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E-1, E-2 are the names of the forms issued for declaring that the goods are sold/purchased

in transit. A detailed explaination follows: E-1 sales. In this 3 states/ parties are involved during the transportation of goods. And as per the state tax laws, upon entering each state, a central tax of 4% for each is state is payable. However if the goods are redirected or endorsed to a different party then to avoid multiple taxation, this sale in transit is applied. (An example to explain this) A trader Mr Gupta at Punjab want to buy some machinery, he contacted that machinery expert Mr Mehmood of Delhi, now Mr Mehmood cant find that machine in Delhi, but he has a freind Mr Satpaal of Kolkata who manufactures that machine. So in this case Mr Mehmood of Delhi will ask Mr Satpaal of Kolkata to sell it to him, but deliver it to Mr Gupta at Punjab. And Mr Mehmood will receive an invoice from Mr Satpaal (with his name as buyer and Mr Gupta's name as consignee). The goods will go directly to Mr Gupta at Punjab, however he will be billed by Mr Mehmood (with Mr Mehmoods profit of course). BUT MR MEHMOOD WILL NOT ADD ANY SALES TAX ON HIS BILL TO MR GUPTA. and this is the interesting part, that since goods have been taxed at 4% at source from Mr Satpaal of Kolkata they will not be further charged any tax. This will save tax to Mr Gupta of Punjab from being taxed at Delhi Now comes the forms part. In this example Mr Gupta of Punjab will issue a C Form to Mr Mehmood of Delhi, and Mr Mehmood to Mr Satpaal, AND MR SATPAAL WILL ISSUE AN E-1 FORM TO MR Mehmood of Delhi, thus completing the chain. And if this chain is broken at any point the party liable shall have to pay 10% as central sales tax. Now same is the case with E-2 form, however there are more than 3 States / parties involved in this transaction. And the second stage seller (Mr Mehmood in above example) has to issue an E-2 form to the subsequent purchaser (Mr Gupta in above example)

E1 Sales procedure
E-1, E-2 are the names of the forms issued for declaring that the goods are sold/purchased in transit. E-1 sales.: In this 3 states/ parties are involved during the transportation of goods. And as per the state tax laws, upon entering each state, a central tax of 4% for each is state is payable. However if the goods are redirected or endorsed to a different party then to avoid multiple taxation, this sale in transit is applied. i. e.

Customer/Purchaser: Mr. A at MP Trader/Dealer: Mr. B at Gujarat Manufacturer: Mr. C at Maharashtra

A Customer/Purchaser Mr. A (MP) want to buy some products from Mr. B (GJ) which is product expert. But B hasnt stock with him so he will contact his friend Mr. C (MAH) which is a manufacturer. Now, Mr. B will ask Mr C to sell it to him, but deliver it to Mr A. Invoice: Mr. C to Mr. B (Mr. B as buyer and Mr. A as consignee) with 4% CST for MP-MAH. The products will go directly to Mr A (MP). Mr. B (GJ) also raise invoice to Mr. A. (w/o Sales tax, with its profit, final payment) So, CST is already applied to inv from Mr. C to Mr. A for actual good delivery, Mr. A do not required to pay additional sales tax for inv from Mr. B. This will save tax to Mr. A of MP from being taxed at GJ. Forms involved: Mr. A will issue a C form to Mr B. Mr. B will issue a C form to Mr. C. Mr. C will issue an E-1 form to Mr. B And if above sequence is broken at any point the party liable (Mr. A) shall have to pay 10% as CST.
In this case Form E-1 is for claiming exemption from CST on subsequent sale. So, that Mr. B can raise invoice w/o sales tax.