Central Sales Tax CST in India

Central Sales Tax in a democratic country like India is considered to be an integral component of the tax structure of the country. Central Sales Tax CST in India stands as the primary source of income for the government and is widely used for the maintenance of the country. In a bid to improve governance and infrastructure, the government has introduced different blocks of taxes applied on different kind of goods and services. Since the introduction of Central Sales Tax in the Sixth Constitutional Amendment, it has improved the capital revenue of the India government.

Central Sales Tax can basically be said as the tax levied on the sales generated by inter-state trade and commerce within the boundaries of a country. In basic words, it can be considered as a tax that an individual has to pay for the goods sold by inter-state trade and commerce. It is to be paid the state government in which the good is sold. CST is charged only on inter-state trade and commerce, any transaction within a state or import/export of goods within a state doesn’t come under the purview of CST.

Central Sales Tax Act, 1956

Central Sales Tax Act was introduced in the Sixth Constitutional Amendment which made it possible to bring the taxes on sale/purchase of goods in interstate trade under the purview of the legislative jurisdiction of Parliament. Sales Tax basically comes in the Central Sales Tax Act, 1956, which is to be followed by all the entrepreneurs and businessmen continuing their business in India. Central Sales Tax Act is considered to be the main focus part to define the rules and regulations guiding sales tax. Though the Central Sales Tax Act was introduced in the parliament in 1956, it was possible only in 1957 to come it into action.

This CST Act comprises of situations where Central Sales Tax would be applicable, penalties involved, trade restrictions, appeals, important goods for interstate trade and any other information which is relevant.

Central Sales Tax in India

Central Sales Tax came into action only after when it was introduced in the parliament in 1956 to regulate sales/purchase of commodities and taxes regulating such sales. We all know, India is a union of states and all these states are the strength of our country. The strength of our country lies in the ability to handle these states collectively, which is where Central Sales Tax has to play its role. Although CST is a part of or is levied by the Central government, it is to be administrated by the state government in which sale originates.

It is expected by the trade dealers to pay both the state and central sales tax whose transactions are involved in the inter-state trade.

Central Sales Tax- Objectives

The Central government introduced this tax system to simplify the taxation system of the country. Since Central Sales Tax is introduced it has helped the government in a various way. The Central Sales Tax was launched with these objectives:

    The first objective of CST is to formulate principles for determining when a sale of  sale/purchase of goods takes place, it is divided into 3 section which are:

  1. Under Section 3 in the course of inter-sale trade and commerce.
  2. Under Section 4,i.e., outside the state.
  3. Under Section 5 in the course of import/export outside India.
  •     Give certain goods special importance in the course of inter-state trade under Section 14.
  •     To provide for the collection of tax under Section 9(3).
  •     Under Section 9(1), to provide for the levy of tax.
  •     Under Section 9(5), charging a different rate of interest on a different kind of sale of goods during inter-state trade or commerce.
  •     Under Section 15, to provide the authority to collect tax from companies in case of liquidation.
  •     To provide for the settlement of disputes in course of inter-state trade and commerce.

Central Sales Tax Rates

Central Sales Tax Rates has changed periodically. It is determined by the government and since it has come into force, the change is Central Sales Tax Rates are found to be very common. At the beginning, the sales tax was originally 1% then it shifted to 2% and by July 1975 onwards it was changed to 4%. Goods which are costly or important are not charged under the provisions of CST Act.

Since the individuals were finding the rates to be high enough, the Parliament had to accept an amendment which shifted the Central Sales Tax Rates to 3% in 2007. Soon with the plan of the introduction of Goods and Service Tax(GST), the Central Sales Tax Rates were further brought down to 2% in 2008.

The table below shows the Central Sales Tax Rates as per 2015-16.

 

Nature of Goods When Sale made  to Govt. with submission of ‘D’ Form When Sale made to registered dealer for resale/use in manufacture with submission of ‘C’ Form When Sale made in any other case
For Declared Goods 4% or State Sales Tax, whichever is lower 4% or State Sales Tax, whichever is lower 2% * VAT rate
For Other Goods 4% or State Sales Tax, whichever is lower 4% or State Sales Tax, whichever is lower 10% or State Sales Tax, whichever is lower


Central Sales Tax Rules:

Being a part of a country means to need to amend the rules and regulation of that country. So, if you want to participate in interstate trade these are few basic rules and regulation amended by CST Act that you need to obey.

    A dealer who wants to participate in interstate trade and commerce needs to submit an application for Form A for registration under Section 7 of the Act. The proprietor should duly sign the application and it should be verified by a competent authority.

    Even if an applicant has many multiple places of business in the state only a single application will be accepted, no more than one application will be entertained.

    The Certificate of Registration should be kept safely at the principle place of business and a Xerox copy should be shown during the time of the inter-state transaction.

    In case, if a proprietor loses the Certificate of Registration, he can opt for a duplicate copy of his Certificate of Registration by paying in form of court stamp fee.

 Central Sales Tax Registration

All the individuals dealing in interstate trade and commerce need to opt for the registration of Central Sales Tax. They need to furnish their TIN registration number. This is a TaxPayer Identification Number, which will further lead an individual to fill other necessary forms and pay the registration fee for the same.

The document required for registration are as follow:

  • Address Proof.
  • PAN card.
  • Government Approved ID proof.
  • Purchase invoice.
  • Bank statement.
  • Photographs.

The document required can vary from state to state.

Central Sales Tax Exemption

Central Sales Tax is exempted in certain occasions or any particular case. It is mentioned below:

  • CST is excluded when the outward freight and outward insurance are paid separately and are passed on to the buyer during dispatch.
  • If the goods are returned back within 180 days, Central Sales Tax is excluded.
  • Sales to SEZs and foreign companies are exempted from Central Sales Tax.

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