Central Sales Tax Act,1956 & CST(R&T) Rules

& CST ( O)Rules, 1957

Presented by :Smt. Supriya Jena,

DeputyDirector(Sr.)

Basics of CST
Concept of CST
The concept of Central Sales Tax is closely related to the concept of
taxation in the Constitution. Under the constitution, taxation of sale and
purchase of goods is a State subject except sale or purchase of goods in

the course of inter-state trade.

In respect of inter-state sale or purchase of goods the Sale Tax is levied
under provisions of CST, 1956 and the tax is collected by the State from
which the movement of the goods commenced & the entire proceeds are
retained by the State.
Central Govt has authority to decide the rate of duty on Goods.
Administration, Collection, Appeal, Assessment is done by State Govt and
all revenue are given to state of seller.
It is an Indirect Tax as the burden falls on the consumer. It is levied by
Central Govt on taxable turnover of Inter-state sale of goods made by
registered dealer in ordinary course of business.

CST is applicable only when following conditions are satisfied:There should be a Dealer
He should be a Registered Dealer under the CST Act
He must carry on any business
Sale should take place in the course of inter-state trade or commerce
Sale must be of goods defined under CST Act

Definition of Dealer u/s 2 (b)

means any person who carries on the business of buying, selling, supplying
or distributing goods, for cash, or for deferred payment, or for valuable
consideration;& it includes

- Local authority , body corporate, company and other association of

persons etc. which carries on such business.
- Factor ,broker , commission agent who carries on the business for his
principal.

- An auctioneer who carries on the business of selling & auctioning goods

belonging to his principal.
Explanation 1- Every agent of a dealer residing outside the State who buys,
sells, supplies or distributes goods in a State or acts on behalf of such dealer
& every branch or office in a Sate of a firm registered outside that State or a
company/ body corporate, the Principal office or HQRS whereof is outside
that State

When Govt is a Dealer

Explanation 2- Government Departments like railways, post, PWD etc which,

whether or not in the course of business, buys, sells, supplies or distributes

goods, directly or otherwise for cash or for deferred payment or other
valuable consideration shall be a dealer.

EXCEPTION
The exception is sale, supply or distribution of unserviceable or old stores or
waste products or accessories.

PRINCIPLES OF CENTRAL SALES TAX

INTER-STATE SALE
SECTION-3

INTRA-STATE SALE
SECTION- 4

SALE IN COURSE OF IMPORT/EXPORT

SECTION-5

INTER-STATE SALE (SECTION-3)

OCCASIONS THE
MOVEMENT OF GOODS
SEC. 3(a)

EFFECTED BY TRANSFER OF
DOCUMENTS OF TITLE TO THEGOODS
SEC. 3(b)

There are two types of inter-State sales u/s 3.

An inter-State sale contemplated by clause (b) is one, which is effected by
transfer of documents of title to the goods during their movement from one
state to another. Where the property in the goods has passed before the
movement has commenced, sale will evidently not fall with in clause (b).
The dividing line between sale or purchases under section 3(a) and those
under section 3(b) is that in case of 3 (a),the movement of the goods is under
the contract of sale or purchases but in case of 3 (b) the contract comes into
existence after commencement and before termination of the inter-State
movement of the goods. Sale taxable as falling in clause (a) of section 3 will be
excluded from purview of clause (b) of that section.
In other words clause (a) contemplates a sale where under the contract of
sale the goods sold are moved from one state to another.

Clause (b) on the other hand contemplates a sale where the property in the
goods sold passes by transfer of document of title during the movement of the
goods from one state to another.

When the sale occasions movement of goods from one

state to another [as per section 3(a)]
This means there is a completed sale in pursuance of contract of sale or
purchase whereby goods move from one state to another. A sale occasions
movement of goods when the contract of sale so provides or in other words if
the movement of goods from one state to another is under a covenant or
incident of the contract of sale. A sale can be treated as an inter- state sale if, all
the following conditions are satisfied.
Transaction is a Completed sale.
The contract of sale contains a condition for the movement of goods from
one state to another.
There should be physical movement of good from one state to another/ a
transport of those goods from one State to another as a result or incident of the
contract of sale.
The sale concludes in the state where the goods are sent and that state is
different from the state from where the goods actually moved.
It is not necessary that sale precedes the inter- state movement of goods, sale
can be entered before or after the movement of goods.
It is immaterial in which state the ownership of goods passes from seller to
buyer.

When the sale occasions movement of goods from one

state to another[as per section 3(a)]

Example- A of Bhubaneswar sends goods in his own name to Delhi. At Delhi

goods are sold to different parties by the employees of A. In this case, the
movement of goods is not result of sale or agreement to sell. It is sale which
takes place in Delhi and not subject to central sales tax.

