This article is written by Tanay Khanna, a student of NLUO, on Central Sales Tax and its registration procedure.

What is Central Sales Tax?

The sixth amendment in the Constitution of India changed the scenario of taxation in India by introducing the Central Sales Tax (hereinafter referred as CST). The amendment brought the taxes on purchases or sales of goods in the course of inter-State trade or commerce expressly within the purview of the legislative jurisdiction of Parliament and restrictions could be imposed on the powers of State legislatures with respect to the levy of taxes on the sale or purchase of goods within the State where the goods are of special importance in inter-State trade or commerce. According to Article 266 of the Constitution of India no tax can be levied on a person until or unless it is backed by a law. Hence in pursuance of this the Central and Sales Tax, 1956 was enacted which governs the current Central Sales Tax system.

Central Sales Tax is levied by the Central Government of India under Entry 92A of List I (Union List) of the Seventh Schedule to the Constitution on India but, it is collected by that state government from where the goods were sold. Hence the tax revenue collected is given to the same State Government which collected the tax. The current Central Sales Tax rate in India is 3 per cent.

Central Sales Tax is charged only on the inter-state transactions and not on the transactions occurred within the state or import/export of sales. Section 3(a)/ (b) defines the interstate nature of transaction. When any transaction between two parties from different states records the movement of goods then it is called interstate transaction. A sale, effected by transfer of documents of title to goods when goods are in inter-state movement, is also an interstate sale. However, consignments to agents or transfer of goods to branch or other offices are not considered as interstate sale. In addition to this goods that are sold within a state, but while transporting travel through another state is not considered inter-state sales. Moreover,there is no exemption limit of turnover for the levy of central sales tax.

Central Sales Tax Act has also provided special importance to certain goods in order to increase their circulation. Section 2(d) of the Act classifies good into two categories: declared goods and other goods. Declared goods are those goods which have been given special importance by the virtue of Section 14. Examples of such goods are cereals, coal, cotton, crude oil, jute, oilseeds, pulses, sugar, etc. The rates of tax on declared goods are lower as compared to the rate of tax on goods in the second category.

CST Transaction Forms

Manufacturers/Traders /Exporters/Dealers, during the course of transaction, have to issue certain proclamations in the prescribed form to the sellers/buyers. The forms are printed and supplied by sales tax authorities and these forms are to be prepared in triplicate.

Some important forms are mentioned below:

Form D: Any sale to Government is taxable @ 4 per cent or applicable sales tax rate for the particular sale within that State whichever is lower. To avail this concession on CST, Form D is issued by the Govt. Department which purchase the goods.

Form I:  This form is issued by a dealer/buyer located in a Special Economic Zone. This form gives concession on the central sales tax because no tax is levied when sales s made to a dealer located in SEZ.

Procedure to get CST registration

The registration for central sales tax is done in the same manner that of VAT. To register for CST Manufacturers/Traders /Exporters/Dealers has to first acquire his TIN registration number. TIN is an acronym for Tax-Payer Identification Number, which is unique number allotted by Commercial tax department of the respective States. It is an 11-digit number to be mentioned in all VAT transactions and correspondence. TIN number is used to identify dealers registered under VAT. It is a single number which is allotted to the dealers for the registration of all three taxes i.e. VAT, CST and Service tax. First two digits of TIN indicate the issued state code. However, the creation of other nine digits of the TIN number may differ from state to state. It is applied for both sales done within a state or between two or more states. TIN is also being used to identify dealers in the same way like PAN, to identification of assesses under income tax act.  Manufacturers/Traders /Exporters/Dealers can apply for the

Mandatory documents required to apply for a TIN registration are: ID Proof / Address proof / PAN card of proprietor with 4 to 6 number of photographs, Address proof of Business premises, 1st Sale / Purchase Invoice, copy of LR/GR & payment/collection proof with bank statement, Surety/Security/Reference. However, the requirements of certain documents may differ from State to State. This is due to the reason that even though the central sales tax has been framed by the central government but, the state governments are allowed to frame such rules, subject to such notification and alteration as it deem fit.

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