Sales Tax Liability
Central Sales tax is generally payable on the sale of all goods by a
dealer in the course of inter-state Trade or commerce or, outside a
State or, in the course of import into or, export from India.
Interstate Sale
A sale or purchase shall be deemed to take place in the course of
interstate trade or commerce in the following cases:
When the sale or purchase occasions the movement of goods from one State
to another;
When the sale is effected by a transfer of documents of title to the
goods during their movement from one State to another.
Where the goods are delivered to a carrier or other bailee for
transmission, the movement of the goods for the purpose of clause (b)
above, is deemed to start at the time of such delivery and terminate at
the time when delivery is taken from such carrier or bailee. Also, when
the movement of goods starts and terminates in the same State, it shall
not be deemed to be a movement of goods from one State to another.
To make a sale as one in the course of interstate trade, there must be
an obligation to transport the goods outside the state. The obligation
may be of the seller or the buyer. It may arise by reason of statute or
contract between the parties or from mutual understanding or agreement
between them or, even from the nature of the transaction, which linked
the sale to such transaction. There must be a contract between the
seller and the buyer. According to the terms of the contract, the goods
must be moved from one state to another. If there is no contract, then
there is no inter-state sale.
There can be an interstate sale even if the buyer and the seller belong
to the same state; even if the goods move from one state to another as a
result of a contract of sale; or, the goods are sold while they are in
transit by transfer of documents.
Sales Tax payable to
whom and By whom
Sales tax is payable to the sales tax authority in the state from
which the movement of goods commences. It is to be paid by every dealer
on the sale of any goods effected by him in the course of inter-state
trade or commerce, notwithstanding that no liability to tax on the sale
of goods arises under the tax laws of the appropriate state.
Possible offences, which may be
committed, that are liable to be penalized and penalties for such
offences
The offences that may be committed and, the penalties, prescribed for
can be summarized as under. Offences, under section10, are punishable
with simple imprisonment (up to 6months) with or without fine.
Giving false declaration in Form C, E-I, E-II, F or H, which he knows or
has reason to believe it to be false.
Not getting registered under the CST Act, when required to be registered
or not complying with provisions relating to security.
False representation by a registered dealer that the goods, purchased
are covered under his certificate of registration for a concessional
rate.
Falsely representing that he is a registered dealer, though he is not.
Misusing or using for different purpose, the goods, obtained under C
form at a concessional rate.
Having possession of form C, which is not obtained as per provisions of
the CST Act.
Collecting any amount, representing as sales tax, by an unregistered
dealer or by a registered dealer in contravention of the provisions of
the CST Act.
Liability of a
Company in liquidation, with respect to payment of Central Sales Tax
and the liability of the directors of a private company
If a liquidator or receiver is appointed in the case of a company, he
should inform the Sales Tax authorities within 30 days of his
appointment. The Sales Tax Authority shall intimate him the amount of
tax due from the company in liquidation within 3 months. The Sales Tax
authorities are "preferential creditors' in a case of liquidation.
The Liquidator shall not dispose of assets of the company before setting
aside the amount of dues as intimated by sales tax department. The
liquidator may, however, part with such assets or properties in
compliance with any order of a court or for the purpose of payment of
the tax, payable by the company under the CST Act or, for making any
payment to secured creditors whose debts are entitled under law to
priority of payment over debts due to the government, on the date of
liquidation or, for meeting such costs and expenses of the winding up of
the company, as are in the opinion of the appropriate authority,
reasonable.
Liability of
the directors of a private company with respect to payment of
Central Sales Tax
If a private limited company is in liquidation and, any tax, assessed on
the company, cannot be recovered, it becomes the personal liability
of the directors, jointly and severally.
Directors can however avoid this liability; if they prove that the
non-payment of tax was not on account of neglect, misfeasance or breach
of duty on the part of the directors, in relation to affairs of the
company.
The power to levy Sales tax
1.No state can levy sales tax on any sale or purchase where such sale or
purchase takes place outside the state and in the course of import of
goods into or export of goods outside India.
2.Only the parliament can levy tax on inter-state sale or purchase of
goods
Main Principles in
State Sales Tax Laws
1.A sale or purchase of goods is said to take place when the transfer of
property in the existing goods or future goods takes place for
consideration of money.
2.The goods have been divided into different categories and different
rates of sales tax are charged for different categories of goods.
3.In most of the cases related to the sales tax, the tax on the sale or
purchase of goods is at single point.
4.Under the provisions of some state laws the assesses are divided into
several categories such as manufacturer, dealer, selling agent etc. and
such as assess is required to obtain a registration certificate to that
effect. The sales tax or the purchase tax is levied on that assessee on
the basis of his category such as dealer, manufacturer etc. on
production of certain forms or certificates (and differential rates of
sales tax are levied).
5.Generally , a quarter return of sales or purchases is insisted upon
and the assessee is required to furnish the return in the prescribed
form.
6.At the time of assessment, the assessee has to furnish all the
documentary evidence and satisfy the concerned sales tax / commercial
tax officer.
7.The sales tax laws of the states prescribe the procedure to be
followed in case an assessee prefers to make an appeal.
8.Every dealer should apply for registration and obtain a registration
certificate to that effect. The registration certificate number should
be quoted in all the bill / cash memos.
Transactions not amounting to inter-state sales
Not all dispatches of goods from one state to another result in inter
state sales rather the movement must be on account of a covenant or
incident of the contract of sales. There are some instances wherein the
goods are moved out of the selling state and yet they are not considered
inter state sales :-
Intra-state sales
Stock transfer from head office to branch & vice versa
Import and Export sales or purchases
Sale through commission agent / on account sales
Delivery of Goods for executing works contract
Sales Tax ID number
A state sales tax ID number is basically a business version of your
Social Security number under which you collect and pay tax for any
service or product you sell that qualifies for taxation in your state.
The state department of taxation provides sales tax ID numbers and it
takes about a month to get one.
The rule of thumb for sales tax is that most services are exempt and
most products are taxable except for food and drugs. However, states
have been gradually adding to the list of services that are taxable for
the last few years. Check with your state department of taxation to
determine if the product or service you sell is taxable in your state.
Exception in the sales taxes
Sales to resellers such as wholesalers and retailers that have a valid
state resale certificate.
Sales to tax-exempt institutions such as schools or charities
forms to be filled
-Form C;
-Form D;
-Form G;
-Forms E-I & E-II.