Suresh Mayya

CENTRAL SALES TAX 1

TAXES
DIRECT TAX INDIRECT
TAXES
INCOME TAX
WEALTH TAX CENTRAL EXCISE
CENTRAL SALES
TAX
CUSTOMS DUTY
SERVICE TAX
OCTROI ETC.

CENTRAL SALES TAX 2

CENTRAL GOVERNMENT
INCOME TAXES(EXCEPT ON AGRICULTURE)
CUSTOMS DUTY
EXCISE DUTY (EXCEPT ON LIQUOR)

CENTRAL SALES TAX 3

STATE GOVERNMENT
TAX ON AGRICULTURE
EXCISE ON LIQUOR
BOTH CST AND LST

CENTRAL SALES TAX 4

LOCAL AUTORITIES
OCTROI
MUNICIPAL TAXES
TAXES ON HOUSE PROPERTY

CENTRAL SALES TAX 5

INDIRECT TAXES
CENTRAL EXCISE
CENTRAL SALES TAX
CUSTOMS DUTY
SERVICE TAX
OCTROI ETC.

CENTRAL SALES TAX 6

CENTRAL SALES TAX ACT-1956
CONDITIONS
1) There Should Be A Dealer
2)he Should Be A Registered Dealer
3)he Must Carry On Any Business
4)sale Should Take Place
5)sale May Be To A Regd Or Unregd Buyer

CENTRAL SALES TAX 7

6. The Sale Should Be Of Goods.
7. The Sale Can Be Of Also Declared Goods
(Goods Of Specific Importance)
8. The Sale Should Take Place In Course Of
Inter State
9. The Sales Should Not Be Within The Same
State.
10.The Sale Should Not Be Outside India

CENTRAL SALES TAX 8

DEFINITIONS
Appropriate State (Sec 2 a)
In relation to a dealer who has one or
more places of business situated in the
same State, that State
If he has places of business in different
states, every such State
State, where the business is situated

CENTRAL SALES TAX 9

DEFINITIONS
DEALER U/S 2(b).
He is a person one who is involved in the
activities of buying, selling, distributing the
goods directly or indirectly either for cash
or for deferred payment, for commission,
brokerage, etc.

CENTRAL SALES TAX 10

Definition …
Dealer Includes
1.local Authorities ,Co-operative Societies, A
Company, HUF, Association Of Persons,
firms..
2.A Factor, Supplier, Broker, Del Credere
Commissioner, etc
3.An Auctioneer(Govt, Agent, etc) who
carries on the business of selling or
auctioning the goods belonging to the
principal
CENTRAL SALES TAX 11
 Example
 A mercantile agent
 A Government, whether or not in the course of
business buys, sells, supplies or distributes
goods directly or otherwise
 A physician running a clinic and pharmacy
 A Cooperative Society selling refreshment to its
members and non members
 Food corporation of India having profit motive
Not a Dealer:
 A doctor selling medicine on his own prescription
 An educational institution supplying goods to its students

CENTRAL SALES TAX 12

Registered Dealer Sec 7
A person should register himself u/s 7 the
registration may be
1. Voluntary registration or
2. Compulsory registration,

CENTRAL SALES TAX 13

Business 2(aa)
Business includes
Trade, commerce, mfg and adventure in nature
of trade commerce and mfg
Any incidental and ancillary activities related to
main business should also be considered as
business

CENTRAL SALES TAX 14

Points to be remembered
The profit motive is not compulsory for the
sales tax purpose

The tax is levied on sales not on profit

CENTRAL SALES TAX 15

Sale -2(g)
Sale includes
A transfer of goods for money
Involves two persons, seller and buyer
Transfer of goods for money’s worth
Transfer of goods on an agreement to pay
on deferred system
Hire purchase system and installment
system

CENTRAL SALES TAX 16

Points to be remembered

Sale may be to a registered buyer or unregistered

buyer.
Element of price is essential
Free supply is not sale
Quantity discount is not a sale
Mortgage is not a sale
Depot transfer is not a sale
Agreement to sale – not sale

CENTRAL SALES TAX 17

Goods-2(d)
Goods means any article, thing, commodity, and
which is movable, however goods does not include
Newspapers
Actionable claims
Stocks
Shares
Securities
Animals and birds in captivity are movable property
and hence goods

CENTRAL SALES TAX 18

Points to be remembered
News papers - when news papers are sold as
newspapers either new or old, is to be treated as not
a goods.
When old papers are sold as old newspapers then to
be treated as goods.

