Central Sales Tax : The Basics You Need to Know

The Central Sales Tax (CST) is a tax imposed on inter-state trade or sales of goods. It is imposed by the Central Government of India under Entry 92A of List I (Union List) of the Seventh Schedule to the Constitution of India. However, the liability of collecting the tax in such case is that of the state government from where the goods were sold. The Central Sales Tax is an indirect tax levied on consumers which were enacted under the Central Sales Tax Act in 1956. Within a state, the seller or a dealer of goods is responsible for collecting the State Sales Tax on the sale of goods and Central Sales Tax in case of an interstate trade or sales of goods. Therefore, the state government which collected the tax gets the tax revenue also.

Inter-state Sales

“When any transaction between two parties from different states records the movement of goods then it is called interstate transaction.”
“A sale, effected by transfer of documents of title to goods when goods are in interstate movement, is also an interstate sale.”
However, transfer of goods to branch or other offices or consignments to agents are not considered an interstate sale.
“Goods that are sold within a state, but while transporting travel through another state is not considered inter-state sales.”

Objectives Of Cst Act

To outline the principles for determining Inter State Sale (ISS) or Sale outside a state or Import sale or Export sale.
Declaring certain special importance goods (Called Declared goods).
“Provide for the levy, collection, and distribution of taxes on the sale of goods in the course of inter-State trade.”
Specification of conditions and restrictions on state laws imposing taxes on declared goods.
“To provide for the collection of tax in the event of liquidation of a company.”

Conditions For Cst Act To Become Applicable

The sale should not take place of the course of import into or export from India.
The registration of the dealer under the CST Act.
The sales of goods should be made by the dealer to any buyer whether registered or not.
He should make a sale of any goods.
He should carry on any business.
The sale should be made in course of interstate trade or commerce.

Registration Procedure

To register for CST, it is mandatory for all Manufacturers/Traders /Dealers/Exporters to obtain his TIN registration number first. TIN is abbreviated for Taxpayer Identification Number allotted by Commercial tax department of the respective States VAT as a unique number. It is a single number allotted to the dealers for the purpose of registration of VAT and CST.

Following are the mandatory documents required to apply for a TIN registration

ID Proof
Address proof
PAN card of proprietor
4 to 6 photographs
Address proof of Business premises
1st Sale / Purchase Invoice
copy of LR/GR & payment/collection proof with a bank statement
Surety/Security/Reference

Various Important Forms Under This Act

Form D: Form D is issued by the Govt. Department which purchases the goods in order to avail the following concession:

4% tax or applicable sales tax rate for the particular sale within that State whichever is lower.

Form I: Form I is issued by a dealer/buyer located in a Special Economic Zone in order to avail the following concession:

No tax is imposed on the sales made to a dealer located in Special Economic Zone (SEZ).

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