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CST

The Central Sales Tax Act 1956 1. Introduction:

1.1. Relevant Constitutional Provisions

State List Entry 54 Empowers the states to levy taxes on Intra-state sales/purchases of goods other than NEWSPAPERS

Union List Entry 92A Authorizes the Central Government to levy tax on interstate sales / purchases of goods other than NEWSPAPERS

Article 269 1. Stipulates the power of Central Government levying CST 2. Provides for assignment of CST collection to States 3. Provides for crediting the collection in the Union Territories to the consolidated fund of India.

Note 1: Article 286 doesnt allow these states to impose tax on sale/purchase taking placze outside the states or in course of import or export of goods.

Note 2: Though the levy of tax on Intrastates sales is the prerogative of states, ARTICLE 286 empowers the parliament to impose restriction and conditions on the power of the states to levy tax on sale of the declared goods and on deemed sales under work contract, hire purchase, and lease.

MT Educare 1.2. Objects

The Central Sales Tax Act -1956

To define interState Sale (ISS) (Sec 3) To define outside state sale (Sec. 4) To define Export or Import Sale (sec. 5)

Objects of CST Act

To provide for collection of taxes from companies under liquidation (sec. 17, 18) To Impose tax restriction on intra-state sales of declared goods (sec. 15) To Declared goods of special importance (sec. 14)

To provide for the levy (sec. 6, 6A, 8, 8A), collection (sec. 9(1), 9(2), 9(2A)) and distribution 9(3) of CST

Test Q1: Sales are made from Pondicherry to Karaikal / Yanam / Mahe Your Knowledge Pondicherry to Chennai. Can the Pondicherry Union Territory take the taxes collected on both the sales?
Q2: Levy of tax on intra state sales is the prerogative pf states as per Entry 54/State List. Can the central Government interfere with the powers of States in this regard? Q3: The central government is planning to bring about suitable amendments to CST Act providing for levy of Sales Tax on Inter State sales of Newspapers. Your client, who is already not doing well in Newspaper industry, comes to you with a long drawn face! What will be counseling to him?

2.

Provision of CST in brief:


2.1. When Provisions of CST Act are attracted? There should be a Dealer (sec. 2(b)) He must be a Registered Dealer (Sec. 7) The Dealer must carry on Business (sec. 2(aa)) There must be Sale (sec. 2(g)) The sale must be of Goods (Sec. 2(d)) The sale may be of Declared goods or otherwise (sec. 14 & 15) The sale must be in the course of Inter State Trade or Commerce (sec. 3) It should not be a Sale Inside a State (sec. 4(2)) The Sale should not take place in the course of Import or Export (sec. 5)

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The Central Sales Tax Act -1956

The buyer may or may not be Registered Dealer 2.2. Consequences if these conditions are satisfied: CST shall be levied It shall be levied on Turnover (sec. 2(j)) It is levied at a Specified rate (sec. 8) It shall be collected only by the Registered Dealer (Sec. 9A) It shall be remitted to the state from which movement of goods commences It shall be retained by the state in which it is collected (although it is the revenue of CG) The registered dealer shall submit return and assessment shall be completed by the assessing authority in the appropriate state.

3.

Relevant definitions:
3.1. Dealer (sec. 2(b))

Dealer means any person engaged in the business of Buying Sellin g Supplyin g Goods He may be
Individual HU F Fir m AOP Company/BC Co-op Society Clu b Local Authority

Distributing

He may carry on these businesses Directly Indirectl y Regularl y Irregularly

He may transact on Cash Basis Credit Basis

His reward may be Commission The term includes Delcredere Agent Any other remuneration

Mercantile Agent

Facto r

Broke r

Commission Agent

Auctioneer

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The Central Sales Tax Act -1956

Deemed Agents Every person being agent of a principal (dealer) residing outside state *Buying, Selling, Supplying or distributing the goods of the principal in his state * Acting as 1. Mercantile Agent 2. Agent for handling goods 3. Agent of handling documents 4. Agent for collection and payment of sales price 5. Guarantor for such collection and payment Branch office of HO registered outside the state

Government

Buying, Selling, supplying or Distributing goods (note 1)

Note 1: 1. Government may carry out these for Cash / deferred payment / commission / remuneration / other valuable consideration. 2. Government may carryout these activities directly / indirectly. 3. These may/may not be carried out in the course of BUSINESS. 4. Government includes Union Govt. State Govt. Union territory

5. Government excludes Local bodies Govt. Companies PSUS

6. Term goods doesnt include Surplus, unserviceable old Stores. Waste products Obsolete machinery or parts / accessories

Note 2:

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The Central Sales Tax Act -1956

Commission agents, auctioneers or brokers do not carry on business on their own account. They only secure orders for their principals. In view of wide definition, they may be held liable to pay tax and Penalty, if principal falls to pay tax and penalty due [Pench valley coal co. vs. State of MP]

Q1:

A the Auctioner sells the goods of P, the Principal. The Tax Officer goes to P for collection of tax because P is the owner. But P is absconding. Now the Tax Officer goes to A, the Auctioner. The latter refuses to pay tax on the ground that he is not the owner! The STO is your good friend. What will be your advice to him?

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Q2: Q3:

The goods of a Maharaja are sold by an Auctioneer. Who will pay tax Maharaja or Auctioneer? A forest officer of the Government of Tamil Nadu sells sandalwood as well as condemned furniture. Is he a dealer? 3.2. Business Sec 2(aa) Business includes Any Adventure or concern in the nature of trade, commerce or manufacture Any incidental ancillary or connected transaction

Any trade, Commerce or Manufacture

Note: Element of regularity of transaction need not be present. Even an isolated transaction falls with in the ambit of the term.

the scope of definition. not be present.

Even illegal business falls within Element of profit motive may/may

Q1.

The Peshkar of a temple says that he will not pay Sales Tax on the sale of prasadams, since he has no profit motive. As a matter of fact, there is loss

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The Central Sales Tax Act -1956

only. When there is loss in sales, how can he pay Sales Tax? His contention looks reasonable! What do you say? (Tirumalai Tirupathi Devasthanam), (Arulmigu Dandayuthapani Tirukoil) Q2. Sai Publication Find is a Trust meant for spreading the message of Saibaba of Shiridi. Through books, pamphalets and other literature, the message of Saibaba is made available to devotees on nominal charge to meet cost. Does this sale of books, pamphalets, booklets, photos, stickers etc. attract sales tax? (Sai Publication Fund)

Q3.

Port Trust sells unserviceable and unclaimed articles. Does this attract sales tax? (Board of Trustees of the Port of Madras) Q4. A bank sells the assets given as security by the borrowers for realisation of loan. Does this attract sales tax? (Canara Bank) Q5. A company carrying on business sells Tea and Snacks to its employees from its factory canteen. Does this attract sales tax? (Burmah Shell Oil storage and distributing company) Q6. A coffee plantation with a view to facilitate new plantation clears the forest growth and sells trees, which are cut and sold as firewood. Does this attract sales tax? (Shakthi Estates), (Sri Shanmugam Estate)

3.3.

Goods (sec 2(d)) Excludes News Paper Actionable Claims Stocks, shares or Securities

Includes All materials All Articles All Commodities All other kinds of moveable Property 3.3.1. A)

Classification of Goods: Goods

Future Goods

Exiting goods

Not physically held by seller at the time of contract Should be procured or manufactured

Specific / Ascertain Goods

Unascertaine d Goods

Physically held by the seller at the time of contract Identified for delivery to buyer

Physically held by the seller at the time of contract But not identified

Example:

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The Central Sales Tax Act -1956

You go to a shop and ask for a tilting type wet grinder. The shopkeeper does not have the stock. He says he will procure or manufacture. The goods you want to buy are not presently available. They are called FUTURE GOODS. After a month, the tilting type wet grinders you wanted are available for sale in the shop. The shopkeeper has 100 grinders. They are of four colors red, green, blue, yellow and 25 numbers in each color. You have decided to buy one; but you have not decided about the color. All the 100 grinders, which were originally FUTURE GOODS, have now become UNASCERTAINED GOODS. The goods are there waiting for your selection. Your choice is in favour of green color. Now, all the 25 numbers of green variety have become ASCERTAINED GOODS. But you want to ensure that the grinder rotates with out any wobbling. So you ask the shopkeeper to run the green color grinders on after another. After trial you choose a wobble free grinder. That grinder has come to the deliverable state. Your final choice is called SPECIFIC GOODS. B) Goods Declared Goods List of Declared goods Cereals (paddy, rice, wheat, ragi, barley, etc.) (Not all cereals; Listed items only) Coal; Cotton; cotton fabrics; cotton yarn Crude Oil; Hides and skins; Iron and Steel; Jute; Oil Seeds; (Peanut, Til, Castor etc.) Not all oil seeds; Listed items only) Pulses; (Black Gram, Green Gram etc.) (not all pulses; Listed items only) Man-made fabrics; Sugar; Unmanufactured tobacco; Woven fabrics of wool Other Goods

Note: This list is exhaustive Q1: From the following identify the items that could be considered as goods 1. Newspaper 2. Copyright 3. Import licenses 4. Gas 5. Steam

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The Central Sales Tax Act -1956 Electricity (MP Electricity Board) Lottery Tickets Computer Software available of the shelf Computer Software Tailored to a client Stock and Shares Standing trees forming part of land sold. Standing trees sold for being cut and removed (Titaghun Paper Mills) House Licence issued by government to gather to fish from the lake. Licence issued by the government to gather tender leaves from the forest. Mines Minerals extracted from the mains Cages animals and birds Dead animals Cash, Currency, Cheque, DD, and negotiable instruments Old newspaper sold as scrap (The Hindu vs. The State of Tamilnadu) Old newspaper sold as newspaper (Sait Rickaji Furtarnal vs. State of Andhra Pradesh) Illustrated weekly of India (weeklies and magazines) (Wheeler & Co Vs. State of Bihar) India Today (weeklies and magazines)

A company floated shares five years back. In floats additional shares now. The company receives a notice from the Sales Tax Officer for the payment of Sales Tax on the new as well as old shares. The MD comes to you with an argument that the levy on the sale of old shares is time barred! Is the right? Q2: True or False: 1. All cereals, pulses and oil seeds are declared goods. 2. Dressed hides and skins are declared goods and not raw hides and skins. 3. Raw Tobacco is declared goods and not cigarettes. 4. Cloth is declared goods and not clothes (garments) 5. Laddus are not declared goods 6. Charcoal is not declared goods. From the following identify the items that could be considered as declared goods: 1. Cotton 2. Cotton waste 3. Cotton Yarn 4. Cotton Yarn Waste 5. Paddy/Rise 6. Husk 7. Jute 8. Jute product

Q3:

3.4.

Sale Sec (2(g)) Essential Elements

Two-parties Buyer and

Transfer of property

Property should be in

Valuable consideration in Money/Moneys worth

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The Central Sales Tax Act -1956 goods

Definitions applies to Grammatical variations of the Word Sale Like plural sales; verb sell Cognate expression of the word sale Any other word having same meaning

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The Central Sales Tax Act -1956

Deemed Sales Transfer of property in goods other wise than in pursuance of a contract Example: Compulsory transfer of controlled goods sugar cement etc) in pursuance to Govt. Order. Transfer of property in goods through works contract Delivery of goods under HP System
Note: This concept of deemed sales is included here after the insertion of new definition 29A under Article 366 of the constitution through the Constitution (46th amendment) Act, 1982. Transactions not treated as sale Mortgage 1. Imm ovable property is handed over to the lender as security (title not passed on) 2. It may be Physical handing over or handing documentarily Pledge Movable property is physically handed over to the lender as security (title not passed on) Hypothecation 1. Movable property pledged to lender but possession is not handed over to the lender. 2. Goods continued to be in the hands of borrower. 3. In case of default by the borrower the lender can take over the goods Charge creation 1. Goods continued to be with the borrower. 2. borrower undertakes not to sell 3. In case of sale, the first charge is to the lender.