CENTRAL SALES TAX 19

Few examples of sale
Sale of steam, canned soft ware,
Electrical energy
Animals and birds
Uprooted trees
Second hand goods
Rejected goods
Sim card
Trade mark
Lottery tickets

CENTRAL SALES TAX 20

Declared goods –sec 2(c)
Declared goods includes
(Declared under section 14 of CST Act as special
importance to inter state trade)
Cereals, pulses, coal including coke but not
charcoal, cotton waste, hand made garments,
tobacco, raw tobacco, jute, oil seeds, cotton in
unmanufactured form, crude oil, sugar,
khandsare sugar, aviation turbine fuel, cigars,
hides and skins, woven fabrics of wool.

CENTRAL SALES TAX 21

Points to be remembered

Declared goods are goods of special

importance. If declared goods are sold
there are certain benefits which can be
obtained by the dealer, which is not
available for the ordinary goods.

CENTRAL SALES TAX 22

Inter State Sale-sec 3
Once the goods are taken out of dealers
place then final destination should be
taken into consideration and not the route
through which goods are transferred.
Two tests – movement of goods from one
State to another and transfer of document
of title

CENTRAL SALES TAX 23

 Essential Ingredients of Inter State
Sale
A sale is under a contract
Contract may be express or implied
Goods must move from one State to another
Sale must be a part of the same transaction
Examples:
 Supply of naphtha by IOC from its refinery at Bihar to Kanpur in UP through
pipeline
 Movement of bamboos from MP to West Bengal under a contract of sale
 Goods carried by assessee personally in pursuance of an agreement
 Sale through branch office in one State on receipt of goods from head office by
way of transfer of stock
 Sale by VPP

27 January 2010 CENTRAL SALES TAX 24

Examples
In case of depot sale
Head office-------Karnataka
Depot office ----------Delhi
If order is taken from customer in Delhi
and goods are transferred to Delhi first and
then sale is made- Inter State Sale

CENTRAL SALES TAX 25

Inter State Sale…
If first goods are transferred to Delhi
depot and then sale is made – it is
sale within Delhi and hence intra state
sale. Then no CST is applicable, but
form F should be given.

CENTRAL SALES TAX 26

Inspection

Customer from Delhi comes to Karnataka

and inspects the goods, this is inter state
sale,.
If purchase is also made along with
inspection then it is intra state sale.

CENTRAL SALES TAX 27

Subsequent sale
When the goods are in transit then if buyer
redirects the goods to some other
customer of other state, it is called as
subsequent sale and should be treated as
inter state sale.

CENTRAL SALES TAX 28

Basis of charge

When all these conditions are satisfied

then CST will be levied at specified rate on
taxable turnover which will be based on
sales and not on profits.

CENTRAL SALES TAX 29

Specified rates
For the purpose of specified rates buyers
are classified into three
Government buyer (Form D)
Registered buyer (Form C)
Un registered buyer (No forms)

CENTRAL SALES TAX 30

Rates of Tax under CST (Sec 8)
Sale of declared or general goods with Form C
1. If SST is less than 2% SST Rate
2. If SST is 2% or above 2%
3. Sale of declared or general goods without Form C SST Rate

Notes:
1. State Sales Tax (SST) for declared goods cannot exceed 4%
2. Where the goods are exempt under the local tax laws in the
appropriate state, the CST is also not payable on such sale
3. Till 31-5-08, it was 3%. With effect from 1.6.08 CST is 2%

CENTRAL SALES TAX 31

Example

27 January 2010 CENTRAL SALES TAX 32

Concessional Rate of Tax under
CST Act
Available only on submission of Form C
The rate of SST or 3% whichever is less
If form C is not submitted SST or VAT is available
Goods must be mentioned in the Form C
Goods purchased must be for
 Resale by him or
 For manufacture or processing of goods for sale
 In mining
 Generation or distribution of electricity

