CENTRAL SALES TAX ACT, 1956

1. Background of Central Sales Ta !CST" Act

a) Constitution provides that tax on inter state sale will be only by law of
Parliament.
b) Subsequently, tax on inter state sale was levied by State on the basis
where the goods are actually delivered for consumption.
c) The above view was held by Supreme Court in the case of State of
Bo#$a% &s. T'e (n)ted *otors +nd)a Ltd )n 195, !arch). This caused
hardship to dealers requiring registration with each state, filing returns and
assessment, etc.
d) "n the case T'e Bengal +##un)t)es Ltd &s. State of B)'ar )n 1955
#ctober), The Supreme Court reversed its earlier decision and held that
tax can be levied only by the act passed in Parliament. This made the
collection made by the States illegal. So, an ordinance was passed in
$%&& to rectify the situation.
e) The based on recommendation of Taxation 'nquiry Commission,
constitution was amended in $%&( and Central Sales Tax )ct was passed
and imposition of central sales tax was made effective from 1
st
-ul% 195..
/. 0$1ects of CST 2
a) *ormulate principles for determining
i) +hen Sale , Purchase ta-es place in the course of inter state Trade or
commerce
ii) +hen sale or purchase ta-es place outside the State
iii)+hen Sale , Purchase ta-es place in course of 'xports , "mports.
b) To provide for levy, collection and distribution of taxes on sale of goods in
the course of inter state trade or commerce.
c) To declare certain goods to be of special importance in the inter state
trade or commerce and specify the restrictions and conditions to which
state laws imposing taxes on sale or purchase of such goods of special
importance called as declared goods) shall be sub.ect to/
0. CST is payable in the State fro# 3')c' t'e #o&e#ent of goods
co##ences.
1. Ta on +nter State sales of goods /
CST is tax on inter state sale of goods.
&. Sale is a )nter state sale when
a) Sale occas)ons #o&e#ent of goods fro# one state to anot'er.
0r
b) Sale is effected by transfer of docu#ents during their movement from
one state to another.
(. Entr% 9/A of l)st of cond)t)ons2 Taxes on sale or purchase of goods other
than 2ewspaper on inter state sale.
.. +ntra state Sale 2
Sales 3 where both buyer and seller are from the same state, e.g. 4!umbai
to Pune5 or 4)hmedabad to Surat5. These are intra state sales, i.e. sale
within the state).
4. +nter state Sales2
+hen buyer and seller are in different state, it is inter state sale, e.g. when
buyer is in Chennai Tamil 2adu) and seller is in Trivendram 6erala) or
)llahabad 7.P.) to 8yderabad ).P.)
%. L)a$)l)t% of CST /
'very dealer shall be l)a$le to pay tax on all sales of goods other than
electrical energy) effected by him during the course of )nter state trade or
co##erce

