Indirect tax laws


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Indirect tax laws

  1. 1. INDIRECT TAX-LAWS Central Sales Tax
  2. 2. Central sales tax is an indirecttax which levied by the centralgovernment on the taxableturnover of inter-state sale ofgoods made by a registereddealer during the prescribedperiod in the course of hisbusiness.
  3. 3. FEATURES OF CENTRAL SALES TAX a. central sales is levied on inter statesales of goods made by registereddealers.b. Central sales tax is levied at aspecified rate.c. Central sales tax is not levied on salesinside a state. It’s liable for local salestax.
  4. 4. d. Central sales tax is imposed by the centralgovernment but it is collected by the state in whichmovement of goods commences.e. It’s administered by local sales tax authorities ofeach state.f. Eventhough it’s the revenue of the centralgovernment the tax collected is retained by the state inwhich it’s collected. The central government shall nottake central sales tax from states.
  5. 5. CENTRAL SALES TAX ACT -1956Central sales tax Act was passed in the year 1956 to levy central sales tax on inter sale of goods.This Act came into force on 5th January, 1957 but section. 6 of this Act was enforced from 1st July, 1957 and section. 15 was enforced from 1st October, 1958.
  6. 6. Central sales tax Act envisages a single point levy at the first point of inter-state sale.Central sales tax Act 1956, makes provisions for every few procedures and rules. In respect of provisions like return, assessment, appeals etc., provisions of General sales tax law of the state applies.
  7. 7. OBJECTIVES OF CENTRAL SALES TAX ACT, 1956 Formulating principles for determining when a sale or purchase of goods takes place in the course of inter-state trade or commerce or outside a state. Formulating principles for determining when a sale or purchase of goods takes place in the course of import into or export from India.
  8. 8. To declare certain goods to be of special importancein inter-state traders commerce.To provide for the levy, collection ad distribution oftaxes on sales of goods in the course of inter-statetrade or commerce.To specify the restrictions and conditions to whichstate law in imposing taxes on the sale or purchases ofsuch goods of special importance shall be subject.
  9. 9. SCOPE OF THE ACT The Central Sales Tax Act, 1956 dealswith inter-State sales(Sec.3), sale or purchaseof goods taking place outside a State (sec.4),sale of purchase in the course of export andimport (Sec.5), liability and charge to sales tax(Sec.6), registration of dealers (Sec.7),determination of taxable turnover (Sec.8), levyand collection of tax (Sec.9), offences (Sec.10 to12), declared goods (Sec.14 and 15).
  10. 10. CATEGORIES OF SALESInter-State SaleIntra-State SaleSale in the course of import/export, andDeemed sales
  11. 11. It has already been defined that the term ‘Sale’means any transfer of property in goods by oneperson to another for cash or deferred paymentor for any other valuable consideration andincludes a transfer of goods on the hire-purchaseor any other system of payment by installments,but does not include a mortgage or hypothecationof, or a charge or pledge on goods. While tax on inter-state sale is levied by theCentral Government, tax on intra-state sale islevied by the State Government of the state inwhich the sale takes place.
  12. 12. INTER-STATE SALE Sec.3 of the CST Act, 1956 has defined inter-State sale orpurchase as follows; “A sale or purchase of goods shall be deemed to take place in thecourse of inter-State trade or commerce if the sale or purchase.a) Occasions the movement of goods from one state to another, orb) Is effected by transfer of documents of title to the goods during their movement from one State to another” A careful scrutiny of the above definition would reveal thatinter-state sale should occasion the movement of goods from onestate to another. It can also take place by transfer of documents oftitle to the goods during their movement from one state toanother.
  13. 13. FEATURES OF INTER -STATE SALEThe important essential or feathers of an inter-state sale areenumerated below:o There should be an agreement to sale containing a stipulation in respect of movement of goods from one state to another.o There should be physical movements of goods from one state to another.o Such movement of goods must be the result of a convent or incidental to the contract of sale.o It’s not relevant in which state the property in the goods passes.o Concluded sale should take place in a State that is different from the state from which movement of goods.
