This document discusses sales tax and customs duty in India. It provides details on: 1) Sales tax is a tax paid to the government for the sale of certain goods and services, while use tax is paid directly by consumers. Sales tax in India is governed by the Government of India Act of 1935. 2) Customs duty is governed by the Customs Act of 1962 and is levied as a percentage on the assessed value of imported or exported goods. It has objectives like restricting imports to preserve foreign exchange and protecting domestic industry. 3) There are different types of customs duties including basic duty, countervailing duty, and protective duties. Importers are liable to pay duties once goods enter territorial waters

1. SALES TAX
AND
CUSTOMS
DUTY

2. SALES TAX
The Government of India Act, 1935 by virtue of entry 48
of the Provincial List permitted tax to be levied on sales of
goods and on advertisement.
A sales tax is a tax paid to a governing body for the sales
of
certain goods and services.
When a tax on goods or services is paid to a governing body
directly by a consumer, it is usually called a use tax .

3. Ingredients
The existence of goods in the State
at the time sale.
The manufacture has taken place in
the State
The Property in the goods is
transferred in the State for a price
There has been a payment of price
& title in the goods has been

4. Applicability of CST (Act 1956)
Tax is levied on interstate
sales
Sales tax thus collected is
retained by the collecting state
Sales tax under this scheme
is payable in the state from
where movement of goods

5. Rate of CST
Different rates are prescribed for:
Sales to Government (charged at 4% with an
issued certificate in ‘D’ form).
Sales to registered dealers (4%)of goods
included in their registration certificates (‘C’
form).
Sales of declared goods to un-registered
dealers (twice rate).
Sales of goods other than declared goods to
un-registered dealers (as applicable for sale
inside the State/10%).
Sales of goods of whose tax rate is Nil /less
than 4% for sales inside a State.
If local sales tax is Nil, CST will also be Nil, if sale is to

6. As per Section 8 of CST Act, the rates of taxes are to be decided as per rates under
Local Act.
From 1/6/2008 onwards
Local Rate of Tax Rate of tax under CST Act
Supported by ‘C’ Form
(Form D as abolished)
Without C Form
Declared goods 2% 4%
If the goods are
generally exempt under
Local Act
Exempt Exempt
1% 1%(C Form not required) 1%
4% 2% 4%
5% 2% 5%
12.5% 2% 12.5%

7. Customs Duty
Customs duty is Governed by the Customs Act, 1962.
It is levied as a percentage on the assessed value of the product that is
exported or imported from India.
Customs is an authority or agency in a country responsible for
collecting and safeguarding customs duties and for controlling the flow
of goods including animals, transports, personal effects and hazardous
items in and out of a country.

8. Objective
• To restrict imports to preserve foreign exchange.
• To protect Indian Industry from undue
competition
• To prohibit imports & exports of goods for
achieving the policy objectives of the Govt.
• To regulate exports
• To co-ordinate legal provisions with other laws
dealing with foreign exchange.

9. Exemption from Custom Duty(Sec 25)
• Goods derelict, wreck, etc. (Sec 21) brought are entitled to
be admitted duty free.
• Remission of Duty on lost, Destroyed or Abandoned
goods (Sec 23).
• Denaturing or Mutilation of goods -Sec24 permits
change in the form of goods to the other form
and charging of lower rate of duty, if goods
when imported in the condition they are in,
attract a higher rate of duty.
• Circumstances should be of an exceptional nature
• The circumstances should be stated in the exemption
order

10. Type of Customs Duties
• Basic Duty
• Countervailing Duty/Additional Customs
Duty: It is payable only if the imported
article is such as, if produced in India, its
process of production would amount to
'manufacture' as per the definition in Central
ExciseAct,1944. It is calculated on a value
base of aggregate of value of the goods
including landing charges and basic
customs duty.

11. • Protective Duties: they are intended to give
protection to indigenous industries, so as to
not make a glut (an excessive supply) of
cheap imported articles in the market making
the indigenous goods unattractive.
• Duty on bounty Fed Articles
• Export Duty
• Import Duty

12. Liability of payment of duty
• To pay import duty commences as
soon as goods enter the territorial
waters and is collected when goods
are unloaded on the land at a later
date.
• No customs duty is leviable on
goods which are in transit in the
same ships / if goods are in transit