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INTRODUCTION TO CST ACT,1956

Tax is levied by Central Government but is


administered and collected by State Government.
Tax is collected from the State from which the
movement of goods start.
CST is applicable when there is a registered dealer and
sale is in course of inter-state trade or commerce.
CST is levied on specified rate on turnover of goods
which is determined on the basis of sale price,
Registered dealer deposit the CST return to the
notified authority in appropriate state in which he is
registered.
Notified authority assesses the liability of registered
dealer and order refund and penalty accordingly.
FEATURES OF CST,1956
The salient features of CST Act are as under:-
(1) SCOPE: CST extends to the whole of India.
(2) LEVEID BY CENTRAL GOVERNMENT: CST is levied by central govt.
but it is collected by the state govt. from where the goods have been
sold. IN case of UT, tax is deposited in the consolidated fund of India.
(3) NO EXEMPTION LIMIT: CST is levied on the turnover made in course of
inter-state sale. There is no limit for turnover, as it is normally available
in case of State Sales Tax.
(4) ADMINISTERED BY STATE GOVT.: The CST rules have been framed by
the central govt. but State governments are allowed to adopt such rules
as they deem fit. The rules regarding return, payment of tax, appeal etc.
are not given in CST & as such the rules followed by States in respect to
their Sales Tax Laws, are followed for the purpose of CST Act.
(5) CONCESSIONAL RATES: Concessional rate(2%) of CST is applicable if
(a) declaration in form C is issued by purchaser who is a registered
dealer;
(b) Certificate in form D is issued by govt. if buyer is govt.
(6) SALES ARE EXEMPT: Certain sales are exempt
under CST Act if
(a) Sale is within the state as it subject matter of
General Sales Tax of State.
(b) Subsequent Sale during Inter State movement
by transfer of documents to registered dealer/govt.
(c) Sales or purchase of goods in the course of
import or export .
(7) CATEGORIES OF GOODS: CST Act has divided
Goods into two categories:
(a) Declared Goods or goods of special
importance: States cannot levy tax on these declared
goods more than 4% and not more than once.
(b) Other Goods: These goods are subject to CST
@10% or at the rate applicable to such goods inside
the appropriate state, whichever is higher.
NEXUS THEORY
Nexus means connection or link.
With regard to taxation matters (specially sales tax), it was well accepted
theory that in case, any State has a connection with the sale transaction (say
seller or buyer resides in the state), the state is competent to impose tax on
such transaction.
Meaning thereby, that in case of inter state sale, both states (the state where
seller is situated and the state where buyer is situated) used to levy tax.
Thus, each state having a territorial nexus with the sale, used to levy tax, with
the result that the same transaction had to suffer tax in different states with
the associated hardship to trade, resulting into higher burden of tax on the
ultimate consumers.
The Law makers were aware of this problem. Therefore, they
introduced Entry 92A and amended Article 286 of the Constitution of India,
imposing restrictions on State power to levy tax, on the following transactions:
Inter state sale/ purchase
Export sale/purchase
Import sale/purchase
Sale outside the state (means local sale inside some other state
Thus, nexus theory has lost its relevance after amendments in the
Constitution f India.
Registration Procedure Under
central sales act (section 7)

There are two types of registration :-

Compulsory
registration
Section 7(1)

Voluntary registration
Section7(2)
Compulsory
registration
under section 6 , dealer is liable to
pay tax in case he is performing an
inter state sale.
Section 7(1) , every dealer who is
liable to pay tax must apply for
registration . He has to register
himself with the state sales tax
authorities under the central sales
act, 1956
It is generally small amount
The dealer cant have exemption
Voluntary registration
When a dealer is registered under state
sales tax authorities.
He may voluntary want to register himself
under central sales tax act (authorities).
Dealer may register even though he is not
liable to pay tax.
Generally , this provision is useful incase a
dealer purchases interstate sale and perform
sales within the state.
So that , he may purchase at concessional
rates of tax against Form C.
Purchase
s
(interstat
e)
Voluntary
registration
(to
purchase at
concessiona
Sales
l rates)
(within
state)
Procedure for registration
Application for registration is to be made in
prescribed Form A with prescribed fees as per
central sales tax (registration and turnover)
rules within 30 days from date when dealer
becomes liable to CST.

