The document provides an introduction to the Central Sales Tax (CST) Act of 1956 in India. Some key points: - CST is levied by the central government but administered and collected by state governments. It is collected in the state from which goods begin inter-state movement. - The Act divides goods into declared goods and other goods, with declared goods subject to a maximum tax rate of 4% that can only be levied once. Other goods face a tax rate of 10% or the state rate, whichever is higher. - Registered dealers must file CST returns with the notified authority in their state. The authority assesses tax liability and orders refunds or penalties. Concess

1. INTRODUCTIONTO CST ACT,1956INTRODUCTIONTO CST ACT,1956INTRODUCTIONTO CST ACT,1956INTRODUCTIONTO CST ACT,1956
Tax is levied by Central Government but is administered and
collected by State Government.
Tax is collected from the State from which the movement of
goods start.
CST is applicable when there is a registered dealer and sale is in
course of inter-state trade or commerce.
CST is levied on specified rate on turnover of goods which is
determined on the basis of sale price,
Registered dealer deposit the CST return to the notified authority
in appropriate state in which he is registered.
Notified authority assesses the liability of registered dealer and
order refund and penalty accordingly.

2. FEATURES OF CST,1956FEATURES OF CST,1956
The salient features of CST Act are as under:-
(1) SCOPE: CST extends to the whole of India.
(2) LEVEID BY CENTRAL GOVERNMENT:CST is levied by central govt.
but it is collected by the state govt.from where the goods have been sold. IN
case of UT, tax is deposited in the consolidated fund of India.
(3) NO EXEMPTION LIMIT: CST is levied on the turnover made in course of
inter-state sale.There is no limit for turnover,as it is normally available in case
of State SalesTax.
(4)ADMINISTERED BY STATE GOVT.:The CST rules have been framed by
the central govt.but State governments are allowed to adopt such rules as
they deem fit.The rules regarding return, payment of tax, appeal etc. are not
given in CST as such the rules followed by States in respect to their Sales
Tax Laws, are followed for the purpose of CST Act.
(5) CONCESSIONAL RATES: Concessional rate(2%) of CST is applicable if
(a) declaration in form C is issued by purchaser who is a registered dealer;
(b) Certificate in form D is issued by govt.if buyer is govt.

3. (6) SALES ARE EXEMPT: Certain sales are exempt under CST
Act if
(a) Sale is within the state as it subject matter of General Sales
Tax of State.
(b) Subsequent Sale during Inter State movement by transfer of
documents to registered dealer/govt.
(c) Sales or purchase of goods in the course of import or
export .
(7) CATEGORIES OF GOODS: CST Act has divided Goods into
two categories:
(a) Declared Goods or goods of special importance:
States cannot levy tax on these ¶declared goods· more than 4% and
not more than once.
(b) Other Goods:These goods are subject to CST @10% or
at the rate applicable to such goods inside the appropriate state,
whichever is higher.

4. NEXUS THEORYNEXUS THEORY
Nexus means connection or link.
With regard to taxation matters (specially sales tax), it was well accepted theory
that in case, any State has a connection with the sale transaction (say seller or buyer
resides in the state), the state is competent to impose tax on such transaction.
Meaning thereby, that in case of inter state sale, both states (the state where
seller is situated and the state where buyer is situated) used to levy tax.
Thus, each state having a territorial nexus with the sale, used to levy tax, with the
result that the same transaction had to suffer tax in different states with the
associated hardship to trade, resulting into higher burden of tax on the ultimate
consumers.
The Law makers were aware of this problem.Therefore, they introduced
Entry 92A and amendedArticle 286 of the Constitution of India, imposing
restrictions on State power to levy tax, on the following transactions:
Inter state sale/ purchase
Export sale/purchase
Import sale/purchase
Sale outside the state (means local sale inside some other state
Thus, nexus theory has lost its relevance after amendments in the
Constitution f India.

5. Registration Procedure UnderRegistration Procedure Under
central sales act (section 7)central sales act (section 7)
There are two types of registration :-
Compulsory registration
‡ Section 7(1)
Voluntary registration
‡ Section7(2)

6. Compulsory registrationCompulsory registration
under section 6 , dealer is liable to pay tax
in case he is performing an inter state sale.
Section 7(1) , every dealer who is liable to
pay tax must apply for registration . He has
to register himself with the state sales tax
authorities under the central sales act, 1956
It is generally small amount
The dealer can·t have exemption from
registration

7. Voluntary registrationVoluntary registration
When a dealer is registered under state sales tax
authorities.
He may voluntary want to register himself under
central sales tax act (authorities).
Dealer may register even though he is not liable to
pay tax.
Generally , this provision is useful incase a dealer
purchases interstate sale and perform sales within the
state.
So that , he may purchase at concessional rates of tax
against Form C.

8. Purchases
(interstate)
Sales
(within
state)
Voluntary
registration
(to purchase at
concessional
rates)

9. Procedure for registrationProcedure for registration
Application for registration is to be made in prescribed
Form A with prescribed fees as per central sales tax
(registration and turnover) rules within 30 days from date
when dealer becomes liable to CST.
APPLIACTION
IN
PRESCRIBED
FORM A
Prescribed fees
Within 30 days
when dealer
liable

10. The Application should be duly signed and verified as
provided under law following can sign the application :
Type of dealer Duly signed by
Incase of proprietorship firm the proprietor
In case of partnership firm the partner
In case of HUF the Karta/manager
In case of company the director or principal officer
authorized
In case of government Duly authorized officer

11. Main contents of application formMain contents of application form
1) Name of the business
2) Place of the business
3) Address
4) Other places of business inside the state and outside
the state
5) Registration numbers of above
If dealer has places of business in different
states
he has to obtain separate registration in each
state
If dealer has different places of business in
same state
He has to register under one state with
additional places of business on the certificate

12. Security from dealerSecurity from dealer
As per provision 7 , the registration authority may ask for proper
security from the applicant for the realization of tax due and proper
custody use of Forms (C,E1 ,E2, FH etc ) which are supplied by the
sale tax authorities for use of dealer
Additional security can also be demanded
The security should not be more than tax estimated tax liability
Demanding of security is not essential
The security can refunded partially or wholly such security is not
required
Security furnished by dealer is in form of surety bond
Surety become insolvent or dies, the dealer should within thirty days of
occurrence
Informing the authority who is granting the certificate of registration
Within ninety days of occurrence , must furnish a fresh surety bond or
other security for the same amount of the bond as in prescribed manner.