Inter-State sale Transaction u/s 3(a)

Example- Regd Dealer A in Odisha purchases Readymade garments worth
1,00,000/- @5% VAT & effects sale @ 1,30,000/- to a regd Dealer B of
Kolkata against C declaration Form.
A will pay VAT (input tax) of 5000/- in Odisha & will collect CST @ 2% on
1,30,000/- ( i.e.2600/-) [ u/s 8 (1) of the CST Act]
His ITC will be limited to the extent CST is paid ( i.e. 2600/-) and ITC of
2400/- will lapse. As per sec20(3) proviso (d)
If B is an unregd dealer or if B is unable to give C Form to A, A will collect
CST @ 5% [ at the applicable rate in Odisha u/s 8(2) of the CST Act] i.e. 6500/He will get ITC of 5000/- under VAT return. He will pay CST of 6500/- under
CST return. [ Annexure II of VAT-201]
One C Form covers all sale transactions made in a quarter. But where the
delivery of goods is spread over to different quarters in a FY or of different FY,
separate forms are required. [u/r 12(1)of CST (R&T) Rules]
If A purchases goods from outside the State against C Form , he can not
take any ITC.

Inter-State sale Transaction u/s 3(a)

Purchase against C Form
A regd dealer can purchase from outside the State against C Form & can
avail concessional rate of tax @2% on such purchase. [ u/s 8(1) & 8 (4) of CST
Act]
He can obtain Form from his sales tax authority on payment of 21/-. Now eform is applicable. He will file an application in Annexure G.
He will give original & Duplicate copies to the Seller & will retain the
Counterfoil. The seller will hand over Original to the assessing authority.
The purchaser in Odisha shall maintain a Register in Form V & he shall show
the utilisation account of C Form in Form V-1 to his sales tax authority. [u/r 6
of CST (O) Rules]
Sale against C Form
A regd dealer can sell against C Form. While filing returns for the month/qtr
ending 30th June,30th Sept, 31st Dec & 31st March, he will submit a Statement &
Forms received from the Purchasers for the transactions made in the Qtr
preceding the Qtr for which the Return is filed [ u/r 7A of CST (O) rules]
.

Stock transfer/ Branch transfer of Goods u/s 6A

A regd dealer claims that he is not liable to pay CST on the ground that
movement of goods from one state to another was occasioned by reason of

transfer of such goods by him to any other place of his business or to his
agent or Principal, & not by reason of sale, the burden of proving so shall be
on such dealer

The dealer to whom the goods are transferred (Transferee) will furnish a
F Form to the sender of goods. A single form will cover transactions made
during a calender month.

The Transferee/receiver of goods can obtain F from his sales tax authority
on payment of 21/-. Now e- form is applicable.
.

Stock transfer/ Branch transfer of Goods u/s 6A

He will give original & Duplicate copies to the Transferor/Sender & will
retain the Counterfoil. The sender will hand over Original to the assessing
authority alongwith a Statement in Form C within 3 months from the end
of period to which the declaration relates. [ u/r 12 of CST(R&T) Rules & u/r
6C of CST(O) Rules].

The Receiver in Odisha shall maintain a Register ( accounts of such

Form) in Form V C. [u/r 6C of CST (O) Rules]. He will file an application in
Annexure H for Form F

While filing returns for the month/qtr ending 30th June,30th Sept, 31st
Dec & 31st March, the transferee/receiver will submit a Statement & Forms
received for the transactions made in the Qtr preceding the Qtr for which
the Return is filed [ u/r 7A of CST (O) rules].

Stock transfer/ Branch transfer of Goods u/s 6A

Implication of ITC in case of stock transfer of goods

A regd dealer in Odisha purchases furnitures within Odisha & effects Stock
transfer of the same to its branch in Kolkatta.
Purchase Price = 100,000/- VAT @ 13.5%= 13,500/- ( Input Tax). He has
paid at the time of purchase.
He will not pay any CST on such transfer.

He will be entitled to ITC ( 13,500- 4000/-) = 9,500/ because excess of 4% will be allowed as ITC u/s 20(3)(e)
Information will be given in Annexure I in VAT-201.
If goods purchased are sent on Stock transfer partially, ITC shall be allowed

proportionately

SALE BY TRANSFER OF DOCUMENTS OF TITLE OF GOODS [as U/s 3(b) & u/r
6(2).
Transit Sale ( subsequent sale)Basic requirements are: The first requirement of a transit/subsequent sale is that there must be a
relative prior sale which had either occasioned movement of goods or was
effected by the transfer of documents of title to goods
There must be movement of goods from one State to another before any
contract of sale or agreement to sell have been made.
Such transfer of title documents must take place while the goods are still in
movement or transit
A Document of title to goods, bears internal evidence of ownership of goods
by holder of document.