A transfer of goods form one branch in one state to a

branch in the other state does not attract CST if such
transfer is against Form C
27 January 2010 CENTRAL SALES TAX 33
27 January 2010 CENTRAL SALES TAX 34
FOR UNREGISTERED
BUYER
Same as LST

Sale to Government will be

equivalent to sale to unregistered
dealer w.e.f. 1-4-2007
CST rate at a glance.doc

CENTRAL SALES TAX 35

question
A DEALER IN PUNJAB MADE INTER STATE
SALE OF GOODS R,T,V,X,Y,Z.SALES TAX
RATES AS PER PUNJAB SALES TAX ACT FOR
SALE WITHIN STATE IS NIL, 2%,4,6,8,AND
12%.WHAT IS THE SALES TAX RATE
APPLICABLE IF DEALERS WHO ISSUED ( C )
FORM, ( D) FORM ,NO FORM.

CENTRAL SALES TAX 36

TURN OVER.-2( j )
TURNOVER IS AGGREGATE OF THE SALE
PRICES RECIEIVED AND RECEIVABLE BY THE
DEALER IN RESPECT OF SALES OF ANY GOODS
IN THE COURSE OF INTER STATE TRADE,MADE
DURING THE PRESCRIBED PERIOD.(USUALLY
QUARTERLY),LESS CST.

CENTRAL SALES TAX 37

FORMULA
TURNOVER = 100*SALEPRICE .
100 +RATE.

TAX PAYABLE= SALEPRICE *RATE .

100 +RATE.

CENTRAL SALES TAX 38

PROBLEM
AGGREGATE SALE PRICE DURING JULY TO
SEPTEMBER 2007 WAS RS 10400 IN INTER
STATE SALE FROM HARYANA.IF THE GOODS
ARE SOLD WITHIN THE STATE OF HARYANA,
SALES TAX RATE IS 7% .BUYER FROM DELHI
ISSUED DECLARATION IN FORM C. WHAT IS
TURNOVER AND TAX PAYABLE.

CENTRAL SALES TAX 39

PROBLEM
Aggregate Sale Price During October To
December Was Rs 11000, In Inter State Sale
From Gujarath, If The Goods Are Sold Within
The State Of Gujarath Sales Tax Rate Is
7% ,Buyer From Chennai Did Not Issue Any
Sales Tax Declaration. What Is Turn Over And
Tax Payable.

CENTRAL SALES TAX 40

SALE PRICE –SEC 2( h )
Sale Price Means The Amount Payable To A
Dealer As Consideration For The Goods, Less
Any Sum Allowed As Cash Discount According
To The Practice Prevailing In The Trade,but
Inclusive Of Any Sum Charged For Anything
Done By The Dealer In Respect Of The Goods At
The Time Of Or Before The Delivery Thereof,
Other Than Cost Of Freight, Or Delivery Or The
Cost Of Installation In Cases Where Such Cost
Is Separately Charged.

CENTRAL SALES TAX 41

SALE PRICE SEC-2 ( h )
INCLUDES
CONSIDERATION FOR SALE
EXCISE DUTY
SALES TAX PAYABLE BY THE DEALER
SUM CHARGE FOR ANYTHING DONE BY THE
DEALER IN RESPECT OF GOODS AT THE
TIME OF DELIVERY OR BEFORE THE
DELIVERY.
FREIGHT (IF INCLUDED IN SALE PRICE)
INSURNCE (IF INCLUDED IN SALE PRICE)
CENTRAL SALES TAX 42
CONTD
COST OF INSTALLATION (IF INCLUDED IN
SALE PRICE)
COST OF PACKING MATERIALS AND
PACKING CHARGES.
BONUS OR INCENTIVE FOR ATTAINING
SALES TARGET.
DESIGN FEES CHARGED INRESPECT OF
GOODS MFGD AS PER THE DESIGN GIVEN
BY THE BUYER.

CENTRAL SALES TAX 43

WHAT IS NOT INCLUDED IN SALE
PRICE
CASH DISCOUNT OR TRADE DISCOUNT OR
QUANITITY DISCOUNT,
COST OF FREIGHT(IF CHARGED SEPERATELY)
COST OF INSURANCE(IF CHARGED
SEPERATELY)
DEPOSITS FOR RETURNABLE CONTAINER.