  14. 14. INTRA-STATE SALE A sale takes place inside Tamilnadu. It should be intra-state sale only. It should not be inter-state sale. This sale takingplace inside Tamilnadu is outside Kerala, Karnataka, AndhraPradesh, etc., Thus sale inside one state is outside all other states.The other states have no nexus with the sale and hence they cannotlevy tax on such sales.,
  15. 15. SALE IN THE COURSE OF IMPORT/EXPORT The sale is effected by seller and he is not connected with the exportof those goods which actually takes place, it is known as ‘sale for export’. Inthis case the seller may not be definite about the goods he sold to the buyerwhich are meant for export. The sale is not linked to export. In the case of sale in the course of export, the seller would be definitethat the goods sold to the buyer are mainly for export. In other words, theseller and the buyer both have an intention to export, an obligation to exportand there is an actual export goods. In other words, the sale is inextricablyconnected to export. The obligation to export may arise from any law,contract or from the nature of transaction itself.
  16. 16. DISTINCTION BETWEEN INTER-STATE & INTRA-STATE1. This is governed by CST Act, 1. This is governed by respective 1956. State Acts.2. CST rates are uniform thought 2. State sales tax rates are different the country. from state to state.3. For inter-state trade 3. The rates are determined by the transactions, the rates are levied respective State Government. by the Central Government.4. Possibilities are remote to pay 4. There may be necessities to pay sales tax at more than one stage. sales tax at more than one stage.5. In this case, CST is levied when 5. In this case local tax is levied goods move from state to when sale/purchase takes place another State. within the state.6. Thoroughly inter-state trade, 6. Under intra-state trade, there is there is possibility for no possibility for export/import export/import activities. activities.
  17. 17. SECTIONS OF CENTRAL SALES TAX ACT, 1956The different sections of the central sales tax Act 1956 have been given below;Section Deals withSec.1 Short title, extent and commencement .Sec.2 DefinitionsSec.3 When is a sale or purchase of goods said to take place in the course of inter-state trade or commerce.Sec.4 When is a sale or purchase of goods said to take place outside a state.Sec.5 When is a sale or purchase of goods said to take place in the course of import or export.Sec.6 Liability to tax on inter-state sales.Sec.6A Burden of proof etc., in case of transfer of goods claimed otherwise than by of sale.
  18. 18. Sec.7 Registration of dealers.Sec.8 Rates of tax on sales in the course of inter-state trade or commerce.Sec.8A Determination of turnoverSec.9 Levy and collection of tax and penalties.Sec.9A Collection of tax to be only by registeredSec.10 Penalties.Sec.10A Imposition of penalty in lieu of prosecutionSec.11 Cognizance of offences.Sec.12 Indemnity (Legal exemption from penalties)Sec.13 Power to make rules.Sec.14 Certain goods to be of special importance in inter-state trade or commerce (Declared goods)Sec.15 Restrictions and conditions in regard to tax and sale or purchase of declared goods with in a state.
  19. 19. Sec.16 Definitions.Sec.17 Company in liquidationSec.18 Liability of directors of private company in liquidation.
  20. 20. IMPORTANT DEFINITIONS1. APPROPRIATE STATE(SEC.2(A) “Appropriate State” in relation to a dealer means a state inwhich a dealer has one or more places of business. When the dealer has more than one place of business situatedin different states, each of these states will be treated as “appropriatestate”. Only an appropriate state can collect, retain and administercentral sales tax. In relation to a dealer who has one or more places of businesssituated in the same state-that state. That is, if a dealer has one ormore places of business situated in the same or a particular state thenthat state is considered, as the “Appropriate State” to him for the taxpurpose.
  21. 21. BUSINESS (SEC.2(AA)) “Business” includes (i) any trade, commerce ormanufacture or any adventure or concern in the nature of trade,commerce, or manufacture, whether or not Such trade, commerce,manufacture, adventure is carried on with a motive to make Giftor profit and whether or not any profit or gain accrues from suchtrade, commerce, manufacture, adventure or concern and (ii) Any transaction in connection with or incidental orancillary to such Trade, manufacture, adventure or concern.