Transit Sale u/s 3(b) & 6(2).

The sale of goods Act,1930 defines document of title to goods Some of the
examples are Lorry Receipt (LR) in case of transport by road; Railway receipt

(RR) in case of transport by rail, bill of Lading (BL)in case of transport by sea,
Airway bill (AWB) in case of transport by air.
Where a sale in course of interstate trade has either occasioned the movement

of such goods from one sate to another or has been effected by a transfer of
documents of titles to such goods during their movement

from one sate to

another, any subsequent sale during such movement effected by a transfer of

documents of titles to such goods to a regd dealer shall be exempt from CST.
The dealer effecting such subsequent sale will furnish a certificate in E-I Form
to the authority.[ u/r 12(4) of CST ( R&T) Rules ]

Transit Sale u/s 3(b) & 6(2).

Example:X of Delhi sends goods to Y of Bhubaneswar. The Railway Receipt is sent by
post to Y. While the goods are in transit Y sells goods by transfer of documents
of title to goods (RR) to Z of Bombay. In this case sale was effected by transfer
of/endorsing the documents of title to goods (Railway Receipt) to the buyer
when the goods were in movements from Delhi to BBSR.
X is the 1st seller of goods & Y is the 2nd seller. X will collect CST @2% from Y.
The sale transaction between Y & Z will be tax exempt
X will give E I certificate to Y & will receive C Form from Y
Z will give C Form to Y
Y will submit E-I Form received from X & C Form received from Z to the
assessing authority within 3 months.
While filing returns for the month/qtr ending 30th June,30th Sept, 31st Dec &
31st March, Y will submit a Statement & Forms received for the transactions
made in the Qtr preceding the Qtr for which the Return is filed [ u/r 7A of CST
(O) rules]

INTRA STATE SALE u/s 4

As per section 4 (1) when a sale or purchase is inside a state
As per section 4 (2) such sale or purchase shall be deemed to have taken
place outside all other States

Sale inside a state as per section 4 (2) means

1. In case of specific goods or ascertained, if goods are within the state at
the time of the contract of sale is made.
2. In case of unascertained or future goods, if goods are within the state,
at the time of their appropriation to the contract.
Example :-A transferred goods to his depot.Goods were sold from the depot to
the buyers in Delhi.
Comments
Transfer from Punjab to depot in Delhi is purely a stock transfer ,therefore
no sales tax on the same
Sale from depot to customers is a local sale and termed as sale inside state
of Delhi. As the sale is inside the state of Delhi, it automatically becomes
outside all other states.

INTRA STATE SALE u/s 4

As per section 4 (1) when a sale or purchase is inside a state
As per section 4 (2) such sale or purchase shall be deemed to have taken
place outside all other States

Sale inside a state as per section 4 (2) means

1. In case of specific goods or ascertained, if goods are within the state at
the time of the contract of sale is made.
2. In case of unascertained or future goods, if goods are within the state,
at the time of their appropriation to the contract.
Example :-A transferred goods to his depot
Goods were sold from the depot to the buyers in Delhi
Comments
Transfer from Punjab to depot in Delhi is purely a stock transfer ,therefore
no sales tax on the same
Sale from depot to customers is a local sale and termed as sale inside state
of Delhi. As the sale is inside the state of Delhi, it automatically becomes
outside all other states.

Registration u/s 7 of CST Act read with rules 3 to 8 of CST (R&T) Rules
U/s 7(1) of the CST Act - When a dealer in Odisha effects interstate sale for any
amount, he is liable to pay CST & is required to obtain RC both [compulsory
regn under the VAT Act u/s 10(4)] & u/s 7(1) of CST Act
U/s 7(2) of the CST Act - When a dealer in Odisha is liable to pay VAT even if
he does not effect interstate sale, he is required to obtain RC compulsorily
under the VAT Act u/s 10(4) & may obtain RC u/s 7(2) of CST Act
Application for regn u/s 7(2) shall be made within 30 days & application u/s
7(1) can be made at any time, in Form A prescribed under CST (R&T) Rules
[u/r 3]

R.C. Shall be issued in Form B prescribed under CST (R&T) Rules & will bear
TIN issued under VAT Act.
Before grant of RC he is required to pay security equivalent to tax payable
for a year [ u/s 7(2A) & u/r 3(2) of CST (o) rules]

RC can be cancelled if his liability has ceased or he has failed to pay

security or additional security or tax/ penalty or his liability under VAT Act
has ceased if he has taken RC u/s 7(2) [ u/s 7(4)(b) of CST Act]
Penalty of 1& times for failure to be registered u/s 10(aa) read with
sec10A