Central Sales tax is a 3
i) 9evy on Sale of goods
ii) Sale as def)ned u,s :g)
iii) Sale should be of all goods other than electrical energy as defined u,s :
d)
iv) Sale should be in the course of )nter state trade or co##erce as
defined u,s 0.
$;. Categor)es of Sales /
a) "nter State Sale
b) Sales during "mport , export
c) "ntra state sales i.e. within state)
$$. +nter State Sale/
Sec5,
) sale or purchase of goods shall be dee#ed to ta-e place in the course of
inter state trade or commerce if the sale or purchase<
a" #ccasions the movement of goods from one state to another or
$" "s effected $% a transfer of docu#ents of t)tle to the goods during their
movement from one state to another
Two conditions to be met /
a) Contract for Sale of goods, and
b) ) transport of those goods from one state to another
$) 'ssential ingredients of inter<state sale include/
Transaction must be completed sale= location of buyer and seller is not
material . They can be within the same state. The sale will be inter state if, it
occasions movement of goods from one state to another in pursuance of
Contract for sale of the said goods. 0R "nter3state sale by transfer or
documents to the title to the goods i.e. 9orry >eceipt, >ailway >eceipt, ?ill of
9ading, @elivery 2ote) is also possible when the buyer and seller are in the
same state.
:) There should be agreement of sale, which contains express or implied
stipulation regarding movement of goods from one state to another.
0) There should be physical movement of goods from one state to another.
1) "t is immaterial in which state the property ownership) of goods passes to the
buyer.
&) Sale need not precede inter state movement. Sale can be either before the
movement or after the movement.
() !ovement of goods should be incidence of sale necessitate by the contract of
sale.
A) !ode of transport is immaterial.
1/. Stock Transfer 6 Branc' Transfer 7 8or# 8
#ne of the basic and obvious conditions of inter<state is that there should be
a sale. "f manufacture sends goods to his own branch located in other state,
it is not a sale, as you cannot sell goods to yourself. Similarly, if dealer sends
goods to his agent in other state, who stoc-s the goods on behalf of the
dealer, it is not a sale. "t will be seen that goods are dispatched to another
state and the person dispatching the goods retains the ownership of goods=
since no sale is involved, there is no inter<state sale. This can be called as
stoc- transfer or branch transfer.
Stoc- transfer envisages transfer of standard products, which are sold off the
shelf is buyers -nown, or the goods are identified before removal from the
factory, it is not a stoc- transfer. "n short, stoc- transfer of tailor made goods
or customs built products is a bogus stoc- transfer shown to save CST.
e.g./ T"SC# manufacturing various standard siBes and shapes of steel at
Camshedpur transfers its product of steel plates, rods, billets, etc, to the
depots. +hen the goods are sent, there is inter<state movement, but the
movement has not been occasioned on account of contract of sale, hence it
is a stoc- transfer and not inter<state sale.
"n case buyer at 6ol-ata wants steel of particular siBe and specification,
which is not a standard siBe, and in case he approaches T"SC# to
manufacture the same at Camshedpur in ?ihar and transfer the same to
depot at Calcutta, this sale would be termed as inter<state sale.
The burden of proof in case of branch transfer,stoc- transfer, dispatch of
goods on consignment basis rest with the assessee or dealer. )uthorities
can presume the sale as inter<state sale unless it is proved otherwise. *or
this purpose, the dealer has to produce declaration and documents in the
prescribed *orm<*.

$0. 9oods under CST < "nclude all materials, articles, commodities and all
movable property but not 2ews Paper actionable claims, share, debenture,
securities, etc.
1:. Sale / !g" *eans
a) Transfer of property in goods
b) ?y one person to another
c) *or consideration 3 cash or for deferred payment includes hire purchase,
installment system but not !ortgage, 8ypothecation or Pledge D includes
auction sale.
15. ;erson l)a$le for CST2

'very dealer who in the course of inter<state trade or commerce sells the
goods shall be liable to pay tax under this act.
$(. <ealers 3 Section :b) includes 3 all persons, firm, body corporate, clubs,
society, 87*, local authorities, company, and association of persons, who
carry on business whether regularly or otherwise.
1.. Reg)strat)on !Sect)on . !++"2
'ffective @ate / ;$,;1,$%A0.
a" Co#=ulsor% Reg)strat)on /
i) "t is duty of every dealer carrying on inter<state trade to get
registered as soon as he becomes liable to pay tax under the
CST )ct.
ii) )n application for registration has to be made within 0; days
from the date the dealer becomes liable to pay tax. )pplication
has to be in prescribed *orm 4)5.
iii) 2oncompliance with this requirement ma-es the dealer liable to
penalties u,s $; D $;)).

$" >oluntar% Reg)strat)on 2
) dealer not falling under above category can apply voluntarily for
registration to claim benefits under the )ct provided that he is liable to pay
tax under the sales tax law. )pplication can be made at any time after the
commencement of the )ct.
c" A#end#ent, Cancellat)on of Reg)strat)on /
@ealer should apply for amendment , cancellation for /<
i) Change of name, place or nature of business 3 )mendment
ii)Ceases to carry business, insurance, insolvency, failure to pay tax<
cancellation.
14. ?uantu# of CST
To decide on the quantum we have to find /
a) Turnover and
b) >ate of Tax
19. Rate of Ta

!)" Sales to 9o&ern#ent 2
Taxable E :F and Government to issue certificate in *orm 4@5
!))" Sale to Reg)stered <ealers of goods )nclude )n t'e Reg)strat)on
Cert)f)cate < E :F provided goods are eligible and included in
certificate of registration and the buyer has to issue a certificate in
*orm 4C5
!)))" Sales to (nreg)stered <ealer2
"n case of declared goods twice the rate applicable to such goods
inside the state 3 generally i.e. $;F < as @eclared goods attract &F tax
either under CST or under local )ct..
"n case of other goods at rate applicable within state for such goods .
!)>" Sale of goods where the rate of tax is 2il or less than 1F, by
2otification.

