2. Introduction:
CST (Central Sales Tax) ) is a form of indirect tax imposed only
on goods sold from one state to another state, which particularly
takes into account that the buyer and the seller needs to be in two
different states.
VAT (Value Added Tax) is a form of indirect tax imposed only
on goods sold within a particular state, which essentially means that
the buyer and the seller needs to be in the same state. Only when
tangible goods and products are sold, VAT can be imposed.
3. Contd.
Both Sales tax and VAT are Consumption tax. To take an example, if
a consumer consumes a goods worth Rs. 100 on which tax rate is
10%, the objective of both the system is to collect Rs 10 (i.e. 10% of
Rs 100) to the Government. Both are Indirect Tax, meaning the
consumer does not pay the tax to directly the government, but to
the business from whom he has purchased the goods. The business
remits it to the Government.
4. When do I have to pay CST?
Sale of goods is considered to take place when the property in
goods passes from the seller to the buyer. Also, there are events
which do not appear to be a direct sale of goods but are still
considered as deemed sales events under the CST legislations.
They are:
Transfer of property in the course of executing a contract involving
provision of material and services (generally termed as a works
contract);
Lease or hire purchase transaction of moveable goods (generally
termed as right to use); and
5. Transfer of intangible goods, such as goodwill and intellectual
property rights.
The liability for payment of CST/VAT lies with the seller, however, the
seller can charge the CST/VAT to the buyer along with the price of
goods sold.
6. Vat and CST on same transaction
The state in which the transaction would be taxable is the place
where the place of the business of the seller is perceived to be
located. CST is a origin based tax collected by exporting state
where as VAT is a destination based tax collected by importing state
both cannot go together. Hence VAT and CST cannot be
applicable on transactions which are same.
7. Rate of CST and VAT
Sale to registered dealer for resale/use in
Nature of Goods Sale to Govt. on submission of ‘D’ Form manufacture on submission of ‘C’ Form Sale in any other case
4% or State Sales Tax(or VAT), whichever 4% or State Sales Tax(or VAT), whichever
Declared Goods is lower is lower 2 * VAT rate
4% or State Sales Tax(or VAT), whichever 4% or State Sales Tax(or VAT), whichever 10% or State Sales Tax(or VAT), whichever
Other Goods is lower is lower is lower