CENTRAL SALES TAX 44

CONTD
COST OF INSTALLATION (IF CHARGED
SEPERATELY)
TAX AND FEES STATUTORILY
RECOVERABLE FROM BUYER.(OTHER
TAXES)
SUBSIDY PAID BY GOVERNMENT NOT PART
OF TURNOVER
SALE PRICE OF THE GOODS RETURNED BY
THE BUYER WITHIN 6 MONTHS
SALE PRICE OF GOODS REJECTED BY THE
BUYER.
2007 dec CENTRAL SALES TAX 45
PROBLEM
A dealer effected following sales during January-
March, 2007 quarter - (i) Invoice No. 65 for Rs.
1,76,800. (inclusive of tax) (ii) Invoice No. 66 for Rs.
1,25,000 plus tax @ 4% (iii) Invoice No. 67, for Rs.
40,000. plus C.S.T. @ 4% - Rs. 1,600. Goods worth
Rs. 10,400 (inclusive of taxes) were returned within
6 months. Calculate the turnover and sales tax
payable, if rate of tax is 4%. (ICWA Inter)

2007 dec CENTRAL SALES TAX 46

A dealer effected the following sales during (April to June)

Invoice dt 2.4.97 for Rs 26,000 + tax @ 4%

dt 19.4.97 for Rs 70,000 + tax @
4%
dt 2.5.97 for Rs 52,000 (incl of tax)
dt 4.6.97 for Rs 12,200 + tax @ 4%.
dt 25.6.97 for Rs 20,000 + tax @
4%. Goods worth Rs 6,100 (exclusive of tax)
were returned on 28.6.1997 ( sale date 4.6.97)
Goods worth Rs 5,200 (inclusive of tax) sold on
25.12.1996 were returned on 30.6.1997..
Calculate the turnover and sales tax payable if the
SOLUTION

Aggregate sale price (which is

inclusive of CST) is total of five
invoices less sales return within six
months. Hence, aggregate sale price is
(i) Rs 27,040 + (ii) Rs 72,800 + (iii) Rs
52,000 (iv) Rs 12,688 (v) 20,800 Less
(vi) Sale Return Rs 6,344. Hence,
aggregate sale price is Rs 1,78,984.

CENTRAL SALES TAX 48

From the following details, compute the central
sales-tax payable by a dealer carrying on business
in New Delhi : Gross Turnover – Rs 16,00,000.
Other details - i) Trade commission for which
credit notes have to be issued separately - 48,000
ii) Installation charges - 25,000 iii) Excise duty -
80,000 iv) Freight, insurance and transport charges
recovered separately in the invoices - 60,000 v)
Goods returned by dealers within six months of
sale, but after the end of financial year - 40,000 vi)
Central Sales-tax. - Buyers have issued ‘C’ forms
for all purchases. (CA Inter)
How would you arrive at taxable turnover
under the Central Sales Tax Act, 1956 from
the following particulars : (i) Gross sales as
per accounts : Rs. 10,00,000. (ii) Gross sales
include : (a) Rs. 50,000 being trade discount
allowed to wholesale dealers in terms of
agreement. (b) Rs. 20,000 being quantity
discount allowed to buyers on the basis of off-
take in a specified period. (c) Rs. 70,000
being excise duty paid on goods but
recovered from customers by charging the
same in invoices. (iii) No sales tax is included
in gross sales
.(iv) Gross sales figures are net of sales
returns detailed below : (a) Goods worth Rs.
25,000 received back after the expiry of six
months from the date of sale as the customer
rejected the goods not found in accordance
with the order. (b) Goods worth Rs. 40,000
returned by the buyers after six months
because of inability to the price. (v) A sum of
Rs. 75,000 has been recovered from the
customers towards freight which has been
separately charged in the invoices. The
amount of freight is not included in gross sales
.(c a ).
SOLUTION
Hence, taxable turnover is Rs
10,00,000– Rs 50,000 (trade
discount) – Rs 20,000 quantity
discount + Rs 40,000 (Goods
returned after 6 months added
back) i.e. Rs 9,70,000/-.

