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CENTRAL SALES TAX
Bhargav.K
RajdeepFiona
Pradeep.T
Amutha PriyaPreethi
Presented By,
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Introduction
Objects and Basic Scheme of the CST Act
The objects of the Act, as stated in preamble of the CST Act are -
To formulate principles for determining
(a) when a sale or purchase takes place in the course of inter-state trade or commerce
(b) When a sale or purchase takes place outside a State
(c) When a sale or purchase takes place in the course of imports into or export from India
To provide for levy, collection and distribution of taxes on sales of goods in the
course of inter-state trade or commerce
To declare certain goods to be of special importance in inter-State trade or commerce
and specify the restrictions and conditions to which State laws imposing taxes on saleor purchase of such goods of special importance (called as declared goods) shall be
subject.
CST Act imposes the tax on inter state sales and states the principles and restrictions
as per the powers conferred by Constitution.
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Basic scheme of the CST Act
SALES TAX REVENUE TO STATES
TAX COLLECTED IN THE STATE WHERE MOVEMENT OF GOODS
COMMENCES
TAX ON INTER STATE SALE OF GOODS
STATE SALES TAX LAW APPLICABLE IN MANY ASPECTS
CST ACT DEFINES SOME CONCEPTS
DECLARED GOODS
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Inter-State and Intra-State Sale - Entry 92A of List I -
Union List reads : Taxes on the sale and purchase of
goods other than newspapers, where such sale or
purchase takes place in the course of Inter-state trade orcommerce.
NEWSPAPER SPECIFICALLY EXCLUDED
Categories of Sales - (a) Inter-State Sale
(b) Sale during import/export
(c) Intra-State (i.e. within the State) sale
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CENTRAL SALES TAX ACT-1956
CONDITIONS
1) There Should Be A Dealer
2)He Should Be A Registered Dealer3)He Must Carry On Any Business
4)Sale Should Take Place
5)Sale May Be To A Regd Or UnregdBuyer
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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
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Stock transfer
Movement of goods takes place from one State to
another, but it is not an inter State sales.
In Goodyear India Ltd. v. State of Haryana - (1990) 76STC 71 (SC) (at page 98), it was held that mere
consignment of goods by a manufacturer to his own
branches outside the State does not amount to sale or
disposal as such; the consignment of goods is neither
sale nor a purchase.
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When StockTransfer is treatedas Inter-State sale
Goods are despatched to branch/consignment agent in another State and then these are soldfrom the branch, depot or place of consignment of agent. However, if the movement of goods
is occasioned on account of sale, the movement will be treated as inter-State Sale. One
illustration will make the distinction clear.
Let us assume that Tata Iron and Steel Co. Ltd. (TISCO), manufacturing Steel, has a factory
at Jamshedpur, Bihar. TISCO manufactures Steel of various standard shapes and sizes.
TISCO has a depot at Howrah in West Bengal. Steel plates, rods, billets etc. are sent to its
depot at Howrah. When the goods are sent from Jamshedpur to Howrah, there is inter State
movement, but the movement has not occasioned on account of any covenant or contract for
sale. Hence, it is not an Inter-State sale but a stock transfer. Sale takes place when a
customer approaches TISCO depot at Howrah and takes delivery from Howrah. Here, the sale
by TISCO from its Howrah depot is an Intra-State sale within West Bengal.
However, assume that a buyer from Howrah wants Steel of a particular size and specification,
which is not a standard size and specification and hence is not available in Howrah depot of
TISCO. He approaches TISCO and TISCO manufactures Steel in its Jamshedpur factory in
Bihar as per the specific requirements of the buyer. After manufacture, goods are sent todepot of TISCO at Howrah and goods are sold to the buyer from Howrah depot of TISCO. In
such case, the movement of goods from Jamshedpur, Bihar to Howrah, West Bengal has
occasioned as a necessary incident of contract and hence it is a Inter State sale, even
ifgoods are supplied from depot of TISCO at Howrah and invoice is raised from TISCO,
Howrah.
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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
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continued
Dealer Includes
1)local Authorities ,Co-operative
Societies, A Company,HUF,Association Of Persons,firms..
2)suppliers, Broker, Del Creder
Commissioner,etc
3) An Auctioneer(govt ,Agent,etc)
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In State of Orissa v.Orissa Road Transport Co. Ltd. 1997 AIR
SCW 3489 = 107 STC 204 = (1997)5 SCALE 589 = AIR 1997
SC 3409 (SC 3 member), it was held that occasional sale of
disposable un-serviceable spare parts at yearly interval by a
transport company would make the organisation 'dealer'.
