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,1956The 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 THEORYNexus 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, 1956It is generally small amount The dealer can’t have exemption from registration

Voluntary registrationWhen 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.

Purchases

(interstate)

Sales (within state)

Voluntary registration

(to purchase at concessiona

l rates)

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 IN

PRESCRIBED FORM A

Prescribed fees

Within 30 days when dealer liable

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 firm

the proprietor

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 form1)Name of the business2)Place of the business3)Address4)Other places of business inside the state

and outside the state5)Registration numbers of above

If dealer has places of business in different states he has to obtain separate registration in each stateIf dealer has different places of business in same stateHe has to register under one state with additional places of business on the certificate

Security from dealerAs 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 dealerAdditional security can also be demanded The security should not be more than tax estimated tax liabilityDemanding of security is not essential The security can refunded partially or wholly such security is not requiredSecurity 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 surety bond or other security for the same amount of the bond as in prescribed manner.

Forfeiture of securityThe authority granting the certificate of registration may by ordered for some good or sufficient cause , forfeit the whole or any part of the security furnished by a dealer

For realizing any amount of tax or penalty payable

by the dealer

If the dealer is found to have

misused any of the Forms or failed to have kept them in

proper custody

This order for forfeiture can be issued only after giving an opportunity of personal hearing to the dealer .

Order demanding security

Additional demanding security is

appealable

Appeal to be filled

With in 30 days of service of the

order

To be filled prescribed Form

and with prescribed authority

The appellate order shall be

final

Certificate of registrationDealer will be issued a certificate of registration in form ‘B’A copy of certificate issued for every place of business in the stateCertificate of registration must be kept in principal place of business and copy of the certificates should be kept at each additional place of businessThe certificate can be amended for change name place ,natureBut CoR is non- transferableIn case of lost or destroy of certificate , duplicate is issued for fees charge Rs. 5In case of rejection of the certificate by sale tax authority , the reasons must be recorded in writing .However , before rejection , personal hearing should be given to applicant and opportunity to correct or complete required particulars should be given

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 applicationE.g. :- thus all sales / purchases made when the application is pending are to be treated as sales made by a registered dealer

Cancellation of registrationA ) 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 taxThe cancellation of registration from the end of year and can’t be in the middle of yearB ) SUO MOTTO CANCELLATION BY THE DEPARTMENTSales tax authorities may cancel registration after giving notice if dealer ceased to existHas ceased to carry on the businessHas failed to furnish additional security Has failed to inform the death of suretyFailed to pay tax or penalty payable under the actObtained voluntary registration ceases to sales inside the state or For any other sufficient reason

Offences and penalties under CST Act

Central sales tax act provides for penalties and punishments in respect of certain offencesFurther, 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 applicableCST Act provides for three types of punishments :(a)Imprisonment &fine(b)Compounding of offences(c)Penalty

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

Collecting any amount representing as Central Sales Tax by an un-registered dealer or by a registered dealer in contravention of 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 lawsIn that case , the proceedings in the court of law will not be launched . Means , no imprisonment /fine.

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 for other offences like late payment or non- payment of tax , false declaration of turnover , non- filling or late filling of returns etc..

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

Power to demand production of Account BooksPower to seize the BooksPower to searchPower to seize goodsReassessmentPower to call for information from banking companies

POWERS AND FUNCTIONS OF ASSESSING AUTHORITIES