2007 dec CENTRAL SALES TAX 52

M/s Roy Brothers, Kolkata, West
Bengal, are dealing in two products
namely X and Y. The gross Inter State
Sales are Rs. 8 lakhs and Rs. 10 lakhs
respectively during 04-05. CST was not
charged in the Invoice. If the products X
and Y are sold within State of West
Bengal, the sales tax rate is 8% and 4%
respectively. Other information in
respect of the year is as follows :
( a) Product X is not manufactured in India. It is
imported. Product ‘Y’ is ‘declared goods’, included
under section 14 of CST Act.
(b) Out of sale of product X, goods worth Rs. 2.50
lakhs were rejected by customer. The goods were
dispatched in December 95 and returned by
customer in October 96 as these were not to the
specification.
(c) In case of sale of Rs. 2 lakhs of X, goods were
imported by Roy Brothers. These were unloaded in
Kolkata port. Before goods were cleared from
customs, they were sold by transfer of documents to
a buyer in UP. Customs duty was paid by the buyer
from UP
 d) D form was received in respect of balance sales
of ‘X’. The sales price is inclusive of packing charges
of Rs. 10,000, shown separately in Invoice.
(e) Out of total sales of Y, sales of Rs. 6 lakhs were
inclusive of packing charges of Rs. 15,000, transport
charges of Rs. 12,000 and transit insurance charges
of Rs. 6,000. These charges were separately shown
in Invoice. C form was received in respect of the
sales. These goods were purchased by Roy
Brothers from a manufacturer in West Bengal for Rs.
4,57,600, which included West Bengal State sales
tax of Rs. 17,600
(f) Balance sale of ‘Y’ was to unregistered dealers.
A cash discount of Rs. 20,000 was given to buyers
in respect of the sale. Roy Brothers had introduced
a scheme of additional discount to those who effect
sales more than 10% of their sales of previous year.
Such additional discount amounted to Rs. 25,000
during the year on these sales. The sale of Rs. 4
lakhs is without considering these discounts of Rs.
20,000 and Rs. 25,000. These goods were
purchased by Roy Brothers from a manufacturer in
West Bengal for Rs. 2,99,200, which included local
sales tax of Rs. 11,800.
SOLUTION
In case of ‘X’, the position is as follows – (i) Time limit
of 6 months is not applicable to rejected goods. Hence,
deduction of Rs 2.50 lakhs is permissible. (b) If the
goods are sold before crossing of customs barrier, it
will be a sale during import and hence no sales tax is
payable. Thus, aggregate sale price of ‘X’ for tax
purposes is Rs 3.50 lakhs (out of total sale of Rs 8
lakhs). Since D form is received, CST @ 4% is
payable. Hence, turnover is Rs 3,36,538.46 and CST
payable is Rs13,461.54
2)In case of sale of ‘Y’ of Rs 6 lakhs,
deduction of transport charges of Rs 12,000
and transit insurance charges of Rs 6,000 is
permissible. Thus, aggregate sale price of ‘Y’
for tax purposes is Rs 5,82,000 (out of total
sale of Rs 6 lakhs). Since C form is received,
CST @ 3% is payable. Hence, turnover is Rs
582000 and CST payable is Rs. 17460
In case of sale of ‘Y’ of Rs 4 lakhs, deduction of
cash discount of Rs 20,000 is permissible but
deduction of bonus discount is not permissible.
Thus, aggregate sale price of ‘Y’ for tax
purposes is Rs 3.80 lakhs (out of total sale of Rs
4 lakhs).
CST will be equal to 4%
Tax payable will be equal to 3.8 lacs * 4%
=15200
Will Roy Brothers be able to obtain any
refund of tax paid on their purchases ?
If so, how much ?

If declared goods are sold inter-state,

refund of local tax paid on purchases is
permissible. Hence, Roy Brothers are
entitled to get refund of Rs 29,400/-
(Rs. 17,600
+11,800.)
CENTRAL SALES TAX 60
(a) Sale of Rs. 2 lakhs were direct exports in their own
name.
(b) Sale of Rs. 5 lakhs were made to an exporter who
made direct sales.
(c) Sale of Rs. 3 lakhs were to Government agencies.
(d) Sale of Rs. 9 lakhs were to registered dealers.
(e) Sale of Rs. 4 lakhs were to unregistered dealers. If
the goods are sold within State of UP, local sales tax
rate is 8%.
State in each of aforesaid cases : (A) Sales tax
declaration form which should be obtained from the
buyers. (B) State in each case Central Sales Tax (CST)
rate applicable (a) If required declaration is received
and (b) If required declaration is not received.
FORMS TO BE ISSUED