Supply of goods by any association to its members

Supply of foods and drinks

Lease transactions

Points requiring Attention: 1. Sale vs. agreement to sell Sale Property in goods passes from the seller to buyer for a consideration immediately Agreement to sell Property in goods passes from the seller to buyer for a consideration on future date or subject to fulfillment of certain conditions

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The Central Sales Tax Act -1956

Agreement to sell become sale once the stipulated period elapses or the conditions fulfilled 2. 3. 4. 5. 6. 7. Property in goods = Title to goods. Possession = Physical holding. Relevant event = Transfer of property not possession Barter Sales Exchange = Sales Barter vs. Exchange Exchange It is sale except for consideration being in kind. The value of goods transferred is very much considered by the parties

Barter It means reciprocal transfer of goods one in consideration for other. The value of goods transferred is not at all considered by the parties

8. The transaction to qualify as sales should involve ascertain goods. 9. Sale includes sale of illegal goods 10. In fructuous sale Sale or return basis Sale Sale is complete only when the buyer accepts goods or intimates is consent to take goods before the specified date Note: Receipt of advance will alter the position. [pieco electronics and electricals] 11. Works Contract Sales tax cannot be levied on the full value of the works contract. But only on value of goods actually transferred in execution of works contract. (Builder association of India vs. UOI) 12. Bailment Sales (no transfer of property in goods) Unfructified sale Goods have been sold to the customer but it has not reached him. The buyer rejects the goods [Metal alloy co] Goods lost on transit Goods not reached the buyer. So there is no delivery of goods and therefore no sales

Note: Receiving compensation from the insurer will not alter the position. [vania silk mills]

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The Central Sales Tax Act -1956

Q1.

On an advertisement by a dealer, pay Rs. 114 and carry a Kinetic Honda, a customer takes delivery of the vehicle. The dealer feels that the sale is complete, only when the last installment is received and therefore he will pay tax at that time. The Tax Officer demands tax for the whole price immediately. Who is right? STO or Dealer?

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Q2. Q3.

A contractor obtains ballast from quarries belonging to the railways and supplies them at work sites. Examine the incidence of tax. Can sales tax be levied on work contracts and hire purchase transaction

3.5.

Registered Dealer (sec. 2(f))

It means a dealer who is registered under section 7 3.6. Appropriate State (sec. 2A) Dealer Place(s) of business (POB) in only one state POB in more than one state (i.e., different states) Every such state = Appropriate state, with respect to place of business situated with in its territory.

Such state = Appropriate state

Note: Union territory = State

A dealer has his corporate office in Pondicherry, a Factory in Tamil Nadu, a Depot in Karnataka and branch offices in Kerala and Andhra Pradesh. Determine the appropriate state(s) for this dealer.

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3.7.

Place of Business (Sec. 2(dd))

POB of Agent Where dealer carries on business through Agent

Ware house [go down or other places where a dealer stores his goods.

Place where the dealer keeps his books of accounts

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The Central Sales Tax Act -1956

During the Durga Puja days (nine days) a dealer in Calcutta kept his books of accounts in his puja room. In the course of a raid, the sales tax Officer entered his puja room. The dealer feels that the action of the Government Official is a trespass into his puja room!. Comment. [Sheonath Prasad Vs. State of Bihar]

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4.

What is Inter-State Sale? (ISS) (Sec. 3)


Sale/Purcha se Is effected by a transfer of document on title to the goods during their movement from one state to another ISS (u/s. 3(b)) Also called Endorsement Sale or sale by transfer of Document of Title

Occasions movement of goods from one State to another

ISS (u/s. 3(a))

Explanation 1 When movement of goods commence? On delivery of goods to carrier for transmission Explanation 2: If Movement of goods commences and terminate in the same state, then sale ISS, though in the course of such movement goods pass through the territory of any other state Essentials for sec. 3(a) Sales 1 . 2 . 3 . 4 . 5 . 6 . 7 There should be a sale. The transaction should relate to goods There should be movement of goods The movement should be on account of sales. The movement should not be a disjointed event. Both the events should be integrally coupled. The movement should be from one state to another. (union territory = State The movement should commence in one state and terminate in another state. Merely passing through the territory of one state is not enough. It is immaterial where the buyers and sellers are located. They may be in When movement of goods terminate? When delivery is taken from such carrier

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The Central Sales Tax Act -1956

the same state. It is not relevant in which state the property of goods passes from seller to buyer. 1. Indian Oil corporation Vs. UOI Enters into contract for supply of Naphtha to IE- factory in Kanpur Important Judicial ruling Indian explosives Ltd.

Indian Oil corporation

Bihar - Barauni

Kanpur-up IOC - Depot

IOC-Factory
IE Fertilizer Factory

Note: The cost of pipeline borne by IE ltd. IOCs Contention Movement from IOC-Factory (Bihar) to IOC-Depot (Kanpur) = Branch Transfer. Movement from IOC-Depot (Kanpur) to IE Fertilizer factory = Local sale (intra-state sale) Supreme court Ruling Held that this sale = ISS Reason: The movement of goods was in pursuance of contract and with out such movement could not be sold to buyer in UP.

2. Balabhagas Hulaschand vs. State of Orissa.

Orissa Cuttack Supplier Purchase raw s of Raw Broker jute Jute


s

Transport raw jute through

West BengalCalcutta Firm

Note: The Firm inspects, weighs and accepts (if it is to their specification). Firms Contention Supreme court Ruling When goods where booked from Held that this sale = ISS Orissa there was an agreement to Reason: sell. The movement to Orissa to west

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The Central Sales Tax Act -1956 Bengal was in pursuance of agreement to sell (being an essential ingredient for sale)

Sale concluded only at Calcutta. Therefore this not ISS Essentials for sec. 3(b) Sales 1 . 2 . 3 .

There should be movement of goods from one state to another. The movement may or may not be in pursuance to contract of sale. While the goods are in movement, there should be a sale by transfer of document of title.

How sale by transfer of document of title effected? The BUYER TURNED SELLER should not receive goods from the carrier, instead the goods should be in the custody of the CARRIER. Usually the document of title will be in the name of buyer turned seller. He shall strike out his name in the document of title and insert the name of the NEW BUYER. He should advice the carrier to take the goods straight away to the NEW BUYER. Illustration A

Enters into contract for sale of goods

Document of title MUMBAI Mr. A (Seller) BANGALORE Mr. B (Buyer turned seller)

Goods in movement

MAHARASHTRA

Note: Sale of goods by Mr. A to Mr. B = ISS (Sec 3(a)) Sale of goods by Mr. B to Mr. C = ISS (Sec 3(b))

Endorsement of Document of Title in favour of

MYSORE Mr. C (New Buyer) What do we mean by document of Title? Mode of Document of Title

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The Central Sales Tax Act -1956

(LR) (BoL)

Lorry Bill of

Receipt Lading way Bill

Rail Receipt (RR) Airway (AwB)

1.

Deemed Movement So long as the goods are in the custody of transporter, the goods are Points deemed to be in movement. This is a legal fiction. The Requiring Attention moment the transporter makes physical delivery of goods to the ultimate buyer the movement ends. Situation of goods Immaterial The goods may be in Maharashtra or in Karnataka when the endorsement sale is made. They may not have left Mumbai at all or they may even have reached Bangalore. These facts are immaterial. Endorsement with in the state. The endorser and the endorsee may be in the same state. Even then the position is same (East India Corporation Vs. State of Tamil Nadu) Is there any restriction on Number of Endorsement

2. 3.

4. Sales?

No, the only condition is the buyer turned Seller (i.e., Endorser) should not have taken delivery of goods from the transporter.

5.

KERALA BMD Order Govt. State of Tamil Nadu Vs. Bombay Metal Depot. Judicial ruling
Endorsed DOT

KERALA Govt.

CHENNAI TAMILNADU BMD

Placed Order

Placed Order

Supplied goods straight to

Send DOT R. Soumyanarayanan FCA. Grad. CWA MAHARASHTRA BOMBAY Supplier 16

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The Central Sales Tax Act -1956

Distinguish between Inter-State and Intra-State Sale. 1. 2. 3. 4. 5. 6. 7. Levy by the Union as per Entry 92A/List I (Union List) Seventh Schedule to Constitution Governed by CST Act, 1956 Sale occasions movement of goods from one State to another Levy on sales only. Every sale is taxable. NO free limit. Tax law implemented by respective states and Union Territories. Collections go to the exchequers of Respective States (in respect of Union Territories money goes to the Consolidated Fund of India` Sale can be made by registered Dealer only If the buyers are Registered Tax at concessional rate. Unregistered Tax at higher rate Declaration in Form C, D, EI, EII, F and H are relevant for enjoying certain tax concessions. Scope of Sale has been expanded and deemed Sale concept brought in making use of Art 366 Definition No. 29A Newspapers, shares etc. are not Goods Levy by the State as per Entry 54/List II (state List) / Seventh schedule to constitution Governed by GST Acts of the respective States Movement is within the State Levy may be on sale or purchase. Tax is liable, only if the T.O. exceeds the prescribed limit. Tax law implemented by the respective States and Union Territories. Collections go to the respective states/Union territories Registration is not necessary up to the prescribed monetary limits. Therefore unregistered dealers may make sales. No difference in tariff on account of buyer being Registered/Unregistered

8.

9.

10. 11.

Such declarations are of on relevance. Scope of Sale has been expanded and deemed Sale concept brought in making use of Art 366 Definition No. 29A Same position

12.

Q1.

Decide as to whether transactions constitute ISS

the

following

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The Central Sales Tax Act -1956

a. A of Chennai sells goods to B of Madurai. The goods move from Chennai to Madurai as a result of sale. b. P, the Principal at Pondichery sends his goods to his agent A at Ahmedabad. c. M/s Kasturi & Sons sell The Hindu Business line to ICWAI at Calcutta. d. A of Dubai sells goods to B of Chandigarh. The goods come to Mumbai by sea and move from Maharashtra (Mumbai) to Punjab (Chandigarh) via Gujarat and Rajasthan by land). e. A of Mumbai sells goods to B of Singapore. The movement begins from Maharashtra, passes through Karnataka, Andhra Pradesh, Tamil Nadu and ends at Singapore. f. A of Chennai sells goods to B of Cuddalore. The goods move through Pondichery Union Territory. g. A of Mumbai sells to B of Bangalore. B takes delivery of goods from the lorry and then sells the goods to C of Mysore. h. J of Chennai goes to Hyderabad and buys cultured pearls across the counter at Hyderabad bazaar. The seller knows that the buyer is from Chennai but he does not know whether the buyer is taking the goods to Tamil Nadu. i. Superstar Rajini goes to Mumbai and buys goods across the counter. j. Q2. Goods sent by VPP to a buyer in Himachal Pradesh

A of Mumbai sold paper to B of Chennai [Section 3(a) sale]. By a series of Endorsement Sale under Section 3(b), the goods have been last sold to Y in door number 18 downstairs, Street 1, Sivakasi. The consignment is now in the lorry shed in door number 19 next to Ys premises. Y wants to make Endorsement sale to Z in door No. 18 (upstairs) can he do? state? 6. Can there be an inter-state sale between two persons in the same Pictorial Representation

Q3.

Issues Document of Title Seller Goods given in Custody of Carrier

Sends Document of Title

Buyer turned Seller

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Endorses the Document of title in favour of

New Buyer

Delivers goods on production of Document of Title

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5.

Stock transfer/Branch Transfer/Depot transfer (sec. 6A)


Stock Transfer Tamil Nadu Principal (consignor) Tamil Nadu Factory Sends Manufactured Goods Branch Transfer Tamil Nadu Head Office Sends Goods Branch Kerala Sends Goods Depot Transfer Kerala Agent (consignee) Kerala Depot.

Features: 1. 2. Here there is movement of goods from one state to another. But there is no sale.

