Indian indirect taxation | Updated October 2026

Sales Tax in India: Central Sales Tax, GST and Interstate Sales

India's sales tax framework changed substantially when Goods and Services Tax (GST) was introduced on 1 July 2017. Most supplies of goods and services now fall under GST, while Central Sales Tax (CST) and state sales tax or VAT provisions continue to matter for specified goods and historical transactions.

Important: CST is not generally charged on ordinary interstate supplies covered by GST. Applicable treatment depends on the product, transaction date, place of supply and relevant notifications.

1. Sales Tax Liability in India

Under the Central Sales Tax Act, 1956, CST concerns interstate sales of goods that remain within its scope. Section 6 provides for liability to tax on qualifying interstate sales; section 8 governs rates and conditions, including concessional sales against prescribed declarations. The CST regime must be read alongside amendments made when GST commenced.

For supplies covered by GST, section 9 of the Central Goods and Services Tax Act, 2017 (CGST Act) governs central tax on intra-state supplies, and section 5 of the Integrated Goods and Services Tax Act, 2017 (IGST Act) governs integrated tax on interstate supplies. GST generally applies to goods and services, subject to statutory exclusions, exemptions and notifications.

Petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel remain outside the operative GST levy until the relevant commencement is notified. Alcoholic liquor for human consumption is excluded from GST. State VAT or sales tax rules may therefore continue to apply to these products, subject to the particular state law.

2. What Is an Interstate Sale?

Section 3 of the CST Act treats a sale or purchase as occurring in interstate trade when it occasions movement of goods from one state to another, or is effected by transfer of documents of title during such movement. Under the Act, the movement of goods entrusted to a carrier or bailee begins on delivery for transmission and ends when delivery is taken.

The interstate character depends on the transaction and its connection with the movement of goods, not merely on the residence of buyer and seller. A transfer of documents of title while goods are in transit may also qualify. Sections 4 and 5 address sales inside or outside a state and sales in the course of import or export.

Interstate supply under GST

Section 7 of the IGST Act defines interstate supply, broadly by reference to the supplier's location and the place of supply being in different states or union territories, with additional rules for imports, supplies to or by SEZ units and other specified cases. Section 8 deals with intra-state supply. The place-of-supply rules for goods and services are principally contained in sections 10 to 13.

For example, a taxable supply of goods from a supplier in Delhi to a customer with a place of supply in Maharashtra would generally attract IGST, rather than CST, if the goods are covered by GST.

3. Sales Tax Payable to Whom and by Whom?

Under section 9 of the CST Act, CST is levied by the Government of India and ordinarily collected through the tax administration of the state from which movement of the goods commenced, subject to the Act's provisions. The selling dealer is generally responsible for the tax on taxable interstate sales.

Under GST, the registered supplier generally pays the applicable tax, except where the law places liability on another person, such as a recipient under notified reverse-charge provisions. IGST is collected under the central framework and apportioned in accordance with applicable law. Tax payment and return filing are managed through the official GST portal.

4. Possible Offences and Penalties

Section 10 of the CST Act prescribes offences including knowingly furnishing false declarations, failure to register when legally required, misrepresentation concerning registration or eligible purchases, misuse of goods bought against concessional declarations, unlawful possession of declaration forms and unauthorized collection of tax. Depending on the offence, the Act provides for simple imprisonment that may extend to six months, fine, or both. Section 10A provides for penalty in lieu of prosecution in specified cases.

GST contains separate provisions governing penalties and prosecution, including sections 122, 125 and 132 of the CGST Act. The applicable consequences depend on the offence, amount involved, statutory thresholds and the law in force for the relevant period.

5. Liability of a Company in Liquidation

Section 17 of the CST Act addresses the obligations of a liquidator in respect of tax payable by a company in liquidation, including notice to the tax authority within the prescribed period and provision for notified tax liabilities. The authority is required to notify the liquidator of the relevant amount within the statutory timeframe.

The handling and priority of claims must also take account of applicable insolvency and company law, including the Insolvency and Bankruptcy Code, 2016, where relevant. Tax dues do not automatically override every secured or insolvency claim.