/@" Calculat)on of Turno&er u6s /!)"2
)ggregate of sale prices received and receivable by the dealer in respect
of sales of any goods in the course of inter<state trade and commerce
made during any prescribed period and determined in accordance with the
provision of Central Sales Tax )ct.
*ormula / Turnover H $;; x S ,$;; I >
Tax Payable H S x > , $;; I >
+here > H >ate of Tax and S H )ggregate sale price
:$) ;rescr)$ed ;er)od / Period in respect of which dealer is liable to furnish
returns<Juarterly , !onthly, depending on the turnover of sales they
achieve.
::) Cas' <)scount / 2ot to be considered while computing Tax . Transit
insurance, Statutory @uties , cess, etc not part of 3 price.
'xclusion from sale price /
a) *reight and Transport charges, if charged separately D at actual.
b) Cost of installation and commissioning
c) Cash @iscount , Trade @iscount
d) @eposits for returnable containers
e) Transit "nsurance
f) Taxes and fees recoverable from ?uyer
:0) >ar)ous 8or#s o=erat)&e under CST Act2

$. 8or# A / *orm for obtaining >egistration under CST )ct
:. 8or# B / *orm in which Certificate of >egistration is granted to @ealer
0. 8or# C / *orm to be issued by a >egistered ?uyer to Selling @ealer for
purchase of goods covered under his buyersK) >egistration Certificate at
concessional rate of CST for a) manufacture of Taxable goods, b) for
pac-ing such goods manufactured, c) for >esale of goods purchased in
interstate trade or commerce, d) for mining activity, e) for generation or
distribution of electricity, e) for Telecommunication.
1. 8or# < / This is similar to *orm C as explained here in above, however
to be issued by the >egistered ?uyer if it is a Government @epartment
e.g. @epartment of )tomic 'nergy, @epartment of Telecommunication etc.,
while *orm C is used by registered buyers in private sector.
&. 8or# E5+ 6 E5++ / This *orm is issued by a >egistered Seller to his
>egistered Supplier for .ustifying the movement of goods for subsequent
inter<state sale while the goods are sold in transit. '.g. ) of )hmedabad a
>egistered dealer under CST purchases goods from ! of !umbai also a
>egistered dealer under CST D without obtaining delivery of the said
goods sold the said goods while in transit by way of transferring the
document of title to the goods say 9orry >eceipt) to another registered
dealer @ of @elhi D subsequently following the same mechanism @ of
@elhi sold the same goods in transit to p of Pun.ab then following
sequence of exchange of forms is called for /
) of )hmedabad will issue form C to ! of !umbai D collect form '<" from
! to .ustify the interstate sale of goods at concessional rate of tax at 1F
CST.
@ of @elhi will issue *orm C to ) of )hmedabad D ) will issue form '<"" to
@ to .ustify subsequent interstate sale of the same goods in interstate
trade or commerce without attracting any CST.
P of Pun.ab to issue *orm C to @ of @elhi D secure *orm '<"" from @ to
.ustify the subsequent sale of the same goods in interstate trade or
commerce without attracting any CST D the similar chain of exchange of
*orms will go on.
(. 8or# 8 / "ssued by the receiving ?ranch to the dispatching branch in
case of "nterstate ?ranch transfer of goods.
A. 8or# 9 / *orm of "ndemnity to be issued by the >egistered @ealer in
case of obtaining duplicate *orm from the issuing dealer when the
declaration,*orm is misplaced.
L. 8or# A / This *orm is issued by the >egistered @ealer who purchases
goods from another registered dealer in interstate trade or commerce for
'xport of goods as it is out side "ndia.
%. 8or# + / This *orm is issued by @eveloper, Co<developer of S'M or a
S'M 7nit < who purchases goods from another >egistered @ealers in
interstate trade or commerce for setting<up S'M or for )uthorised
operations of S'M 7nit.