  22. 22. CROSSING THE CUSTOMERS FRONTIERS OF INDIA (SEC.2(AB)) “Crossing the customs frontiers of India”means crossing the limits of the area of a customsstation in which imported goods are ordinarilykept before clearance by customs authorities. For the purpose of this clause “customsstation” and “customs authorities” shall have thesame meanings as in the customs Act, 1962.
  23. 23. DEALER (SEC.2(B)) “Dealer means any person who carries on whetherregularly or otherwise, the business of buying, sellingsupplying or distributing goods, directly or indirectly for cashor for deferred payment, or for commission, remuneration orother valuable consideration.KINDS OF DEALER:A dealer may beo a local authorityo A body corporateo A companyo Any co-operative society or other societyo Club
  24. 24. o Firmo Hindu undivided familyo Other association of personso Factoro Brokero Commission agento Del credere agento Any other mercantile agento An auctioneerDECLARED GOODS (SEC.2(C)) “ Declared goods” means goods declared u/s 14 to be ofspecial importance in inter-state trade or commerce.
  25. 25. GOODS (SEC.2(D) “Goods” include - all materials - articles - commodities - all other kinds of “movable property”MOVABLE PROPERTY: Movable property is a property which may be lifted,carried, drawn or conveyed or made to change the place orposition in one way or the other.
  26. 26. THE WORD “GOODS” DOES NOT INCLUDE: - News papers - auctionable claims - stocks - securities - moneyREGISTERED DEALER (SEC.2(F)) “Registered dealer” means a dealer who isregistered for inter-state sales tax under Section. 7 of thecentral sales tax Act, 1956.
  27. 27. SALE (SEC.2(G) ‘Sales’ means any transfer of property is goods by oneperson to another for cash or for deferred payment or for anyother valuable consideration. It includes a transfer of goods on the hire-purchase orother system of payment by installment. It does not include amortgage or hypothecation of or a charge or pledge on goods.SALE PRICE (SEC.2(H) “Sale price” means the amount payable to a dealer asconsideration for the sale of any goods less any sum allowed ascash discount according to the practice normally prevailing inthe trade, but inclusive of any sum charged for anything done bythe dealer in respect of the goods at the time of or before thedelivery there of other than the cost of freight or delivery or thecost of installation in case where such cost in separately charged.
  28. 28. REGISTRATION OF DEALER (SEC.7) REGISTRATION : A dealer, liable to pay tax under Central sales tax Act, isrequired to seek registration. Registration under Central sales tax Act isrequired even if inter-state is of a very small quantum. The central government has authorized state government toprescribe state sales tax authorities for the purpose of registration.Types of Registration: These are two types of registration. They are a) Compulsory registration b) Voluntary registration
  29. 29. Registration of dealers Voluntary CompulsoryRegistration Registration
  30. 30. COMPULSORY REGISTRATION (SEC.7(1) Compulsory registration is required if goods are soldoutside the state or if sale is made in inter-state trade orcommerce. There is no initial exemption and registration isrequired even if sales are of very small amount.VOLUNTARY REGISTRATION (SEC.7(2)) A dealer who has registered with state sales taxauthorities may voluntarily apply for registration undercentral sales tax Act even if he is not liable to pay central salestax. It is called “Voluntary registration”. It helps a dealer to make purchases in inter-state at a4% concessional rate (by submitting ‘C’ form). Voluntaryregistration is mainly useful when the dealer makes purchasein inter-state but all his sales are within the state.
  31. 31. BENEFITS OF REGISTRATIONThe following are the advantages of registrationINTER-STATE PURCHASE AT CONCESSIONAL RATE: When an unregistered dealer makes inter-statepurchase of goods for resale/manufacturing, he is required topay 10% central sales tax. But a registered dealer can makeinter-state purchases at 4% concessional rate.EXEMPTION ON SUBSEQUENT SALES: Central sales tax Act provides a single point sales tax atthe point of first inter-state sale. All subsequent sales are exemptin certain cases to avoid multiple tax incidence.