Liability of Directors of a Private Company

Section 18 of the CST Act provides for personal, joint and several liability of directors of a private company in liquidation where tax cannot be recovered, subject to the statutory defence that non-recovery was not attributable to neglect, misfeasance or breach of duty. For GST, section 89 of the CGST Act contains a separate provision concerning certain private-company tax dues.

6. Constitutional Power to Levy Sales Tax

The Constitution distributes taxation powers between the Union and states. Article 286 restricts state taxation of supplies outside the state or in the course of import or export. Article 269A provides for levy and collection of GST on interstate supplies by the Government of India and its apportionment. Article 246A confers special legislative powers regarding GST, with Parliament having exclusive power over interstate GST supplies. The Constitution (One Hundred and First Amendment) Act, 2016, established the principal GST constitutional framework.

7. Main Principles in State Sales Tax and VAT Laws

State VAT legislation remains relevant for goods not yet subject to GST and for legacy assessments, refunds, appeals and disputes. The precise rules vary by state.

Taxable transactions: Liability ordinarily arises on sales or purchases falling within the applicable state law.
Classification and rates: Rates may differ according to the category of goods and relevant notifications.
Dealer categories: Rules may distinguish manufacturers, dealers, importers and other registered persons.
Registration: Businesses meeting statutory criteria must obtain and maintain the applicable registration.
Returns and payments: Filing frequency, forms, due dates and payment procedures are prescribed by the relevant state law.
Assessment: Authorities may seek invoices, accounts, declarations, returns and supporting records.
Appeals: Assessment and penalty orders may be challenged through the appellate procedure and limitation periods applicable under the relevant law.

For GST-registered businesses, registration, invoices, records, returns, input tax credit and appeals are governed by the CGST Act, IGST Act, corresponding state GST legislation and related rules.

8. Transactions Not Amounting to Interstate Sales

Not every movement of goods across state boundaries is an interstate sale under the CST Act. Examples requiring examination include:

Transfers of stock between a head office and branch without a sale, supported by appropriate evidence and declarations.
Consignment movements to an agent without an underlying contract of sale.
Imports and exports, which have separate statutory treatment.
Movements of goods for job work or performance of a works contract, depending on the nature of the transaction.
Transactions wholly within a state.

GST distinction: Certain branch or stock transfers between distinct persons registered in different states can be taxable supplies even without consideration, under section 7 read with Schedule I of the CGST Act. Therefore, a movement that is not a CST sale may nevertheless be a GST supply.

9. Sales Tax ID Number and GST Registration

Under GST, registered taxpayers are allotted a Goods and Services Tax Identification Number (GSTIN), a 15-character identifier linked to the state or union territory and PAN-based registration. GST registration provisions are primarily found in sections 22 to 25 of the CGST Act, subject to exemptions and compulsory registration requirements.

Businesses dealing in goods outside GST may also need separate state VAT registration or a registration relevant to CST, depending on the state and their activities. The former description of an Indian sales tax number as a Social Security number is not applicable to India.

10. Exemptions, Concessional Rates and CST Forms

Under the CST Act, a concessional rate may be available for qualifying sales to eligible registered dealers where statutory conditions are fulfilled. A commonly relevant provision is section 8(1), read with the prescribed declaration requirements and restrictions applicable after GST.

Form	Purpose
Form C	Declaration for qualifying interstate purchases at concessional CST rates, subject to eligibility.
Forms E-I and E-II	Certificates used for specified subsequent sales during movement of goods under section 6(2).
Form F	Declaration supporting certain transfers of goods otherwise than by way of sale under section 6A.
Form H	Certificate associated with qualifying penultimate sales in the course of export under section 5(3) and (4).

Historical forms such as Form D and Form G may appear in older CST or state-law materials, but they should not be assumed to provide current general exemptions. Verify the transaction date, the specific statutory provision and current state procedures before relying on any declaration.

GST exemptions, zero-rated supplies and input tax credit follow separate rules. In particular, section 16 of the IGST Act governs zero-rated supplies, including qualifying exports and supplies to SEZ developers or units, subject to statutory conditions.

11. Official Legal Resources

This article provides general information, not an assessment of any particular tax liability. Statutory amendments, notifications, court decisions and state-specific provisions should be checked for the relevant transaction period.