Tax on Consignment Transfers: Sec. 6A levies tax even on Inter-state consignment, unless the dealer proves the followings: 5.1. 5.2. 5.3. 5.4. 5.5. The transaction in question is only a consignment and not a regular sale. [Note: The Onus of Proof lies with the dealer] As a proof the dealer must show the Agency agreement The date of agreement should be earlier than the date of movement of goods The principal should obtain FORM F declaration from his agent. Any other proof like Account Sales other books of Accounts, Bank Pass Book, documents of correspondence, etc.,- in support of principal Agent relationship should be produced to the assessing authority.

Highlights on FORM F

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The Central Sales Tax Act -1956

Printed form available for sale in the sales tax office Agent should get it from his territorial Sales tax officer. Agent can get this, only if he is a registered dealer. Agent should furnish particulars of goods received by him from the principal to the sales tax officer concerned One copy of FORM F retained by agent and another copy is sent to principal The STO will ensure that goods referred to in FORM F suffer tax in the hands of Agent. In the absence of FORM F, the Principal will suffer CST.

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The Central Sales Tax Act -1956

Illustration

Andhra Pradesh Dalmia Paper Mills Ltd. (DPM)

Transfers paper to the Specification of Publishing House

Transfers Papers of Std. Size, color and

DPM Depot (selling Papers of Std. Size, Color and Weight) Publishing House

Delhi

(Manufactures printing paper of various sizes, shades and quality

Weight

Places Order

(Requires paper of Specific Size, color and weight not available with Delhi-Depot)

DPMs Contention Transfers of paper from AP to DPM Depot (Delhi) = Depot Transfer Sale by DPM Depot (Delhi) to Publishing House = Intra-state Sales

Legal position Transfer of paper of specific size by DPM (AP) to DPM (Delhi) 0n receipt of order from Publishing house, and Corresponding sale by Publishing House = ISS Delhi-depot to

Reason: The movement of goods from DPM (AP) to DPM (Delhi) is occasioned by the order placed by the publishing house Delhi.

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Sells paper to the specifications

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The Central Sales Tax Act -1956

South India Viscose Ltd. Vs. State of Tamil Nadu Facts: Govt. Announced Judicial ruling Govt.

A Scheme

Issued allotment Cards Weavers

Where by silk Yarn allotted to weavers at concessional rate

Company Manufacturing Silk Yarn Factory in Tamil Nadu Transfers silk Yarn for sale exclusively to Maharashtra Weavers

Enters into contracts for Supply of Silk Yarn

Weavers in Maharashtra Sale at Concessional Rates

Depot Maharashtra

Companys Contention Transfer ISS Only Transfer Depot.

Supreme Court Contention Not stock-Transfer But ISS

Sale by Depot = Intra-state Sales

Reason: The movement of goods from Tamil Nadu to Maharashtra is in Pursuance of Contract of Sales

Note: Constitutional amendment: Through a new entry 92-B in the union list (46th amendment of 1982) provision has been made for the levy of tax (Consignment tax) on consignment transactions made in the course of Inter-state trade or commerce. But CST Act is yet to be amended in this regard. Thus the new powers remain unutilized by the Parliament.

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The Central Sales Tax Act -1956

Q1. Sales tax authorities are demanding tax on all Test inter-state movements of goods! Are they right? In case Your Knowledge they are not really ISS, what will you do to avoid CST? Q2. The Principal knows the ultimate buyers. Still he sends them to the agent only. Is it consignment or ISS? Q3. According to the 46th amendment to the Constitution inter-state consignment is also taxable! According Sales Tax Officer feels he can automatically levy Tax on Inter-State consignments. Does the Constitutional Amendment ibid give him so much power?

6. When is a sale / purchase of goods said to take place

outside the state (sec 4)


Sales inside a State (sec. 4(2)) Situs of Sale

With respect to Specific goods Ascertained goods Where the goods are present at the time of contract of sale Note: 1.

With respect to Future goods Unascertained goods Where the goods are appropriated as per the contract for Sale

First apply sec 4(2). Find out the state in which the sale has taken place. Then come to sec 4(1). The sale is deemed to take place outside all other states. For Example: If the sale takes place in Tamilnadu, then it is outside Kerala, Karnataka, AP etc. Sale from different states under a single contract A is a seller at Chennai. B is a buyer. The goods are made available at Chennai, Bangalore, Vijayawada, Delhi etc. The contract is Single but the goods are found in different states. Then the sale from each state is said to take place in the respective states. (Explanation to Sec. 4)

2.

1. What is important is the place where the goods are kept or appropriated at the time of contract of sale and not where the property in goods passes.

Points Requiring Attention

2. Where the sale within a state occasions movement of goods from one state to another it becomes ISS and is subjected to CST. Test your knowledge R. Soumyanarayanan FCA. Grad. CWA

Test Your Knowledge 23

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The Central Sales Tax Act -1956

You need 20 machines. The dealer has ten machines on hand 5 in Chennai and 5 in Bangalore. Six numbers were made at Port Blair and delivered as follows: a. Two number at Calcutta. b. Two at Paradeep. c. Two at Visakapatnam. The remaining four numbers were made in Mumbai; but delivered at Chennai. Can you list out the States that are competent to levy tax on the sales in question? Indicate the number of machines falling under each State.

7. Sale/Purchase of goods in the course of Import/Export

(Sec. (5))
7.1. Meaning of Crossing the customs frontiers of India (sec. 2(ab)) It means crossing the limits of Customs area in a customs station in which the imported and exported goods are generally kept pending clearance by the customs officers. Customs station and Customs authorities have same meaning as it the customs Act 1962. Customs Station Sec. 2(13) of customs Act. for vessels Customs Port for Aircraft Customs Airport For trucks and Land customs other Vehicles station Custom Authorities will specify the Customs Area in the customs station Where the imported and exported goods are to be kept pending clearance. Customs authorities (sec. 3 of customs Act) Principal Collectors of customs Collectors of customs Collectors of Customs (appeals) Deputy collector of Customs Assistant collector of customs Such other class of officers

7.2. 7.3.

7.4.

7.5.

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The Central Sales Tax Act -1956

How import takes place? Cargo is unloaded from the ship and handed over to port trust (custodian) Importer files BOE before customs authority Customs authority examines the goods He will assess customs duty on such goods The importer shall pay the duty The customs authority will issue the customs clearance order Importer takes the goods out of customs station

Note: Where the importer doesnt have money to pay the duty, he may temporary deposit the goods in customs bonded ware houses. The importer will get warehouse receipt. When he gets sufficient money, on filing of BOE & Paying duty, he can get the goods cleared from such warehouses. 7.7. How export takes place? The The The The The The The The exporter brings the goods in to the customs area. seller (exporter) files shipping bill to the customs authorities customs authorities assessee the export duty. exporter pays the export duty. customs authorities issue let export order goods are loaded into the vessel exporter gets the Bill of landing from the carrier exporter sends this BOL to the buyer.

7.8. When customs frontier of India is said to have been crossed? The moment the customs authorities assess the duty payable (import/export), the goods are deemed to have cross the customs frontier. Note: What is important is the assessment of duty and not the payment of duty. The goods may continue to be on the customs wharf pending payment of duty assessed, for getting the clearance order. Yet the deemed crossing has taken place when the assessment is over. (Mineral and metals trading corporations US State of AP) 7.9. Sale in the course of export (Sec. 5(1)) Straight Sale Essentials i. There must be a sale/purchase ii. Transaction should relate to goods iii. The sale should occasion export Note: Export & Sale should be an integrated transaction Endorsement Sale or High seas sale Essentials i. Goods should have crossed the customs frontier ii. Buyer turned seller effects the subsequent sale iii. Sale effected thro transfer of document of title to goods (i.e. endorsement in BOL) iv. Buyer turned seller shouldnt have physically handled the goods.

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The Central Sales Tax Act -1956

1. What do we mean by export? Export means taking the goods Out of India, to a place outside India Taking goods to CHENNAI PORT BLAIR Export

2. Importance of destination: Where goods are merely shipped to a foreign country, there being no destination specified, this will not be considered as sale in course of export. (Burmah shell oil storage & distributing company of India Ltd VS CTO) If a company supplies aviation fuel to a foreign going aircraft, at the air port, is not export, since these is no destination of goods in a foreign country. The same logic extends to good and other consumables. 3. Is there any restriction on the number of endorsement sales? No as long as the goods are not physically handled by the buyer turned sellers.

Q1 A dealer in Pune is selling goods to an ONGC Vessel doing offshore oil srilling beyond 12 Nautical Miles (Indian border). He calls it as export sale. The STO contends that it is local sale (Maharashtra GST Act). Who is correct? Dealer or STO?

Test Your Knowledge

Q2 X of Mumbai books his goods by air to his branch office at London. Subsequently, he transfers the documents of title to the buyer at Scotland after the goods have crossed the Customers Frontiers of India. Is this a sale in the course of export? Q3 Aviation fuel is bunkered by aircrafts of IAC (Indian Company) and Lufthansa (Foreign Company) both flying to Singapore from Meenambakkam. Local Sale? Export sale? Q4 You are a passenger to Singapore. On your way to board the aircraft, you buy cocacola from a shop in the Customs Area of airport. Will the shopkeeper treat the sale as local sale/export sale? Q5 X, an Export House of Delhi, first enters into a contract of sale with Y of New York, USA and subsequently purchases these goods from Z of Chennai for the purpose of export to Y of New York. Is the sale by Z to X (last sale before export) be treated as sale in the course of export? 7.10. Sale/Purchase in the course of import Straight sale Endorsement/High seas sale Essentials Essentials i. There must be a i. Goods should not have crossed the customs sale/purchase frontier ii. Transaction should ii. Buyer turned seller effects the subsequent sale relate to goods iii.Sale effected thro transfer of document of title to The sale/purchase should goods (i.e. endorsement in BOL) occasion import iv.Buyer turned seller shouldnt have physically handled the goods. Note: Illustration for endorsement sale

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The Central Sales Tax Act -1956

X-Delhi

Contract sale

of

Y-London

Delhi

Goods imported

Londo n

Sale in course of Import

Sends BOL X Endorses BOL in favour of Z - Chennai

Import sales (deemed)

MMTC procured iron rods from Japan. The goods reached Paradeep Port. MMTC made endorsement sale to SAIL, by scoring out their name in the Bill of Lading and inserting the name of SAIL. The latter filed Bill of Entry, paid Duty and cleared the goods. The STO levied tax on the sale of MMTC. Was he right? 7.11. Pre-export sale/penultimate sale: Sec.5(3)

Test Your Knowledge

Md. Serajuddin Vs State of Orissa SC Ruling. Sale made by STC = Export sale U/s 5(1) Sale made by serajuddin Export sale. It is only sale for the purpose of export & not sale in the course of export. To nullify this SC ruling Sub section (3) was inserted. Now sale immediately preceding the export sale shall also be deemed to be export sales in the following circumstances: i. ii. dealer. There should be an export-order from the foreign buyer Thereafter, the exporter should place a local purchase order with a

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MT Educare iii.

The Central Sales Tax Act -1956

Thereafter, the dealer should sell the goods to exporter (either as intra/inter-state sales). iv. The exporter should then make the sale of same goods to the foreign buyer. v. There should not be any processing of the goods by exporter. vi. The goods covered by the export order, the local purchase order, the local sale and the export sale should be one & the same. vii. The export sale should comply with the original export contract and there should be no diversion of goods to other buyers abroad. viii. The dealer should obtain proof of export from the exporter. (such as, BOL, shipping bills etc). ix. The dealer should also obtain Form-H declaration from the exporter.

Dealer 3

Exporter 2

Foreign Buyer

Local Purchase Order (01.05.04)

Export Order Date (01.04.04)

4
Local Sale Date (01.06.04) Export Sale Date (01.07.04)

5 Export Proof + Form H Declaration Highlights of Form H Printed form available at the sales tax office. Exporter can obtain this from his jurisdictional STO, provided he is a registered dealer. Form-H, prima facie proof as to the compliance of conditions U/s 5(3).