FORM C - REGISTERED BUYER

FORM D - GOVERNMENT BUYER
FORM E1- SUBSEQUENT SALE
FORM E2- SUBSEQUENT SALE
FORM F - STOCK TRANSFER(DEPOT)
FORM H - SALE TO EXPORTER
FORM I - SALE TO SEZ
•Forms for Declarations.doc
CENTRAL SALES TAX 62
SUBSEQUENT SALE
IF SUBSEQUENT SALE IS MADE TO
REGISTERED AND GOVERNMENT DEALER IT IS
EXEMPTED(E1&E2)
IF SUBSEQUENT SALE IS MADE TO
UNREGISTERED DEALER THEN IT IS TAXABLE

CENTRAL SALES TAX 63

Exercises
1. The sales of a dealer including sales tax, if any are as under:Rs
1.Cereals and pulses, sugar and salt(exempt in the State) 2,00,000
2.Shares and Securities 50,000
3.Other goods sold in the State 4,00,000
4.Exports from India 3,00,000
5.Goods purchased and sold in other State 60,000
6.Inter-State sale on which rate of tax is 8% 2,16,000
7.Inter-State sale to a State Govt on Form D (SST 5%) 52,000
8.Inter-State sale to a registered dealer on Form C (SST 3%) 1,03,000
9.Goods sent to Branch located in other State on Form F 2,00,000
Calculate Turnover and Taxable Turnover under the CST Act of the dealer.

27 January 2010 CENTRAL SALES TAX 64

Solution
Calculation of Taxable Turnover
1.Cereals and pulses, sugar and 2,00,000
2.Shares and Securities (not goods, hence exempt) ----------
3.Other goods sold in the State 4,00,000
4.Exports from India 3,00,000
5.Goods purchased and sold in other State 60,000
6.Inter-State sale on which rate of tax is 8% 2,16,000
7.Inter-State sale to a State Govt. on Form D (SST 5%) 52,000
8.Inter-State sale to a registered dealer on Form C (SST 3%) 1,03,000
9.Goods sent to Branch located in other State on Form F 2,00,000
Gross Turnover 15,31,000

27 January 2010 CENTRAL SALES TAX 65

Solution…
Gross Turnover 15,31,000
Less: Sales not taxable under CST Act
1.Cereals and Pulses etc – exempt in State 2,00,000
2.Sales in the State 4,00,000
3.Exports from India 3,00,000
4.Purchases and sale in other State 60,000
5.Goods send to Branch on Form F 2,00,000(-)11,60,000
Gross Inter State Sales 3,71,000
Less: Amount of Tax included in sales
Sales*Rate of Tax
100+Rate of Tax
(1)2,16,000*8/108 16,000
(2)52,000*2/102 1,020
(3)1.03,000*2/102 2,020 19,040
Taxable Turnover
3,90,040
27 January 2010 CENTRAL SALES TAX 66
Exercise 2

During the year total sales of a dealer are $w. 21,02,000. Compute the taxable
turnover of the dealer under the CST Act from the following information
1.Sale of exempted goods 4,00,000
2.Sale within the State 6,00,000
3.Exports from India 3,00,000
4.Inter-State Sale to dealers on Form C 3,32,000
5.Out of sales in (4) Sales returns within 6 months are 20,000
6.Subsequent sale during Inter State trade to registered dealers 2,50,000
7.On othe inter state sale thee rate of tax is 10%

27 January 2010 CENTRAL SALES TAX 67

Solution

Total Sales
1.Sale of exempted goods 4,00,000
2.Sale within the State 6,00,000
3.Exports from India 3,00,000
4.Inter-State Sale to dealers on Form C 3,32,000
5.Out of sales in (4) Sales returns within 6 months are 20,000
6.Subsequent sale during Inter State trade to registered dealers 2,50,000
7.On other inter state sale thee rate of tax is 10%

27 January 2010 CENTRAL SALES TAX 68

 THANK YOU

CENTRAL SALES TAX 69