  32. 32. EFFECTS ON NON-REGISTRATION: If a dealer does not get himself registered, he would be subject to penalty under section. 10 of central sales tax Act., 1956. The defaulters is punishable. a) With simple imprisonment which extend upto 6 months or b) With fine or c) With both imprisonment and fine. In case of continuing default, he is punishable with a fine of Rs.50 per day till the default continues.
  33. 33. PROCEDURE FOR REGISTRATION The following is the procedure for registration underCentral sales tax Act, 1956. ProcedureTo be followed by the To be followed by the applicant registering authority.PROCEDURE TO BE FOLLOWED BY THE APPLICANT: A dealer, who wants to get himself registered under theCentral sales tax Act is required to take the following steps.11. Making application for registration2. 2. Supplying adequate information3. Paying fees for registration 4. Signing the application5. Furnishing security for registration
  34. 34. MAKING APPLICATION FOR REGISTRATION : Application for registration should be made by adealer who is seeking registration, in prescribed form ‘A’ asper Central sales tax (Registration and turnover) rules. Itshould be made to the notified authority.TIME LIMIT:For compulsory registration Within 30 days fromthe date when dealer becomes Liable to CST.For Voluntary registration at any time.
  35. 35. SUPPLYING ADEQUATE INFORMATION :The applicant should provide adequate information in theapplication form such as • The places of business within the state and in other states. • The date in which the business was started and the date in which the first inter-state sale took place. • Details about inter-state purchases. • Accounting period to be followed.PAYING FEES FOR REGISTRATION: In order to get registration under the Central Sales taxAct, the applicant should pay application fee of Rs. 25/- in theform of court fee stamps.
  36. 36. SIGNING THE APPLICATION:The application should be signed by the proprietor of thebusiness.If the applicant is by Application should be signed by• Partnership firm Any one of the partner• Hindu Undivided family (HUF) Karta• Association of persons Principal Officer• Company Director/Principal Officer• Government Authorized officer
  37. 37. FURNISHING SECURITY FOR REGISTRATION : Before granting registration, the registeringauthority may demand security from the applicant. Theapplicant should furnish the demanded security.FROM OF SECURITY:• Surety bonds• Government securities• Cash depositNUMBER OF REGISTRATION:• When a dealer has more than one places of business with in a state, only one registration is required.• Additional places of business are endorsed on the certificate.• If a dealer has places of business in different states, he has to obtain separate registration in each state.
  38. 38. PROCEDURE TO BE FOLLOWED BY THEREGISTERING AUTHORITY:• Verifying the application• Granting of registration• Issuing certificate of registration.VERIFYING THE APPLICATION: Before granting registration, the registration authorityshould verify whether• The application has been made as per the provisions of the Act.• The registration fee has been paid• The information given in the application are true• The demanded security has been furnished.GRANTING OF REGISTRATION: After verifying the application, the notified authoritymay grant registration. If the authority is not satisfied, theapplication may be rejected.
  39. 39. ISSUING CERTIFICATE OF REGISTRATION: When the sales tax authority is satisfied that theapplication is in conformity with the provisions of the centralsales tax Act, it shall grant certificate of registration to the dealerin form ‘B’ specifying the class or classes of goods which may bepurchased at the concessional rate of tax. If the certificate is lost, the notified authority will issue aduplicate certificate after getting Rs. 5 in the form of court feestamps.
  40. 40. CANCELLATION OF REGISTRATION: The notified authority may cancel the certificate ofregistration issued to the dealer when,• The business of the dealer comes to an end• The dealer has ceased to exit• The dealer commits default in furnishing the security as required.• The dealer fails to pay any tax or penalty payable under the Act.• The dealer misuses his registration to evade tax.• The registering authority discovers any errors in the certificate• The dealer requests the authority to cancel the certificate (after paying all dues).Before cancelling the registration, due notice must be given tothe dealer.