Note: Instances where processing done by the exporter doesnt asset Sec 5(3) concessions:
for black pulse black

Removes black skin & converts pulse into gram

This processing by exporter will not affect the Sec 5(3) concession to dealer. Reason: U/s 15, pulses = Grams (i.e., they are treated as same goods).

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Hulling the paddy into rice is processing by exporter. This will not affect the Sec 5(3) concessions to dealer, since U/s 15 paddy = rice (i.e. they are treated as same goods). Q1 X, an export house of Delhi, first enters into a contract of sale with Y of New York, USA and subsequently purchases these goods from Z of Chennai for the purpose of export to Y of New York. Is the sale by Z to K (last sale before export) be termed as sale in the course of export?

Test Your Knowledge

Q2 From the following identify the sales that could be termed as sales in the course of export a. E, the Exporter, first procures goods from D, the dealer. Thereafter he finds a foreign buyer F and makes export sale. b. F of USA placed an export order for sandalwood oil with E of India. E obtained sandalwood from D, extracted oil and sold it to E. c.D sells goods to E, the exporter, for enabling E to sell them to F in London in compliance with the pre-existing contract between E and F, E has some problem in exporting. He sells the goods to K who in turn makes export sales to F to fulfill the Export order of F with E. d. D sells road roller to E for enabling the latter to execute some works contract in Mauritius. E exports the road roller to Mauritius. e. D purchases cardamom from a planter and sells it to E. The latter makes export sale to F of Singapore to comply with the pre-existing contract. Cardamom is taxable at the point of purchase under TNGST Act. D is to pay tax on his purchase and not on his sale. f. D sells goods to E. The latter is to make Export sale to F for complying with some pre-existing export order. The Foreign buyer F breaches the contract. Therefore E makes export sale to another foreign buyer by name K. g. E has an export order for a bus. He manufactures chassis only. E sends chassis to D. The latter builds body on the chassis. The resultant product is a bus. E makes export sale of bus. h. Bankatlal has sold goods to Manaklal of neighbouring State, which the latter proposes to sell to parties outside India against orders to be received in future. Subsequently, Manaklal has exported such goods to some overseas parties. Bankatlal claims that it is a sale in the course of export. Discuss Q3 F wants 1000 shoes from E. The latter places order for 500 numbers on D1 and 500 on D2. (Dealer No. 1 and 2) and is able to export 500 shoes given by D1 to comply with the contract entered into with F. The remaining 500 shoes given by D2 are delivered to a new foreign buyer. Will D1 and D2 get 5(3) concession? Q4 F = Foreign buyer, E = Exporter, D = Dealer. E has problem in exporting and hence he sells the goods to E1, who in turn makes export sale of the goods to comply with the original contract with F. Will D derive the benefit of Sec. 5(3)? Q5 D sells black gram pulse to E. The goods are black in colour (black skin outside and two cotyledons inside). E removes the skin and converts the pulse into gram. (White in colour 2 cotyledons only) for making export sale.

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There is a processing in the hands of E. The goods sold by D are not sold as such in the course of export by E. Will D get 5(3) concession? Q6 D sells paddy to E. The latter hulls the paddy and makes export sale of rice to comply with the pre-existing export order for rice. What D sold is paddy; but what E sold is rice in the course of export. Will D get 5(3) concession?

8. Charging-Section: Sec (6)


8.1. Sales tax law Vs General sales tax law. Sales tax law Sec 2(i) GST + Other special enactment for levying add in sales tax surcharge on sales tax etc. 8.2. Charging provisions Sec. 6(1) Sale Inter-state sale Other ISS Intra-state sale Export sale Import sale VS General sales tax law GST Act only (levies basic sales. Example: TNGST Act, APGST Act, KGST Act etc.

Penultimate sale U/s 5(3) involving interstate movement goods

Outside the scope of charging section

Tax is payable on these ISS Subject to the other provisions

CST is a levy on sale & not on goods sold. The liability for ST is fixed on the seller.

CST is levied always on sales & never on purchases No CST levied on Inter-state sale of electricityPoints Requiring Attention All sales in a year by a dealer are taxable (A dealer makes a single ISS for just one rupee in the whole year Even then he has to pay tax) To the contrary, if the dealers turnover in a year < 300000/- no GST levied under TNGST Act. Multi-point exceptions) taxation applicable under CST Act (Subject to

8.3. No GST; GET CST Leviable (Sec. 6(1A)) CST liability on an ISS cannot be avoided, though such sales if effected within the state would not have attracted GST liability-under the ST law of the appropriate state. Note: This subsection is classifications in nature.

Need for classification:

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The Central Sales Tax Act -1956 Sec 9(2) requires the STO of the state govt. to levey, assess, demand and collect CST as they do in respect of GST. A doubt arises as to whether they could levy CST when GST is not leviable. It has been held that Sec 9(2) provides only the collection mechanism and does not in any affect the tax liability under CST. The provisions in GST Act have no impact on CST Act. Thus sub section (1A) is intended to keep thing beyond any ambiguity in this regard.

8.4. Relaxation with respect to transit sale Sec. 6(2): The CST Act provides for a single point sales tax levy at the point of first sale. Subsequent sales are exempt to avoid a multiple tax incidence. To avail exemption the following conditions should be satisfied. First sale should be ISS The goods should be in the course of movement from one state to another. The buyer should become a seller He should not receive the goods from carrier. Instead, when the goods are in the custody of the carrier, he should make an endorsement sale. The document of title is LR/RR/AWB/BL usually it will in the buyers name. he should strike out his name and insert the name of the new buyer. He should advise the carrier to take the goods straight to the new buyer. The goods should not have been physically handled by him. He is the first subsequent seller. He shall obtain E-1 form from his seller. He will obtain C Form or D Form from his buyer. There can be any number of further subsequent sales by transfer of document of title during the movement of goods from one state to another. The second, third, fourth etc. subsequent sellers shall obtain e-II Forms from their sellers and C-Forms/D-Forms from their buyers. The concessions of Sec.6(2) will flow only if the sellers buyers are registered dealers/Govt. departments. The first seller will obtain C-Form/D-Form from his buyer outside the state and pay tax at the concessional rates. The subsequent sellers will obtain E-I/E-II forms & C-Forms/DForms and claim exemption from tax. If the buyer is govt., then exemption is available with responsible to all goods. If the buyer is a registered dealer, then exemption is restricted to the goods covered by registration certificate.

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The Central Sales Tax Act -1956 Start

Is it an ISS?

No

Yes

CST is not leviable

Buyer=Person notified by CG u/s 6 (3) No CST is leviable

Yes

Is there any subsequent ISS? Yes

No END

Buyer = person notified by CG u/s 6(3) No

Yes

CST is not leviable

Yes

Is it ISS referred to u/s 3 (a) No

CST is not leviable

Yes

Buyer = Govt Or Registered Dealer buying sec8(3) goods?

No
CST is leviable

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The Central Sales Tax Act -1956

C- Form is applicable when the buyer is registered dealer. D- Form is applicable when the buyer is Govt. dept. EI/ EII forms are printed forms available for sale with the sales tax officer. These forms go to prove that the subsequent sales have been made during the inter-state movement of goods. The buyer (being registered dealer) need not give Form C, if such sales/ purchase of goods is generally exempt from the sales tax under the sales tax law of the appropriate state or subject to tax at a rate less than 4%. But now after the amendments through the Finance Act 2002, CForm has become necessary even when the tax rate is less than 4%. 8.5. Sales to certain buyers- Exempted: CG may by notification in OG exempt (Conditionally/ unconditionally) CST on sales made to the following persons: a. Officers/ Staff (entitled to diplomatic concession) of: any foreign diplomatic mission. Consulate in India. UN/ any other agents of the above. b. Consular / diplomatic agents of the above. Provisions Illustrated (Commencing with ISS) DEALERS P Mumbai first seller TRANSACTION First sale u/s. 3(a) made to Q in Bangalore FORMS Issues E 1 Form to Q RESULT Pays S.T. at the concessional rate of 4% based on C/D Forms reed, from Q. Combines E 1 Form from P and C/D Forms from R and gets exemption. Combines E II Form from Q and C/D Forms from S and gets exemption Combines E II Form from R and C/D Forms from T and gets exemption Movement terminates. T becomes the final buyer. SELLING PRICE 100 + 4 (S.T.) = 104

Q Bangalore Subsequent seller 1 R Chennai Subsequent seller II

Subsequent sale u/s. 3(b) made to R of Chennai

Subsequent sale u/s. 3(b) made to S of Madurai

S Madurai Subsequent seller III T Sivakasi Final Buyer

Subsequent sale u/s. 3(b) made to T of Sivakasi Ultimate purchase done. Chain breaks.

Issues E II Form to R Issues C/D Forms to P. Issues E II Form to S Issues C/D Forms to Q. Issues C/D Forms to R. Issues C/D Forms S.

104 + 0 (S.T.) = 104

104 + 0 (S.T) = 104

104 + 0 (S.T.) = 104

to

104 + 0 (S.T.) = 104. THIS IS PURCHASE PRICE FOR T

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The Central Sales Tax Act -1956

Provision Illustrated (Commencing with consignment sale)


DEALERS P Mumbai Principal Q Bangalore Agent & I Seller R Chennai Subsequent Seller I S-Madurai Subsequent Seller II T Sivakasi Final Buyer TRANSACTION Consignment made to Agent Q at Bangalore First sale u/s. 3(b) made to R of Chennai Subsequent sale u/s. 3(b) made to S of Madurai Subsequent sale u/s. 3(b) made to T of Sivakasi Ultimate done. breaks. purchase Chain Issues E I Form to R Issues F Form to P Issues E-II Form to S issues C/D Forms to Q Issues C/D Forms to R FORMS RESULT Escapes Tax Liability Based on F Form Received from Q the Agent. Pays S.T. at the concessional rate of 4% based on C/D Forms from R Combines E II Form from Q and C/D Forms from S and gets exemption Combines E II Form from R and C/D Forms from T and gets exemption Movement terminates. T becomes the final buyer. SELLING PRICE No sale at all. No tax. Goods move for the market price sans S.T. 100 + 4 (S.T.) = 104 104 + 0 (S.T) = 104

104 + 0 (S.T.) = 104

Issues C/D Forms to S.

104 + 0 (S.T.) = 104. THIS IS PURCHASE PRICE FOR T

Q.1. Q.2.

You client makes a single ISS for just Rupee one in a year. Should he pay CST? Under TNGST Act, no tax is payable on second sales and also upto a turnover of Rs. 3 lakhs. Assessing Authority is the same for CST as well as TNGST. Is CST leviable on similar sales in the course of inter-state trade or commerce?

Test Your Knowledge

Q.3. Q.4. Q.5.

Is Electricity goods? Are we to pay CST on the inter-State sale of electricity? Under TNGST Act cotton, sugarcane cardamom etc, are taxed at purchase point. What about the position in CST Act? Assume that coconut sold locally to anyone other than that oil mill is exempt. Therefore coconuts sold to Saravanabhavan in Chennai are not taxable. Your client sells coconuts to a hotel in Bangalore. Should he pay CST or not? X of Kolkata sells goods to y of Chennai and delivers the same to Kolkata to MKS transport .The Lorry Receipt was sent to Y by post. While goods were in Transit, Y sells the goods to Z of Vijayawada by making an Endorsement of LR and goods were diverted to Vijayawada. Is the second sale between Y and Z Chargeable to tax? Ram of Tamil Nadu sells goods to Rahim of Kerala. The lorry way bill is endorsed to Abraham of Maharashtra. In Maharashtra, the goods are chargeable to sales tax at 3%. Discuss whether the second sale is exempt from levy of central sales tax. What are the documents to be furnished in this regard?

Q.6.

Q.7.

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Q.8.