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REGISTERED DEALER SEC7
A PERSON SHOULD REGISTER
HIMSELF U/S7
THE REGISTRATION MAY BE
1)VOLUNTARY REGISTRATION OR
2)COMPULSORY REGISTRATION,
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BUSINESS 2(aa)
BIZ INCLUDES
1)TRADE,COMMERCE ,MFG ANDADVENTURE IN NATURE OF TRADECOMMERCE AND MFG
ANY INCIDENTAL AND ANCILLIARYACTIVITIES RELATED TO MAIN
BUSINESS SHOULD ALSO BECONSIDERED AS BUSINESS
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POINTS TO BE REMEMBERED
THE PROFIT MOTIVE IS NOT
COMPULSORY FOR THE SALES TAX
PURPOSE
THE TAX IS LEVIED ON SALES NOT
ON PROFIT
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Any transaction in connection with or incidental or
ancillary to, the main business would constitute
business, even though the transaction by itself may
not have the characteristics of business as understood
in ordinary parlance - State of Tamilnadu v. Binny
Ltd. - (1982)
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SALE -2(G)
SALE INCLUDES
A TRANSFER OF GOODS FOR MONEY
TRANSFER OF GOODS FOR MONEYS
WORTH
TRANSFER OF GOODS ON AN
AGREEMENT TO PAY ON DEFERRED
SYSTEM HIRE PURCHASE SYSTEM AND
INSTALLMENT SYSTEM .
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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.
POINTS TO BE
REMEMBERED
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GOODS-2(d)
GOODS MEANS ANY ARTICLE ,THING,
COMMODITY,AND WHICH IS
MOVABLE ,HOWEVER GOODS DOES
NOT INCLUDE
NEWSPAPERS,ACTIONABLE
CLAIMS,STOCKS, SHARES,
SECURITIES.
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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 BETREATED AS GOODS.
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DECLARED GOODS SEC2(C)
Declared Goods Includes
Cereals ,Pulses, Coal Including Coke But Not
Charcoal, Cotton Waste , Hand MadeGarments,tobacco, Raw Tobacco, CherootsOf Tobacco ,Jute, Oil Seeds, Cotton InUnmanufactured Form ,Crude
Oil,sugar,khandsare Sugar, Aviation TurbineFuel,refused Tobacco, Cigars ,Hides AndSkins, Woven Fabrics Of Wool.
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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.
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GI PIPES ARE DECLARED GOODS - Steel tubes are galvanised to
make the pipe corrosion resistant. After galvanising, it is called
Galvanised iron pipe. Since galvanising does not change the structure
and function, making GI pipe from Steel tubes does not bring a new
commodity into existence and hence GI pipes are declared goods -
GujaratSteel Tubes Ltd.v. State of Kerala (1989)2 CLA 100 (SC) =(1989) 74 STC 176 (SC) = (1989)2 JT 474 (SC).
CORRUGATED SHEETS - Corrugated iron sheets even after
corrugation are still iron and steel. State ofGujaratv. Shah Veljibhai
Motichand(1969)23 STC 288 (Guj HC) followed inGujaratSmall
Industries Corp v. CST(1999)116 STC 193 (Guj HC DB).
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HR AND CR STEEL STRIPS - In Jindal(India) Ltd. v. Dy CCT(2000)
117 STC 426 (WBTT), it was held that both HR (Hot Rolled) Steel strips
and CR (Cold Rolled) steel strips are one for purposes of declared
goods under CST Act. [The decision was in respect of dispute over
incentive scheme].
SEWING THREAD IS DECLARED GOODS - In State of Tamilnadu v. R
V Krishniah - (1994)92 STC 262 (Mad HC DB), it was held that sewing
thread and cotton yarn are same commodities and hence is liable only
to single point tax - similar decision of Orissa High Court - (1982)51 STC
410 and 411 - contrary decisions in (1976) 37 STC 227 (Ker HC), (1976)
38 STC 11 (All HC) and (1981) 48 STC 460 (Ker HC).
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NO TAX ON CONVERSION OF PULSES - Each of
the pulses whether whole or separated and whether
with or without husk, shall be treated as a single
commodity for purpose of levy of tax under State tax
law i.e. if tax is paid on raw pulses, no further tax is
payable after it is processed [section 15(d)].
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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.
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EXAMPLES
IN CASE OF DEPOT SALE
HEAD OFFICE------------KARNATAKA
DEPOT OFFICE ----------DELHI IF ORDER IS TAKEN FROM
CUSTOMER IN DELHI AND GOODSARE TRANSFERRED TO DELHI FIRST
AND THEN SALE IS MADE-INTERSTATE SALE
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CONTD.
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 .
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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.
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SUBSEQUENT SALE
WHEN THE GOODS ARE IN TRANSIT
THEN IF BUYER RE DIRECTS THE
GOODS TO SOME OTHER
CUSTOMER OF OTHER STATE , IT IS
CALLED AS SUBSEQUENT SALE AND
SHOULD BE TREATED AS INTER
STATE SALE.
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BASIS OF CHARGE
WHEN ALL THESE CONDITIONS ARE
SATISFIED THEN CST WILL BE
LEVIED
AT SPECIFIED RATE ON
TAXABLETURNOVER WHICH WILL BE
BASED ON SALES AND NOT ON
PROFITS.
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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)
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For Registered Buyers
LOCAL SALES TAX RATE OR 3%
WHICH EVER IS LESS
IF LST IS NIL CST WILL BE NIL IF LST IS < 4%-THEN CST WILL BE
SAME
IF LST IS >= THAN 4%-THEN CSTWILL BE 3%.
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FOR UNREGISTERED BUYER
Same as LST
Sale to Government willbeequivalent to sale to unregistered
dealer w.e.f. 1-4-2007
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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