APPLIACTION
Within 30
IN Prescribed
days when
PRESCRIBED fees
dealer liable
FORM A
The Application should be duly signed and
verified as provided under law following can sign
the application :
Type of dealer Duly signed by

Incase of proprietorship the proprietor


firm
In case of partnership firm the partner

In case of HUF the Karta/manager

In case of company the director or principal


officer authorized
In case of government Duly authorized officer
Main contents of application form
1)Name of the business
2)Place of the business
3)Address
4)Other places of business inside the state
and outside the state
5)Registration numbers of above
If dealer has places of business in
different states
he has to obtain separate registration in
each state
If dealer has different places of
business in same state
He has to register under one state with
additional places of business on the
Security from dealer
As per provision 7 , the registration authority may ask for
proper security from the applicant for the realization of tax
due and proper custody & use of Forms (C,E1 ,E2, F&H etc )
which are supplied by the sale tax authorities for use of
dealer
Additional security can also be demanded
The security should not be more than tax estimated tax
liability
Demanding of security is not essential
The security can refunded partially or wholly such security
is not required
Security furnished by dealer is in form of surety bond
Surety become insolvent or dies, the dealer should within
thirty days of occurrence
Informing the authority who is granting the certificate of
registration
Within ninety days of occurrence , must furnish a fresh
Forfeiture of security
The authority
granting the For realizing any
certificate of amount of tax or
penalty payable
registration may by the dealer
by ordered for
some good or If the dealer is
found to have
sufficient cause , misused any of the
forfeit the whole Forms or failed to
have kept them in
or any part of the proper custody
security furnished
by a dealer
This order for forfeiture can be issued only
after giving an opportunity of personal
hearing to the dealer .
Order demanding security

Appeal to be
Additional filled
demanding
security is With in 30 days
appealable of service of the
order

To be filled
prescribed Form The appellate
and with order shall be
prescribed final
authority
Certificate of registration
Dealer will be issued a certificate of registration in
form B
A copy of certificate issued for every place of
business in the state
Certificate of registration must be kept in principal
place of business and copy of the certificates should
be kept at each additional place of business
The certificate can be amended for change name
place ,nature
But CoR is non- transferable
In case of lost or destroy of certificate , duplicate is
issued for fees charge Rs. 5
In case of rejection of the certificate by sale tax
authority , the reasons must be recorded in writing .
However , before rejection , personal hearing should
Effective date of
registration
The CST Act or Rules do not contain any
provision indicating the date from which
registration certificate to be effective.
However court judgment clarified that , the
date of registration is effective from the date
which application for registration is made ,
even if registration is granted later.
In fact , registration is made after the first
inter sate sales is effected , the registration is
effective from the date first interstate sale i.e.
earlier than the date of application
E.g. :- thus all sales / purchases made when
the application is pending are to be treated as
Cancellation of
A )registration
CANCELLATION AT THE INITIATIVE OF THE
ASSESSEEE:
A dealer may apply for cancellation of registration within 6
months before the year ends if he is not liable to pay any
tax
The cancellation of registration from the end of year and
cant be in the middle of year
B ) SUO MOTTO CANCELLATION BY THE
DEPARTMENT
Sales tax authorities may cancel registration after giving
notice if dealer
ceased to exist
Has ceased to carry on the business
Has failed to furnish additional security
Has failed to inform the death of surety
Failed to pay tax or penalty payable under the act
Offences and penalties under
CST Act
Central sales tax act provides for
penalties and punishments in respect of
certain offences
Further, in respect of offences not
provided in the CST act , provisions of VAT
law of the state where the dealer is
carrying on business are applicable
CST Act provides for three types of
punishments :
(a)Imprisonment &fine
Section 10 of CST Act provides that punishment
up to six months of simple imprisonment or with
fine or both can be imposed for following offences
under CST Act
Knowingly giving declaration in form C , E-I ,E-II ,H,I
or J which he knows , or has reason to believe , to be
false
Not regarding under CST Act when required to be
registered
False representation by a registered dealer that the
goods being purchased are covered under his
certificate of registration for concessional rate
Falsely representing that he is a registered dealer ,
though he is not
Misusing or using for different purpose the goods
obtained under C Form at concessional rate
Having in possession C forms which are not
obtained as per provisions of the Act
Compounding of
offences
The offences can be
compounded by Sales Tax
Authorities . Such compounding
can be done in respect of any
offence enumerated above , if
provisions are available in state
laws
In that case , the proceedings in
Further section 10 A of CST ACT authorities
imposition of penalty in lieu of punishment in
respect of offence regarding
(a)Obtaining goods not included in registration
certificate
(b)Purchasing goods representing that he is registered
dealer , tough he is not
(c)Using goods for purposes different than the
proposes for which purchased
()The penalty can be up to one and half time the
tax which would have be
payable.
()The penalty can be imposed by sales tax authority
having jurisdiction over the dealer s place of
business . Once penalty is imposed , prosecution
(for imprisonment/ fine) for same offence shall not
be launched
()Besides above , state laws provide for penalties
Sale Tax Authorities
Excise and Taxation
Commissioner

Joint Excise and Taxation


Commissioner

Deputy Excise and Taxation


Commissioner

Assistant Excise and Taxation


Commissioner
Excise and Taxation Officer

Excise and Taxation


Inspector
POWERS AND FUNCTIONS
OF ASSESSING
AUTHORITIES
Power to demand production of
Account Books
Power to seize the Books
Power to search
Power to seize goods
Reassessment
Power to call for information from
banking companies

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