Fill up the blanks Selling dealer X of Delhi Y of Jaipur Purchasing registered dealer/Government Y of Jaipur Z of Baroda Is it chargeable under the CST Act? Conditions for exemption Place where CST will be collected (If conditions fulfilled) Place where CST will be collected (If conditions not fulfilled)

Inter-state sale First sale Second sale (which takes place during movement of goods from Delhi and Jaipur) Third sale (which takes place during goods movement from Jaipur to Baroda) Fourth sale (which takes place after obtaining delivery of goods at Bombay)

Z of Baroda

A of Bombay (a Government department)

A of Bombay

B of Goa

9. Registration of Dealer (Sec. 7)


i. Applicable to whom: Registration of Dealers

Compulsory Registration Applicable to every dealer liable to CST

Voluntary Registration Appropriate state

Has Sales tax law Applicable to every dealer liable to pay tax under such law Every dealer entitled to get refund or rebate ii. Application for Registration:

Has no Sales tax law Any dealer having POB in such state

(a) To Whom application should be made: Authority in appropriate state notified by Central Government.(Territorial Sales Tax Authority) (b) Form of Application : Form A (c) Time limit for Application : Registration

Compulsory

Voluntary Any time

Not later than 30 days from the date on which dealer becomes liable for CST

(d) Separate Registration under Sec. 7 for each appropriate state POB(s)

In only one state

In more than one state

Only one POB

Different POB(s)

Separate Registration is required in each state.

Single Application is enough

MT Educare Note:

The Central Sales Tax Act -1956

Principal Place of Business If the dealer has different POB within one state, he shall name one such POB as principal place of Business. The application should be submitted to notified authority specified in respect of POB. PPOB (under CST Act) = PPOB (under GST law) (e) Application fees : Rs.25 per application - (Paid in the form of court Fee stamp affixed to application) (f) Registration under GST law a pre-condition : GST RC is an essential prerequisite for getting CST RC (g) IT-PAN Pre-requisite : IT-PAN- Pre-requisite for getting CST RC. (h) Who should sign the application? Individual/proprietary concern Firm HUF Company Any other association of individuals Golf :

Proprietor Any partner Karta Dir/MD/Principal officer Principal officer managing the business Officer authorized by govt.

(i) Verification of application : The application should be verified by the tax officer in the prescribed manner. iii. Processing of application by notified authority: Notified authority shall give opportunity of being heard + allow correction to the application. (if required)

Particulars contained in application are correct & complete? Application fee paid? Conditions regarding security complied with?

No

Yes Notified authority shall register the dealer

Yes

Is the defect made good?

No COR - (In form-B) shall be granted to the dealer. Reject Application

COR - shall be kept at the PPOB (by dealer) Copy of COR shall be kept at every other POB within the state.

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Effective date of registration: Date of application for registration or the date of first ISS (Whichever is earlier) iv. Contents of RC: a. CST Registration number b. Appropriate state c. Principal place of Business d. Other POB e. Nature of Business f. Goods in which he can deal g. Purpose of purchase h. Accounting year i. Warehouses in the state of registration j. Validity period k. Date of registration l. Sign of notified authority

Power to require Security as a pre-condition for registration Notified authority as a pre-condition for issue of RC, require the dealer to furnish security It shall be furnished in the prescribed manner + within the prescribed time. Necessity Proper realisation of CST Proper custody + Use of forms (E-I, E-II,F-form, Cform) Opportunity of being heard should be given before requiring security. v. Power to require additional Security: At any time which RC is in force, the notified authority may require the dealer to whom RC was granted to furnish additional security for the aforesaid purpose. It is binding on the dealers to whom RC has been issued. Opportunity of being heard should be given before requiring additional security. Until he furnishes the additional security, he cannot get the aforesaid forms. vi. Quantum of Security/additional security: Registration

Voluntary

Compulsory

Quantum of Security/ Additional Security

<

Estimated CST payable on ISS

Quantum of Security/ Additional security <

Estimated CST payable for the year of security/ additional security. 38

to such dealer in the year of Security/ Additional security R. Soumyanarayanan FCA. Grad. CWA

MT Educare vii.

The Central Sales Tax Act -1956

Execution of fresh surety bond: Is security/additional security in the form of a surety bond? Yes Does Surety becomes insolvent or dies? Yes i) ii) Inform the notified authority about the occurrence of such event (within 30 days) Yes Furnish fresh surety other security within 90 days. No No Need to execute freshsurety bond doesnt arise.

Note: Until he furnishes fresh surety/other security, he cannot get the aforesaid forms. viii. Forfeiture of security:

Tax/Penalt y payable by dealer? No


Aforesaid forms misused by the dealer? Or Aforesaid forms not kept in proper custody?

Yes

Yes Security will be forfeited after giving opportunity of being heard.

No Security provided will not be forfeited. ix. Duty to make up deficiency: Due to forfeiture of security, if the security furnished by the dealer is rendered insufficient, he shall make up the deficiency in the prescribed manner + within the prescribed time. Until, he makes up this deficiency, he cannot get the aforesaid forms.

x. Refund of excess security: The notified authority, on application of the dealer, may refund the excess security (not required for the purpose of this Act)

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The Central Sales Tax Act -1956

a. b. c. d. e.

xi. Appeal against order requiring security/additional security/forfeiting the security/denying refund of security. Application should be in the prescribed form + in the prescribed manner. Time limit for application: Within 30 days of the service of the aforesaid order (Extension by appellate authority possible) Application is entertained only on furnishing the security (This requirement may be dispensed with at the instance of appellate authority) Prescribed fees should be paid. Order passed by appellate authority is final. xii. Amendment of RC: Reasons for amendment: Name of dealer changed Place of business changed Nature of business changed Class of goods dealt by him changed Any other reason. Amendment - On application from the dealer or suomoto (after due notice) Procedure for Amendment: a. Application to be submitted to the notified authority b. It should set out the specific matters in respect of which amendment is required; the reasons therefor. c. The application should be accompanied by the original RC. & the Copies of RC. d. The prescribed fees shall be paid in the form of court fee stamps. e. The notified authority, if satisfied, will incorporate the changes in RC & return them back. f. Opportunity of being heard should be given before amending RC. Effective date: Date of application by the dealer. In case of suo-moto amendment date of amendment.

xiii. RC Lost, destroyed, defaced, mutilated. If RC is lost, destroyed, defaced or mutilated the dealer may on application to the notified authority and on payment of a fee of Rs. 5/obtain a duplicate copy of RC. xiv. Cancellation of RC: Cancellation

Suo-moto

On application Gap Date of application End of the year

Gap < 6m Note: The notified authority will cancel unless the dealer is liable to pay CST. Effective date of Cancellation: The cancellation shall take effective from the end of the year.

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MT Educare Sumoto Cancellation Reasons/Grounds i) ii)

The Central Sales Tax Act -1956

Dealer ceases to carry on business. Dealer ceases to exist.

iii) Dealer fails to furnish additional security. iv) Dealer fails to furnish fresh surety bond/other security (on the insolvency or death of surety). v) Dealer fails to make up deficiency on for future of security. vi) Other sufficient reason. Note: In case of Voluntary registration, if the dealer has ceased to be liable to pay tax under the sales tax law of the appropriate state the RC may be cancelled. Opportunity of being heard should be given. Duty of Dealer: The dealer shall immediately surrender to the notified authority the RC & the copies of RC granted to him. (This is applicable both for sumoto cancellation and for cancellation on application) Advantages of Voluntary Registration: With Voluntary Registration: Without Voluntary Registration: Effects Sales In course Of inter-state Trade. Effects Sales In course Of inter-state Trade.

Seller

Buyer

Seller

Buyer

Issues form-C Purchase price = Sales price + CST (at concessional rates) Purchase price = Sales Consideration + CST (at non-Concessional rates of tax) Advantages 1. (Use of C form) 2. 3. 4. form) No tax on goods received as agent (Use of F form) No tax on sales U/s. 6(2) (use of E I/ E II and C No tax on Sec. 5(3) sale (use of H form) concessional rate of tax on Inter State Purchases Note: For every subsequent buyers no CST (if it Sec. 3(b) sale)

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MT Educare 5.

The Central Sales Tax Act -1956 No tax on purchase by a unit in SEZ (use of

prescribed form)

Penalty for violation: Penalty Rs.5000 + Imprisonment up to 6 months. For continuing default - Rs.50 per day fine. (Only in case of compulsory registration) Q1. Your client has H.O in Chennai and 9 branches in Tamil Nadu. He wants CST RC. Does he need one RC or 10 RCs?

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Q2. Your Client has H.O In Chennai and 9 brancheseach in a state outside Tamil Nadu. He wants CST RC. Does he need one RC or 10 RCs? Q3. Your Client is a CST RC holder. His STO refuses to give him C form. Is the STO right? If So under what Circumstances. Q4. Your client wants to get registered under CST Act and get the benefit of C form purchase from outside the State. But he does not want to make inter-state sales and pay CST to the Government. Can he do so? Q5. To-day is 12.12.99. Your client decides today to wind up his business by 31.12.99. He does not want CST RC w.e.f. 1.1.2000. Can you arrange for the cancellation of RC by this year end? Q6. Discuss whether registration is required in the following cases under section 7 of the CST Act. State the advantages it registration is requiredName and State of dealer X of Delhi Y of Delhi Z of Delhi A of Delhi B of Delhi C of Delhi D of Delhi E of Delhi Purpose of purchasing goods Resale Resale Resale Resale Manufacture sale Manufacture sale Manufacture sale Manufacture sale State from which goods are purchased Delhi Delhi Punjab Punjab Delhi Delhi Rajasthan West Bengal State in which goods are sold Delhi Haryana and Delhi Delhi Rajasthan Delhi Rajasthan and Delhi Delhi Punjab

and and and and

10.

Rates of tax on sales in the course of Inter-State trade/Commerce.


Sale in the course of Inter-State trade to

Government Sec. 8(1)

Registered dealer-other than government Sec.8(1)

Units located in Special Economic Zone 42

R. Soumyanarayanan FCA. Grad. CWA

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The Central Sales Tax Act -1956

S.No

Government Sec.8(1)

Registered dealer-other than government Sec.8(1)

Units located in Special Economic Zone

Meaning of the term Government : State Governme nt Departmen ts Central Governme nt Departmen ts

Sales covered Sales made to a registered dealer

Significance of SEZ No customs duty on imports made by units in SEZ No excise duty for products manufactured & exposed by units in SEZ Units in SEZ are deemed to be outside India for customs/excise purpose. CST = 0%

Exclusions: Municipality Municipality corporation Universities Government autonomous bodies. Government Company Concessional rate is applicable for sale of any goods. Concessional rate 4% or Local rate whichever is lesser. Submission of D Form The concessional rate is applicable only when the government department gives D Form to the seller. Note: D Form is not sold by sales tax authorities. The concerned

Concessional rates applicable only to goods mentioned in RC & not to all goods.

Concessional rate: 4% or Local rate (whichever is lesser) Conditions for availing concessional rate: a. Purchase for prescribed purposes The goods purchased is meant for Resale Manufacture and sale Telecommunication Network Mining Generation and distribution of electricity and power Packing b. Submission of C Form Concession rate could be

Conditions for exemption a. specified purposes: Units in SEZ should have purchased the goods for the purpose of Setting up Operations Maintenance Manufacture Trading Production

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The Central Sales Tax Act -1956 availed only when the buyer (being a registered dealer) gives C Form to the seller. Note: Printed C Forms are available with the jurisdictional sales tax officer. They should be bought and filled up and sent to the seller. Processing Assembling Repairing Reconditioning Reengineering Packing b. The buyer should be a registered dealer c. The goods purchased are specified in the RC of the buyer. d. The buying dealer should give a declaration in Form H to the selling dealer. Form H should be duly countersigned by development commissioner SEZ

Sale in the course of Inter-State Trade to others

Sale made to other than Govt. Department

Sales made to Unregistered Dealer

Sales made to Registered Dealer Goods sold not covered by the RC of Buyer

Local rate = GST + Surcharge + Additional Sales Tax etc. in the appropriate state of Seller. Sale of Goods

Exempted under the sales tax law of the appropriate state

Not exempted under the sales tax law of the appropriate state.