Return u/r 7 of CST(O) Rules

Regular Return
The Monthly dealers under the VAT Act & Rules will file monthly CST return
& Quarterly dealers under the VAT Act & Rules will file Quarterly CST return
within 21 days from the end of the month/ Quarter [ U/r 7 CST (o) Rules]
The Return is in Form I under CST (o) Rules
Revised Return
Revised return in case of omission or error within 3 months from the end of
the tax period to which the original return relates.
Annual Return
All Registered Dealers shall file Annual Return for the year in within 6 months
from the end of a year
Return shall be accompanied by receipt or e-Challan from Govt. Treasury
or Crossed Demand Draft drawn on any Scheduled Bank
or Bankers cheque issued by a Scheduled Bank
through e-payment at some scheduled Banks like SBI, ICICI, AXIS, UCO,
PNB etc

Statement of Declaration Forms & certificates u/r 7A of CST (O) Rules

Every dealer while filing returns for the month/qtr ending 30th June,30th Sept,
31st Dec & 31st March, will submit a Statement & Forms ( C form, F form, E-I/E-II

certificate, H Form, I Form J form) received from the Purchasers/transferee for

the transactions made in the Qtr preceding the Qtr for which the Return is filed
The Statement shall be submitted in duplicate, a receipted copy will be

returned to the dealer

Return Defaults
1. Levy of Interest for delayed payment or non-payment of tax [u/r 8 of
CST (O) rules]
Interest is 1% of such tax or differential tax or full tax respectively, per month
from due date of Return to date of payment or date of assessment order,
whichever is earlier.
Such interest shall be paid at the time of making payment of tax or the date
specified in demand notice as per the order of assessment whichever is earlier

2. Levy of Penalty [u/r 8A (1) of CST (O) rules]

When a registered dealer fails to pay tax due & interest along with Original/

revised, he may be directed to pay in addition to such tax & interest, a penalty
@ 2% per month on the tax & interest, from the date it had become due to the
date of its payment or order of assessment whichever is earlier, after issuing a
show cause Notice in form Form III
In case of failure to explain or respond, penalty shall be imposed & Demand
notice shall be issued in FormVII

3. Levy of Daily Penalty [ U/r 8A(2) of CST (O) rules ]

When a registered dealer fails to furnish return & pay full tax as per
original return /Revised, he maybe issued with a show-cause Notice in Form III

In case of failure to respond or compliance he may be directed to pay , in

addition to tax, interest, penalty, another penalty of 100/- rupees per day
subject to a maximum of 10,000/- rupees [U/s 34(3)]

3. Example of Annexure II of VAT-201 slide56 /Return

Where CST payable is less than Input tax
P.P = 100,000/- VAT @ 13.5%= 13,500/- ( Input Tax)
Inter-state sale is made
S.P. = 1,50,000/CST @2% against Form C = 3000/- ( CST collected)
ITC creditable = 3000/-

10,500/- shall be reversed as per sl No. 5 of Annexure II

Sec. 6 (2) of CST Act says when goods are in movement from one state to other in pursuance a
contract of sale, then any subsequent sale effected by transfer of documents during such movement
shall be exempt from CST. The first requirement of a subsequent sale under section 6(2) is that it
must have a relative prior sale in the course of inter-state trade or commerce which had (a) either
occasioned the movement of such goods from one state to another, or (b) was effected by transfer of
document of title of such goods during their movement from one state to another. In other words, a
movement of the goods in pursuance to a prior sale is the first pre-requisite of a subsequent sale
contemplated by section 6(2) for enjoyment of exemption. e.g. 1.) A of Delhi Orders B of Haryana
to sell and dispatch to Delhi 50 bags of black paper. B dispatches the goods and send the railway
receipt to A. In the mean time, A had sold identical quantity of same goods to C of Delhi. Instead of
himself taking delivery of goods from railway and then delivering those goods to C at Delhi, A
transfer to C the railway receipt which was sent to him by B. The sale by A to C is an inter-state sale
because it was effected by a transfer of document of title, viz. railway receipt. If C is registered
dealer, the sale from A to C may enjoy exemption from tax on fulfillment of other conditions of
section 6(2), e.g. The production by A of prescribed certificate and/ or declaration etc. The dealer
had entered into a contract with a supplier in the same state and had furnished C form to the
supplier and directed him to deliver the goods to the petitioners customer in another State. It had
obtained forms E1 forms its supplier and C form from customer state. Under section 6(2), the
second sale so effected by the petitioner was to be exempted and the petitioner was entitled to that
exemption as in respect of those transactions, form E1 from the supplier and C forms from customer
had been produced. - See more at: http://taxguru.in/goods-and-service-tax/subsequent-sale-saletransit-cst-act-1956.html#sthash.tieYWhly.dpuf