Introduction to Central Sales Tax or CST

The Central Government of India has levied a tax on sales under the provisions of Central Sales Tax (CST) Act, 1957. As per the provision of this act, any movement of goods from one State to another State on account of sale/purchase or transfer of document of Title to goods between two separate parties is considered as Interstate sale or purchase. All such transactions are liable to CST, except goods sent outside the country, which are exempted from levy of CST. For instance, Consignment and Branch Transfers outside the State, Exports, Deemed Exports etc.,

Introduction to Central Sales Tax

Goods that are supplied to Special Economic Zones, UN, Diplomatic missions, etc. are exempted even the transactions done between different States, based on the submission of Statutory Forms as specified under the CST Act.

Cascading effect of taxes avoided with the introduction of centralized system of Sales Tax to evade the taxes levied by more than one State in Inter State transactions as well to clear the confusion relating to levy and collection of Sales Tax between the states involved in these kind of transactions. There are certain provisions are levied by the Central Government with the introduction of CST Act. It specifies that the CST is payable or levied in the State where the movement of goods commences as a result of interstate sales or purchases.

Dealers registered under CST can claim special benefits like charging low or NIL rate of CST on submission on relevant Statutory Forms. But unregistered dealers are charged with high rate of CST and can’t claim any exemptions on the basis of Statutory Forms as prescribed by the CST Act, 1957.

The Basic CST rate is 2% for Inter State transactions for registered Dealers. It can be claimed if the purchasing dealer issues Statutory Form – Form C to the selling dealer. The selling dealer submits them with his sales tax authorities for payment of 2% and the forms are supplied by the Department of an application by the registered dealers. Also the Inter State sales are exempted from CST, if such sales are med to specified persons or organizations, on submission of Forms like Form H, I, J etc.

In case of unregistered dealers, transaction among States made by them will attract the local sales tax rate of the selling State. No concessions or exemptions are given for such trade made to any category of persons or organizations.

Some point in concern with CST rates

1. Sales made against Form C will attract the CST rate of 2% or local VAT/Sales Tax of selling dealer whichever is less.
2. Under the local sales tax law, if the sale or purchase is exempt or Nil, the rate of CST applicable in case of sale to unregistered or registered dealers, will also be exempt or Nil.
3. The sales tax rates applicable for sale of declared goods, w.e.f. April 1, 2011 is as follows.
   • Sale of declared goods made to registered dealer, will attract levy of CST at local sales tax rate or 2%, whichever is lower.
   • The inter-state sale made to unregistered dealer, will be liable to CST at rates which is equal to VAT/sales tax rates as applicable within the State.