Blanket Exemption

Exemption in specified circumstances under specified conditions

Tax rate = NIL

No concession available Goods sold

Declared goods Tax rate = Local rate * 2

Other than declared goods Tax rate = Local rate or 10% (whichever is higher) 44

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The Central Sales Tax Act -1956

Summary Declared goods Less than or More than 4% equal to 4% CST = Local rate CST = Local rate * 2 CST = 4% CST = Local rate * 2 Other goods Above 4% but 10% or less CST = 4% CST = 10%

Local rate CST with C Form/D Form CST without C Form/D Form

Less than or equal to 4% CST = Local rate CST = 10%

More than 10% CST = 4% CST = Local rate.

Power of State/Government to exempt CST Sec. 8(5) 1. The State Government have been empowered to grant exemption form levy of tax on ISS. 2. The exemption may be whole/part (i.e the tax may be nil or tax may be at a lower rate) 3. The State/Government may prescribe conditions also if they so desire. 4. The exemption shall be in public interest only. 5. The exemption may be in favour of specified goods or specified dealers. 6. The entire exercise is at the discretion of State Government. 7. This concession is available only on producing C Form/D Form.

Q1. X, a dealer in Delhi, makes inter-state sale of goods (other than declared goods) to the following:Buyer Y Z A B C D E

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Local tax rate under the Delhi Sales Tax Act Nil 1.5% 3% 4% 6% 9% 11%

What is the central sales tax rate ifa. The buyers are registered dealers and issue C Form: b. The buyers are Government departments and issue D Form; and c. The buyers are not registered dealer and goods are not declared goods. Q2. Determine the rate of tax applicable and fill up the blanks from the following information.

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The Central Sales Tax Act -1956

Please see below the Table [as in the question paper] with the answer duly filled in. For guidance, read Tax Table below Section 8(5). PRODUCTS A B 0% 2%

Local S.T. Rate

C 4%

D 6%

E 8%

F 10%

G 12%

1. Sales to Government 2. Sales to Regd. Dealers (Specified goods) 3. Declared Goods sold to unregistered dealers 4. Undeclared Goods sold to Unregistered dealers Q3. Your client want to sell locally Sugar, Cigarette and Textiles. He seeks your advice for the rate of tax he has to change on his sales. What will be your answer if he wishes effects inter-state sales? Will your answer change if he decides to sell sweets, garments and Cigarette? (Hint) sec. 8(2)(c)

11.

Determination of Turnover
11.1. Meaning of Turnover (sec. 2(j)) It means aggregate of sales price received and receivable by a dealer in respect of sale of any goods in the course of inter-state trade during the year. It shall be determined in accordance with the provision of this act and rules made there under.

Sale Price (sec. 2(h)) It means the amount to a dealer as a consideration for a sale of any goods. It excludes Cash discount as per normal trade practice. It also excludes Freight, delivery and installation cost if separately charged. It includes any sum charged for anything done by the dealer in respect of goods at the time of or before delivery of goods to the buyer.

Q1. Determine whether the following items could be included in computing the sales price Sl. No. 1. 2. 3. Items Cash discount Trade discount (Radian Industries of India), (Kerala Rubber and Allied products) Quantity discount (Advani Oerlikom)

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To be included To be excluded

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The Central Sales Tax Act -1956

Excise duty (Hindustan Sugar Mills Ltd. Vs. State of Rajasthan) Customs duty Sales tax Royalty Octroi duty Dharmada (Standard Match Industries Vs. State of Tamil Nadu) Weighment charges relating to sale (Rai Bharath Das and Brothers Vs. CST) Freight delivery and installation (Shaw Wallace & Co. Vs. State of Tamil Nadu) Packing charges (Rai Bharath Das and Brothers Vs. CST) (Commissioner of Sales Tax Vs. Prabhath Marketing Company) Insurance charges to cover the risk of seller Insurance charges for covering the risk of buyer at the request of the buyer Indemnity/Guarantee charges to indemnify the buyer from incurring loss in transit Subsidy from government for selling the goods at controlled price which is less than the cost. Incentive bonus for additional sale Deposits for returnable containers Cost of returnable containers (Dyer Meakin Breweries), (Britania Biscuits Company) Interest in service charges incase of hire purchases (Jaya Bharath Credit and Investment Co.) Q2. The respect of goods which are exempt from tax can the cost of packing materials be charged to tax? (Premier Breweries vs. State of Karala) (T. Nagarajan & Brothers), (Chettiar Industrial Corporation).

11.2. Year (sec. 2(k)) This term is used in relation to dealer. It means the year applicable to the dealer under the GST law of the appropriate State. If no such year is applicable it means financial year. All states follow financial year only. Hence Year is financial year under CST. S.No. 1. 2. 3. 4. 5. 11.3. Determination of turnover (Sec. 8A) Particulars Turnover(including CST) Less: CST (1) x Tax Rate/100+Tax Rate Less: sales returns Less: Other deductions (prescribed by Central Government) Turnover for the purpose of this Act Amount xxx xxx xxx xxx xxx

11.4. Conditions for deducting Sales Return a) The sales returns should relate to the sales originally made during the period for which the turnover is to be determined b) The goods should be returned to the dealer within a period of six months from the date of delivery to the buyer.

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The Central Sales Tax Act -1956 c) There should be satisfactory evidence in the books of the dealer for the return of goods i.e. the returned goods should have been entered into the stock account. d) There should be monetary adjustment in support of sales return i.e. the money received from the buyer should be returned.

Note: The sales return can take place even outside the turnover period. In respect of sales made during the later part of the year, returns are possible in the next year only.

Q1. SI No 1 2 3 4 5 6

T.O Period 1997-98 1997-98 1997-98 1997-98 1997-98 1997-98

Date Of sale 01.01.97 01.05.98 01.05.97 01.05.97 01.03.98 01.05.97

Date of Sales Return 31.05.97 30.06.98 31.07.97 31.12.97 30.06.98 31.08.97

Refund of Money Made Made Not Made Made Made Made

Treatment

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Reasons

Q2. The T.O period is 1998-99. Date of sale is 1.12.98. Date of Return is 30.4.99. Returned within six months. But returned next year i.e., not in 98-99. Is the deduction from turnover permissible towards sales Returns? Q3. The T.O period is 1998-99. Date of sale is 1.2.98. Date of return is 31.5.98. Return within six months. Returned during 98-99. Can the dealer claim deduction under sales Returns?

Problems on CST Q1. Total interstate sale for the financial year 2003-04 of X Ltd. Is Rs. 1,50,70,000, which consists of the following: Q2. 4% CST Sales 2% CST sales Rs. 91,50,000 59,20,000

Out of the goods sold for Rs. 1,50,000 on 16.07.2003 that were liable to CST @ 4%, goods worth Rs. 50,000 were returned on 12.12.2003 and goods worth Rs. 1,20,000 were returned on 01.02.2004. A buyer to whom goods worth Rs. 55,000 carrying 2% CST was dispatched on 16.04.2004. Compute the taxable turnover and tax liability of X Ltd., since all the relevant forms have been received. Q3. From the following details, compute CST payable by a dealer carrying on business in New Delhi:-

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The Central Sales Tax Act -1956

T.O. for the year is Rs. 16,00,000, which included the following:Rs. 48,000 25,000 80,000 60,000 40,000 Not given

Trade commission for which Credit Notes have to be issued separately Installation charges Excise Duty Freight, Insurance and transport charges recovered separately in invoices. Goods returned by dealers within six months of sale, but after the end of the financial year CST Buyers have issued C Forms for all purchases. Q4.

Mr. X reported sales turnover of Rs. 36,20,000. This includes the following: (i) Excise duty Rs. 3,00,000; and (ii)Deposit for returnable containers and packages Rs. 5,00,000

Sales tax was not included separately in the sales invoice. Compute tax liability under the CST Act, assuming the rate of tax @ 4%. Q5. Mr. Vishal is a dealer. His sales during the first quarter of 1997-98 (April June) are as under:Date 05.04.97 12.04.97 05.05.97 06.06.97 27.06.97 Invoice No. 1 2 3 4 5 Amount 10,000 + tax @ 4% 80,000 + tax @ 4% 62,400(inclusive of tax) 14,000 + tax @ 4% 18,000 + tax @ 4%

Goods worth Rs. 7,000 (Exclusive of tax) against Invoice No. 4 were returned on 29.06.97. Goods worth Rs. 13,000 (inclusive of tax) sold on 26.12.96 were returned on 30.06.97. Goods worth Rs. 6,500 (inclusive of tax) sold on 27.12.96 were returned on 30.06.97. All the above sales were made in the course of inter-state trade. Calculate the Turnover and the tax payable if the rate of tax is 4%. Q6. A dealer effected the following sales during the first quarter of 1997-98 (April to June):-

Invoice No. Date Value 1171 02.04.97 26,400 + tax @ 4% 1172 19.04.97 70,000 + tax @ 4% 1173 02.05.97 52,000 (inclusive of tax) 1174 04.06.97 12,200 + tax 4% 1175 25.06.97 20,000 + tax @ 4% Goods worth Rs. 6,100 (exclusive of Tax) against Invoice No. 1174 were returned on 28.06.97. Goods worth Rs. 5,200 (Inclusive of tax) sold on 25.12.96 were returned on 30.06.97. R. Soumyanarayanan FCA. Grad. CWA 49

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The Central Sales Tax Act -1956

Calculate the TO and ST payable if the rate of tax is 4%. Q7. Mr. A reports his turnover at Rs. 52,00,000 for the year ended 31.03.2003. Also he reported that goods sold in March, 2003 have been returned by the customers to the value of Rs. 5,20,000 in May 2003. He has not charged tax separately in the sale invoices. Assuming the tax rate @ 4% compute his tax liability under the Sales Tax Act. (i) M/s Snow White Ltd., Mumbai sells iron rods to M/s. Hyderabad ltd., in Vijayawada, both of them are registered dealers for a value of Rs. 10,00,000 inclusive Central Sales Tax @ 4%. The local sales tax on iron rods in Mumbai is 3%. Ascertain the Central Sales Tax Payable. If Hyderabad Ltd. were unable to submit form C, being a unregistered dealer, what will be the Central Sales Tax liability, if the local sales tax rate is 12%?

Q8.

(ii)

Q9.

M/s. Joshuree Brothers, Mumbai, Maharashtra, are dealing in two products A and B. The gross inter-state sales are Rs. 5 lakhs and Rs. 3 lakhs respectively during the financial year 1998-99. No CST was charged in the invoice. If sold within Maharashtra, the rates of sales tax are 6% and 5% on products A and B respectively. Product B is declared goods included under Sec. 14 of the CST Act. The other details in respect of the financial year 1998-99 are as follows:(i) M/s Joshuree Brothers imports product A from Japan, stocks it and then sell it from its Godown. (ii) Product A worth Rs. 1 lakh was returned by the customer in March 99 as this was in excess of his requirements. Product A has been sold to him in June 98. (iii) Product A worth Rs. 0.5 lakhs was imported; but was sold by transfer of documents to a buyer in New Delhi before it was cleared from Customs. Customs duty was paid by the buyer from New Delhi. (iv) C Form was received in respect of the balance sale of product A. (v) Out of total sale of product B, Sales of Rs. 1 lakh were inclusive of packing charges Rs. 5,000; transport charges Rs. 3,000; and transit insurance Rs. 3,500. The charges were shown separately in the invoice. D Form was received in respect of these sales. These goods were purchased by M/s. Joshuree Brothers from a manufacturer in Mumbai for Rs. 7,500 which included Maharashtra sales tax of Rs. 5,500. You are requested to work out the turnover and the CST liability for the yea 1998-99 will M/s. Joshuree Brothers be able to obtain any refund by tax paid on purchases? If so, how much?

