HOME

SCHEME OF CENTRAL SALES TAX RATES

(As on April 01, 2010 & onwards)

 

        Provisions of the Central Sales Tax Act, 1956 are attracted when a sale takes place in the course of inter-state trade or commerce.
        A sale is an inter-state or central sale where such sale-
(i)
either occasions the movement of goods from one State to another; or
(ii)
is effected by transfer of documents of title to goods during movement of goods from one State to another,
        Documents of title to goods are the documents which show possession and control over goods. These documents may be Goods Receipt (GR) issued by road transporter, a Railway Receipt (RR) issued by the Railways, a Airway Bill issued by Airways, a Bill of Lading issued by shipping agency, etc. These documents are issued by concerned agencies after receipt of goods for transporting them from one place to another. Goods mentioned in such documents may be sold by holder of the documents by endorsing such documents in favour of purchaser of such goods. This can happen only before taking delivery of such goods from transporting agency. Purchaser of goods may either sell goods by endorsing (selling) such document to any other person or may take delivery of goods from the transporting agency after surrendering such document. such sales are also popularly known as transit sales.
         As soon as goods are handed over handed over to transporting agency it issues document of title to goods to the person who handsover goods to such agency. At this point movement of goods starts and at the destination as soon as delivery of goods is taken from such agency movement of goods ends. Transporting agency delivers goods after taking back the document issued by it.
         During single journey of goods many sales can be effected by transfer of document of title to goods. Law provides that where first inter-state sale of goods have suffered tax in the State of dispatch, second or subsequent sale of such goods effected by transfer of documents of title to goods will be exempt from levy of tax if selling dealer produces prescribed Form c & Form E1 or E2 as may be applicable. Also first sale of goods is taxed in the State from where movement of goods has commenced.
         To understand rate structure of Central Sales Tax in any State, we can classify goods in two following broad categories:
(i)
Tax free or exempt goods: These are the goods sale and purchase of which is exempt from levy of tax in all circumstances; and
(ii)
Taxable goods: this category includes all goods except tax free or exempt goods.
       Taxable goods can further be classified on the basis of tax rate applicable to sale of such goods inside the State. Some States have also levied additional tax in addition to original rate of tax. For the purpose of the Central Sales Tax, these rates are to considered as sum of original rate and rate of additional tax. For example, if rate of tax on sale of medicine is 4 % and rate of additional tax is 1 % then for the purpose of Central Sales Tax, rate of 5% is to be considered. At present, we can classify taxable goods in each State in following categories:
(i)
Goods, the sale of which attracts a rate of tax which is either 2% or lower than 2% if the same are sold within the State; and
(ii)
Goods the sale of which attrats a rate of tax which is higher than 2 %.
         Now we can look at the tax structure given in the table below:
Sl. No.
State rate of tax with additional tax, if any
Rate of Central sales Tax
Condition of furnishing of Form C
1.
Tax free goods or exempt goods
Exempt
---
2.
Tax rate 2% or lower than 2%
Same rate which is applicable to sale of such goods inside the State
---
3.
Tax rate higher than 2%
2%
If Form C is furnished to the assessing authority after obtaining it from the purchasing registered dealer of goods.
4.
Tax rate higher than 2%
Same rate which is applicable to sale of such goods inside the State
If sale is made without obtaining Form C or if Form C is obtained but is not furnished to the assessing authority.
 
       Inter-State sales (Central sales) of taxable goods are also exempt from payment of Central Sales Tax where such sales are made after obtaining prescribed Form mentioned in each case below:
Inter-state sale to Special Economic Zone Unit being registered dealer:
       If inter-state sale of any goods is made to a registered dealer for use by him in a Unit established in any Special Economic Zone and if Form I is obtained and furnished to the assessing authority, inter-state sale is exempt from levy of tax.
Inter-state sale to certain persons and organizations:
Where an inter-state sale is made to any official, personnel, consular or diplomatic agent of -
(i)

any diplomatic mission or consulate in India; or

(ii)

the United Nation or any other similar International body,

       entitled to privileges under any convention or agreement to which India is a party or under any law for the time being in force, where such persons or organization purchase goods for himself or for the purpose of such mission, consulate, United  Nation or other body, such inter-state sale is exempt from levy of tax if declaration in Form-J is obtained and furnished to the assessing authority.

Inter-state sale of any goods to a developer or an entrepreneur (other than registered dealer) of Special Economic Zone for use in authorized operations:
       The Special Economic Zones Act, 2005 is a central Act and in section 51 of it, it has been given overriding effect on all other Acts. Section 26 of the Act relates to " Exemptions, drawbacks and concessions to every Developer and entrepreneur". Clause (g) of subsection (1) of this section runs as follows:
(1)
Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely: -
 
(g)
exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 if such goods are meant to carry on the authorised operations by the Developer or entrepreneur.
        Sub-section (2) of section 26 runs as under:
(2)
The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1).
         In Rule 32 of the Special economic Zones Rules, 2006, condition for exemption from levy of Central Sales Tax has been prescribed only where sale is made to a registered dealer.

 

 

DISCLAIMER: The facts and law provisions stated here are correct to my knowledge and belief. Users are advised to consult their legal advisors before acting upon the provisions as they are interpreted here. The taxtalkindia.com administration does not own responsibility of any kind.