13. Forfeiture of securityForfeiture of security
The authority granting
the certificate of
registration may by
ordered for some good
or sufficient cause ,
forfeit the whole or
any part of the security
furnished by a dealer
For realizing any
amount of tax or
penalty payable by
the dealer
If the dealer is found
to have misused any of
the Forms or failed to
have kept them in
proper custody
This order for forfeiture can be issued only after giving
an opportunity of personal hearing to the dealer .

14. Order demanding securityOrder demanding security
Additional
demanding security
is appealable
Appeal to be filled
With in 30 days of
service of the
order
To be filled
prescribed Form
and with prescribed
authority
The appellate order
shall be final

15. Certificate of registrationCertificate of registration
Dealer will be issued a certificate of registration in form ¶B·
A copy of certificate issued for every place of business in the state
Certificate of registration must be kept in principal place of
business and copy of the certificates should be kept at each
additional place of business
The certificate can be amended for change name place ,nature
But CoR is non- transferable
In case of lost or destroy of certificate , duplicate is issued for fees
charge Rs. 5
In case of rejection of the certificate by sale tax authority , the
reasons must be recorded in writing .
However , before rejection , personal hearing should be given to
applicant and opportunity to correct or complete required
particulars should be given

16. Effective date of registrationEffective date of registration
The CST Act or Rules do not contain any provision
indicating the date from which registration certificate to be
effective.
However court judgment clarified that , the date of
registration is effective from the date which application for
registration is made , even if registration is granted later.
In fact , registration is made after the first inter sate sales
is effected , the registration is effective from the date first
interstate sale i.e. earlier than the date of application
E.g. :- thus all sales / purchases made when the
application is pending are to be treated as sales made by a
registered dealer

17. Cancellation of registrationCancellation of registration
A ) CANCELLATIONATTHE INITIATIVE OFTHE
ASSESSEEE:
A dealer may apply for cancellation of registration within 6 months
before the year ends if he is not liable to pay any tax
The cancellation of registration from the end of year and can·t be in the
middle of year
B ) SUO MOTTO CANCELLATION BYTHE
DEPARTMENT
Sales tax authorities may cancel registration after giving notice if dealer
ceased to exist
Has ceased to carry on the business
Has failed to furnish additional security
Has failed to inform the death of surety
Failed to pay tax or penalty payable under the act
Obtained voluntary registration ceases to sales inside the state or
For any other sufficient reason

18. Offences and penalties under CST ActOffences and penalties under CST Act
Central sales tax act provides for penalties and
punishments in respect of certain offences
Further, in respect of offences not provided in the
CST act , provisions ofVAT law of the state where
the dealer is carrying on business are applicable
CST Act provides for three types of punishments :
(a)Imprisonment fine
(b)Compounding of offences
(c)Penalty

19. Section 10 of CST Act provides that punishment up to six
months of simple imprisonment or with fine or both can be
imposed for following offences under CST Act
Knowingly giving declaration in form C , E-I ,E-II ,H,I or J which
he knows , or has reason to believe , to be false
Not regarding under CST Act when required to be registered
False representation by a registered dealer that the goods being
purchased are covered under his certificate of registration for
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 concessional rate
Having in possession C forms which are not obtained as per
provisions of the Act
Collecting any amount representing as Central Sales Tax by an
un-registered dealer or by a registered dealer in contravention of
provisions of the Act.

20. Compounding of offencesCompounding of offences
The offences can be compounded by
SalesTax Authorities . Such compounding
can be done in respect of any offence
enumerated above , if provisions are
available in state laws
In that case , the proceedings in the
court of law will not be launched . Means ,
no imprisonment /fine.

21. Further section 10 A of CST ACT authorities imposition of
penalty in lieu of punishment in respect of offence
regarding
(a)Obtaining goods not included in registration certificate
(b)Purchasing goods representing that he is registered dealer , tough
he is not
(c)Using goods for purposes different than the proposes for which
purchased
The penalty can be up to one and half time the tax which would
have be
payable.
The penalty can be imposed by sales tax authority having
jurisdiction over the dealer ¶s place of business . Once penalty is
imposed , prosecution (for imprisonment/ fine) for same offence
shall not be launched
Besides above , state laws provide for penalties for other offences
like late payment or non- payment of tax , false declaration of
turnover , non- filling or late filling of returns etc..

22. SaleTax AuthoritiesSaleTax Authorities
Excise andTaxation
Commissioner
Joint Excise andTaxation
Commissioner
Deputy Excise andTaxation
Commissioner
Assistant Excise andTaxation
Commissioner
Excise andTaxation Officer
Excise andTaxation
Inspector

23. Power to demand production of Account
Books
Power to seize the Books
Power to search
Power to seize goods
Reassessment
Power to call for information from
banking companies
POWERS AND FUNCTIONSPOWERS AND FUNCTIONS
OF ASSESSING AUTHORITIESOF ASSESSING AUTHORITIES