Q10. Geet Pvt. Ltd, Chandigarh, made the following transactions in interstate sale/purchases:(i) Goods sold to a Government Department in Maharashtra Rs. 5,50,000. (ii) Goods sold to a trader in Himachal Pradesh Rs. 5,00,000 (iii) Goods purchased when they were in transit from Rajasthan to Haryana and sold during the movement of the goods to a manufacturer in Haryana by transfer of documents Rs. 2,50,000. (iv) Goods exported directly Rs. 1,20,000. (v) Goods exported through agent Rs. 1,00,000, the agent being paid commission (a), 1%.

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The Central Sales Tax Act -1956

Goods sold to an exporting agency in New Delhi which in turn exported the goods Rs. 1,50,000. Sales tax on the goods is 4%, if sold within the territory of Chandigarh. What are the sales tax declaration forms obtainable from each of the above buyers? What will be the sales tax rate applicable in each case, if the(a) Required declaration is obtained (b) Required declaration is not obtained. Q11. Sumita Garments, Goa had inter-state sale of their product Z for the year April 1999 to March 2000 of Rs. 17,50,000 (inclusive of Sales Tax). The rate of CST was 5%. Goods worth Rs. 1,50,000 sold in January 2000 were returned by a buyer in May, 2000, as they were in excess of his requirement. Goods worth Rs. 1,30,000 despatched in May 1998 were rejected by the buyer and sent back in March 2000. Find out the taxable turnover (T.O.) if C Form was received from all buyers. What will be the taxable turnover (T.O.) if goods worth Rs. 1,50,000 (mentioned above) sold in January, 2000 were returned by the buyer in August, 2000. Determine the CST liability from the following data when sale is effected from Faridabad to Lucknow. Invoice No. 00 708 374 Basic Price Rs. 3,00,000 Excise Duty 16% ad valorem CST As applicable under C Form Trade Discount 8% Cash Discount 2% Quantity supplied 10,000 kgs Quantity returned by the buyer within 3 days of 1,000 kgs dispatch Quantity returned by the buyer after six months of 1,000 kgs dispatch Q13. Calculate the CST payable from the following data: Q12.

Invoice No. 1011

Date Rs. 01.04.200 1,78,967 (inclusive of CST 4%) 1 1012 02.04.200 1,87,697 (Exclusive of CST @ 4%) 1 1013 03.04.200 1,75,000 (inclusive of ST @ 10%) 1 1014 04.04.200 2,50,000 (exclusive of ST @ 8%) 1 50% of goods sold on 1.4.01 on inter-state trade was rejected and returned on 31.3.02. 20% of goods sold on 4.4.01 on local sale was returned on 30.6.01. 30% of goods sold on 2.4.01 on inter-state trade returned on 2.6.01. 10% of goods sold on 3.4.01 on local sale was rejected on 3.10.01.

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The Central Sales Tax Act -1956

Goods of value Rs.1,50,000 stock transferred from Bangalore to Indore on 5.4.01 excludes CST element o 4% Export of goods worth 10 million yens to Japan on 6.4.01 of which 50% were rejected and returned on 1.11.02 (1 yen = Re. 0.35). Export through Canalising Agency for value of 100 Thousand dollars (Export order with Canalising Agency) (1 dollar = Rs. 48). Purchased goods for Rs. 3,00,000 from the market on 9.1.01 and exported to Singapore on 14.1.01 to the Agent for further sale (The goods attracted local ST of 10%). Give reasons for inclusion/non-inclusion of the above. Q14. During 2003-04, the gross inter-state sales made by X Ltd. of Ajmer is Rs. 47,86,000. Although the central sales tax is not shown separately, the following information is available from the records of the companya. The company sells machinery which makes copper wire rods. If it is sold in the Rajashthan State, sales tax rate is 7 per cent (plus additional tax @ 10% of sales tax) b. Information regarding sales with and without C Form is as follows:Inter-state with C Form 29,50,000 12,75,000 37,000 70,000 15,210 92,000 10,500 15,000 sale Inter-State sale without C Form 18,36,000 4,10,000 48,000 17,000 19,700 1,06,000 15,200 84,000

Gross sales It includes the following Excise duty Freight (not being shown separately) Freight (shown separately) Packing charges Cost of installation (shown separately) Insurance charges to cover the risk of the seller Insurance charges for covering the risk of buyer at the request of the buyer The following items have not been deducted to calculate gross sales turnover Trade discount (given by way of credit note on March 31, 2004) Goods returned within 6 months Incentive bonus for additional sale (i) (ii)

18,000 2,00,000 25,000

20,000 1,00,000 20,000

Ascertain the sales turnover and central sales tax payable. Ascertain the amount of CST on the assumption the local sales tax in Rajasthan in respect of machinery for copper wire rods is 3 per cent.

Q15. The manufacturer usually bills as follows: Assessable Value of goods Excise Duty 40% Sales Price 100 40% 140

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The Central Sales Tax Act -1956 Sales tax @ 10% Total 14 154

The ED was permitted to be paid by the buyer. So he billed as follows: Sales price 100 ST @ 10% 10 Total 110 He argues that he can charge ST on his actual sale price only. Is he correct?

12.

Section 9 Levy and collection of CST


12.1. Who levies CST payable by a dealer under the Act? CG (Sec. 9(1)) 12.2. Where the tax so levied is collected? Sec 9(1) ISS

First ISS

Subsequent ISS

Collected in a State where the movement of goods commences

ISSU/S 3(a)

ISSU/S 3(b)

C Form / D Form obtained from buyer EI / E-II form obtained from Seller

These forms not obtained

CST exempted U/s 6(2)

Sale effected by Registered Dealer

Sale effected by unregistered Dealer

Collected in a State where he is registered or where he is supposed to be registered (i.e. appropriate state)

Collected in a state where such subsequent sale has been effected

12.3. Assessment/re-assessment/collection/enforcement The sales tax authorities of the appropriate state shall on behalf of the CG. Assess

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The Central Sales Tax Act -1956

Reassess Collect Enforce Payment of tax including interest and penalty payable by dealer The relevant provision of GST Law of the appropriate state, including provision relating to returns, provisional assessment, advance tax, Appeals, revision, References, Penalties, Charging of interest, compounding of offence etc. shall apply accordingly.

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12.4.

Assigning collections Collection of Taxes, penalties Etc.

Made in States

Made in Union Territories

Assigned to respective States

Goes to consolidated fund of India

GST goes to State Government. Who takes CST UNION or STATES?

13.

Sec.9A: Collection of tax to be made only by Registered Dealers.


Dealers

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Registered

Unregistered

Can collect CST in respect of ISS effected by them in accordance with this Act/rules made under this Act

Cannot collect CST in respect of ISS effected by them

14.

Sec.9B: Rounding off of taxes etc.


Amount

Payable by the dealer

Refund due to the dealer

Tax

Interest

Penalty

Fine

Any other sum

Rounded off to the nearest rupee R. Soumyanarayanan FCA. Grad. CWA 55

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The Central Sales Tax Act -1956

Note:

The dealer shall not make such roundings in his invoice.

STO can round off tax due. Can a dealer do so while billing?

15.

Sec.10 Penalties and sec 10A imposition of penalty in lieu of prosecution


Offences Punishment U/s.10 Simple Imprisonment (maximum) 6 month with or without fine.

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S.No

2 3 4

5.

6. 7. 8. 9

Furnishing false certificate/declaration under Sec.6(2), 6A(1), 8(4), 8(8)-i.e. form E-I, E-II, F, C, D, and SEZ form Failure to get registration u/s.7 Failure to furnish security as required u/s.7 Representing falsely that goods purchased are covered by his (dealers) certificate of registration Falsely representing as registered dealer (when purchase goods in the course of interest state trade. Not using the goods for specific purpose stipulated under sec. 8(3) or 8(6), Wrongly obtaining and possessing Form C, D, H Collection of CST without being a registered dealer. Collection of CST in violation of provisions of Act or Rules.

Penalty in lieu of Prosecution U/s 10A Non-possible

Whether mens rea is required Yes

Non-possible Non-possible Possible

No No Yes

Possible

Yes

Possible Non-possible Non-possible Non-possible

NO No No NO

Note: Quantum of penalty under sec. 10A less than or equal to 1.5 X CST levied under sec. 8(2) Goods

Declared Sec. 10A penalty (max) = 1.5 X 2 X Local rate R. Soumyanarayanan FCA. Grad. CWA

Others Sec. 10A penalty (max) = 1.5 X (Local rate or 10% whichever higher) 56

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No prosecution shall be instituted u/s. 10 in respect of the same facts on which a penalty has been imposed under this section Normal CST rate = 10% Concessional Rate = 4% False declaration made to enjoy the concessional rate. 10A penalty is leviable @ 1.5 times Therefore penalty levied = (10 4 ) X 1.5 = 9%. Is it ok?

Test Your Knowledge

P of Chennai sells foreign Liquor to Q of Bangalore. The rate of tax for local sale is 70%. Q is not able to furnish C Form. Therefore, P charged ST @ 10%. Is it OK?

16.

Cognizance of Offence
a. No Court shall take cognizance of any offence punishable under this act or the rules except with the previous sanction of the Government within the local limit of whose jurisdiction the offence has been committed. No court inferior to that of a presidency magistrate of First Class shall try any such offence. b. All offences punishable under this Act shall be cognizable and bailable.

17.

Indemnity (sec. 12)

No suit, prosecution or other legal proceeding shall lie against any officer of the Government for any thing which is done or intended to be done in good faith under this Act or rules. The law offers protection to the Tax Officer.

18.

Power to make rules (sec. 13)


Rules Framed by CG Framed by SG Prescribed in state sales tax laws Sec. 9(2) provides that all provisions of local sales tax law of each state shall be applicable to dealer under CST in that state.

Section 13(1) authorizes CG to make rules for different purposes

Section 13(2) authorizes SG to make rules. These rules should not inconsistence with the CST Act and the Rules made by CG there under Illustrative list of purposes

Illustrative purposes

list

of

Such rule should relate to

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The Central Sales Tax Act -1956 a. Publication of list of dealers b. Amendment to the list c. Manner of furnishing of security or additional security d. Providing prescribed form to dealers e. Form and manner of keeping book of accounts by registered dealer f. Furnishing information of stock of goods, purchases, sales and deliveries made by a dealer a. returns b. assessm ent c. Advance payment of taxes d. Impositi on of tax liability on transferee of business e. Recover y of tax from third parties f. Appeals g. Review h. Revision i. Rebate j. Penaltie s k. Interest l. Compou nding of offences m. Treatme nt of documents furnished by a dealer as confidential

a. Pr ocedure relating to registration b. Ma nner of declaration U/s 88 c. De termination of turnover d. Ca ncellation of registration e. Pr oduction of certificate of declaration f. En umeration of goods g. Fe es payable in respect of applications h. Fu nctioning of CST appellate Authority Note: 1. In exercise of these powers Central Sales Tax (Registration and

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The Central Sales Tax Act -1956 g. Inspection of books of accounts h. Search and seizure of books i. Authority from whom declaration forms should be obtained j. The conditions for obtaining these forms k. The Manner of keeping custody of these Forms by a dealer l. The manner of use of such Forms m. Form and manner in which appeal can be preferred n. Procedure for hearing appeal o. Fees payable for filing appeal

turnover) rules, 1957 was framed by the Central Government 2. Every rule made by the CG shall be laid before both the Houses of parliament. Any modification to the rules brought about by the Parliament will have prospective effect. Past cases cannot be reopened. (sec. 13(2))

Note: Penalty for contravention of rules Rs. 5000/- + Rs. 50 for every day of continuing default

19.

Tax restrictions on Declared Goods Under GST


Through this section the Parliament imposes certain tax restriction on Intra-States Sales or purchases of Declared Goods a. Restriction on GST Rate GST Rate (Declared goods) <= 4 % Note: Earlier Declared Goods were Single Point Goods. Now there made Multi-Point Goods

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The Central Sales Tax Act -1956

b. GST sale followed by CST sale reimbursement of GST borne Conditions to be fulfilled for reimbursement of GST The transactions should involve declared goods GST should have been levied for sale or purchase inside the state Subsequently, the same goods should be sold in the course of inter state trade CST on such ISS should have been paid If these conditions are fulfilled the dealer effecting ISS can get the GST borne on such goods reimbursed. Position in respect to Other than Declared goods Madurai A Intra-State Sale TNGST ACT 100+4(GST)=104 Chennai B Inter-State Sale Sec. 3(a) CST ACT 104+4(CST)=108 Bangalore C

Position in respect to Other than Declared goods Madurai A Intra-State Sale TNGST ACT 100+4(GST)=104 Chennai B Inter-State Sale Sec. 3(a) CST ACT 104+4(CST)=108 Bangalore C

CST Collected GST Reimbursed by Sales Tax Officer at Chennai Result: 104+4(CST) =108 (-) GST reimbursed = (4) 104 c. GST Rice tax = GST Rice tax GST paddy tax

Result: Goods reach @ 104 and not @ 108

Where GST is levied in respect of Sale or Purchase of Paddy inside the State, the GST leviable on Rice procured out of such Paddy shall be reduced by the amount of GST on Paddy Conditions for availing this abatement in tariff: 1. Paddy should have been procured inside the state. 2. It should have suffered GST 3. The Rice hulled out of such Paddy should be sold inside the same state (GST is suffered) Summary: Paddy Brought from outside the State Rice Sold Inter-State Abatement Available? No

1 .

1 .

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The Central Sales Tax Act -1956 2 . 3 . 4 . Sold Locally Sold Inter-State Sold Locally NO NO YES

Bought from outside the State Bought Locally Bought Locally

d. Paddy = Rice For the purpose of sec. 5(3) paddy is equal to rice. The advantage of this treatment is that the dealer selling paddy to an exporter making export sale of rice becomes eligible for the pre export sale concession Under section 5(3) e. Pulses Each of the pulses referred to in Sec. 14 whether whole or separated and whether with or without husk, shall be treated as a single commodity for levy of tax under the State Law.

=
Pulse of Black Gram (Covered by Skin) Gram (Whole) of Black Gram (Skin removed)

=
Gram (Split) of Black Gram (with skin)

=
Gram (Split) of Black Gram (without skin)

All the four forms are treated as one. Hence, if a dealer buys pulse locally, converts it into gram (whole, split etc) and sells the latter, such sales will be treated as second sales (No tax). For the same reason, pulse sold to an exporter of gram qualifies for concession under section 5(3).

Q1. A dealer buys declared goods locally and sells them inter-state. His purchase suffers GST and sale suffers CST. Can he have any relief?

Test Your Knowledge

Q2. A of Madurai sells black gram pulse to B of Trichy. B removes the husk and sells black gram to C of Chennai. A has already charged tax @ 4%. What is the tax chargeable by B on his sales?

20.

Company in Liquidation (Sec. 17)


20.1. Intimation by Liquidator

Where a company being wound up and liquidator is appointed, he shall give a notice of his appointment to the assessment officer. This should be done with in thirty days of his appointment. 20.2. Communication of Tax dues by Assessment officer

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The Central Sales Tax Act -1956 The assessment officer shall with in 3 months from the date of receipt of notice shall notify to the liquidator the amount of tax payable by the company

20.3.

Duty of Liquidator

The liquidator shall not part with any of the assets of the company or the properties in his hands until he has been notified by the appropriate authority. Once the amount is notified it shall be set aside before any such parting of assets. However, the liquidator can part with assets or properties-

In compliance with any order of a court; or For the payment of tax under this Act; For payment to secured creditors whose debts rank in
priority over Government debts;

For meeting reasonable costs and expenses of winding up


20.4. Liability of Liquidator If the Liquidator fails to give the notice or fails to set aside the amount notified he shall be personally liable for the payment of the tax which the company would be liable to pay. Where the amount was notified, such liability would be restricted to the notified amount Where there are more liquidators than one, the obligations and liabilities attached to the liquidator shall attach to all the liquidators jointly and severally.

21.

Liability of directors of private company in Liquidation (Sec. 18)


When a private company is wound up and any tax assessed on the company cannot be recovered, then every person who was a director of the private company at any time during the period for which tax is due shall be jointly and severally liable for the payment of such tax. However, if he proves that non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, no such liability would arise.

22.
22.1.

Central sales tax appellate Authority (sec. 19)


Constitution For the purpose settling inter state disputes falling under section 6A read with section 9, the Central Government shall constitute an authority called the Central Sales Tax Appellate Authority. Such a constitution shall be notified in the Official Gazette of the Central Government.

22.2.

Composition of the Authority Three members (including Chairman) are appointed by the Central Government

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The Central Sales Tax Act -1956

i. ii. iii.

Chairman Member Member

Retired Judge of Supreme Court or retired chief Justice of a High Court Indian Legal Service Officer Rank of Additional Secretary to Government of India State Government Officer not below the rank of Secretary or Central Government officer not below the rank of Addl. Secretary with expertise in sales tax matters.

22.3.

Terms of appointment The salaries and allowances payable to the Chairman/members and their conditions of service shall be prescribed by CG

22.4.

Administrative staff Administrative staff to the Authority shall also be provided by the CG.

23.
23.1.

Appeals (Sec.20)
Subject matter of Appeal This chapter applies to appeals filed by the aggrieved dealer against an order of the Assessing Officer under section 6A read with section 9. The dispute shall pertain to sale of goods effected in the course of inter-state trade or commerce. That means the point under issue is whether the transaction is sale or stock transfer and not valuation, validity of forms like Form C, D, F etc. and things like that.

23.2.

When appeal could be preferred If the claim made by the dealer under section 6A (Branch Transfer) and under section 9 (Penal provisions as in GST) is rejected by the assessing authority, then the dealer can straightaway appeal to the Authority. He need not pass through the usual appellate fora Under CST Act. This is because of the wording Notwithstanding anything contained in the GST Laws in this section. The authority shall adjudicate the appeal

23.3.

Time Limit for Appeal Time limit for preferring the appeal is 45 days from the date of service of assessment order. (Upto 60 days at the discretion of the Authority) Application fees Application in quadruplicate. FEE Rs. 5000/-

23.4.

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The Central Sales Tax Act -1956

24.

Procedure on receipt of Application (sec. 21)


24.1. Copy to Assessing Officer

Authority shall send a copy of appeal to the assessing officer concerned as well as to each SG concerned and also call for from them all relevant records for perusal and early return. 24.2. Decision by Appellate Authority The Authority shall adjudicate and take a decision on the appeal. The Authority may allow or reject the appeal. Rejection shall be after offering the hearing procedure to both the appellant and the State Government. Reasons for rejection or acceptance of appeal must be recorded by the Authority 24.3. Time limit for Appellate Order The Authority shall try to pronounce its orders in writing within six months of the receipt of appeal 24.4. Communication by appellate Authority The Authority shall communicate its orders to the appellant as well as the assessing officer

25.
25.1.

Powers of the Authority (sec. 22)


Powers of Civil Court Authority shall have the powers of a court under C.P.C, 1908 in enforcing attendance of persons, compelling production of records, issuing commissions for the examination of witnesses, reception of evidence on affidavits and any other matter.

25.2.

Judicial proceedings The proceedings of the Authority shall be deemed to be judicial proceedings.

26.

Procedure for Authority (sec. 23)


The authority shall regulate its own procedure, in all matters including stay of recovery of any demand arising out of its orders.

27.

Authority for advance Rulings to function as Authority under this Act (Sec. 24)

The Central Sales Tax Appellate Authority is to be constituted by the Central Government. Till such constitution, the Authority for advance Ruling (Section 245-O of the Income tax Act) shall be functioning in its place. After this Authority is formed, cases pending with the other Authority shall stand transferred to this Authority

28.

Transfer of proceedings

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The Central Sales Tax Act -1956

After this Authority is formed all cases pending in (or to be taken to) the appellate for a in the States/Union Territories shall also stand transferred to this Authority.

29.

Applicability of order passed


The orders passed by this Authority are binding on the assessing authorities or other authorities under the GST laws of the States/Union Territories.

Introspection
True or False 1. 2. 3. 4. 5. 6. 7. 8. 9. Both registered and unregistered dealers can collect tax under CST. Cost of freight separately charged in the invoice shall be deducted from sale price. Subsidy given by Government to manufacturers to compensate cost of production will form part of sale price. All Directors of Private Company (present and past) are personally liable for any tax due under the CST Act. Indian Railways which sells unclaimed/uncollected good is a dealer. Goods include share and securities When goods are sent by VPP, the sale is said to take place in the state from where the parcel is sent. Electricity supplied will not come within the meaning of Goods under CST Act. The supply of Aviation Spirit by a petroleum dealer from his depots at an Airport in India to an aircraft proceeding abroad is an export out of India eligible for exemption under CST. In rest of declared goods, CST can exceed 4% for sales to Government. Weighment charges charged separately from buyers will not form part of sale price. To avail concession in CST, in respect of sales to registered dealers, Form D is to be furnished by the dealer. Charity or Dharmada collected by dealer will not form part of sale price. Packing charges realised by the dealer was an integral part of sale price. Sale of bundles of old newspapers as waste papers are exempt. There is no benefit for a person to purchase goods from a registered dealer.

10. 11. 12. 13. 14. 15. 16.

Match the following SN 1. 2. Item A Form A Form B Item B Declaration received by the dealer from the exporter for getting the benefit u/s 5(3). This is form of indemnity bond, meant to indemnify Government against possible loss in case of misuse of lost C/EI/EII/F

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The Central Sales Tax Act -1956 declaration forms. Consignment transactions shall also be treated as sales and subject to tax if not supported inter alia by Form F declaration from the Agent. Subsequent sales U/s 3(b) shall be exempt from tax if supported by EI/II form declarations from the previous sellers and C Form/D Form declarations from the buyers. EI/II forms are proof for sufferance of tax. If the buyer is a Government department, then this is the declaration form prescribed to avail the concessional rate of tax. If declaration in this form is given by the purchasing dealer then the selling dealer shall charge tax at concessional rate. Certificate of registration is given by the department in this form. Application for registration as a dealer under CST Act shall be made in this form.

3. 4.

Form C Form D

5. 6. 6. 7.

Form EI/II Form F Form G Form H

Write short notes on 1. Penalty made sale of Export 2. Dealer 3. Place of Business 4. Future goods 5. Business 6. Liability to CST on Sale by VPP 7. Refund of sales tax conditions to be fulfilled (hint Sec. 8A, Sec. 15) 8. Rate of tax leviable in the course of Inter-state sales 9. Compulsory and Voluntary registration 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. Form A Purpose Application for Registration Exclusion of freight and trade discount from sale price Exemption from CST of Second and Subsequent sales Suo-moto cancellation of Registration Crossing the Custom Frontiers of India Year Duties of Liquidator of a company under CST Act Sale in the course of Export Sales tax laws Objects of CST Act Rates of tax in case of sale to Govt. Deemed dealer Appropriate State Stock transfer and its treatment under Inter-state sale Declared Goods Deemed sales Completed sales in course of inter-state sales Cancellation of Registration at dealers request Obtained from Freely available Used by Dealer who registers under the CST Act

Highlights of Forms Under CST

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The Central Sales Tax Act -1956 Sales Tax Authority Sales Tax Authority of the Dealer who purchases the goods Self-Declaration Sales Tax Authority of the dealer who sells goods Sales Tax Authority of the dealer who sells goods Sales Tax Authority of the dealer who receives goods Self-Declaration Sales Tax Authority of the Export House Dealer Issued by the Purchaser, during inter-state sale. Issued by Govt., during inter-state purchase Issued by Seller during movement of goods Issued by seller on Sub-sequent sale U/s 6(2) Issued by Agent to principal Dealer Issued by Exporter to the dealer making penultimate sale for export.

Form for claiming concessional rate of tax in the course of inter state sale Self-Declaration by Government Original inter state sale u/s. 3(1) Inter state sale by transfer of documents of title to goods Transfer other than by sale of goods Indemnity Bond Form for penultimate sale for Export

D E-I

E-II

G H

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