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Central Sales Tax

This part will contain features of Central Sales Tax. Central Sales tax is an inter-state tax and are not applicable to export and import of goods. For more details on our Primer on Central Sales Tax, please click here.

Central Sales Tax (CST) is payable on inter-state sales.
Applicable Law Central Sales Tax Act, 1956
Taxable Event Sale of goods from one state to another, or their movement from one state to another (even if the buyer and seller are located in the same state).
Movement of documents of title to goods have moved from one state to another will comprise an inter-state sale.
Which entities is the tax payable by? Every ‘dealer’ who sells goods in course of inter-state trade or commerce is liable to pay tax under the CST Act.
Rate of CST  
The rate of CST depends on whether goods are sold to a registered dealer or to a non-registered dealer. CST on goods sold:
1)      to registered dealers is 2%[1],
2)      to unregistered dealers is the VAT rate in the selling state. 
CST rate on certain categories of goods (called declared goods[2]) is 5% or VAT rate in the selling state, whichever is lower.  
Note: CST is not payable on i) exports, ii) penultimate sale i.e. sale prior to actual export (if exporter issues H form to supplier), iii) sales to a dealer who has a unit in an SEZ, and iv) on goods which are exempted under the VAT law of the seller’s state and iv)  branch/stock transfer (transfer or stock transfer is transfer of goods from one branch to another branch (in a different state) of the same entity if F Form is issued by the branch office or the consignment agent receiving them from its head office.
Key Compliance Requirements
Registration Any dealer who is required to pay CST is required to be registered. Any other dealer may also voluntarily register. Application for registration must be made in Form A of the Central Sales Tax (Registration and Turnover) Rules, 1957 (CST Rules) within 30 days on which the dealer is liable to pay CST. The application must be signed and verified by the proprietor (in case of a proprietorship business),  or by a partner (in case of a partnership firm, or by a director,  managing agent or principal officer (in the case of a company).
Periodicity of filing returns under CST is similar to that under the VAT legislation of the state.
In addition, rules made by the State Governments prescribe certain filing requirements. For example requirements for registration in Tamil Nadu and Punjab are mentioned under the Central Sales Tax (Tamil Nadu) Rules, 1957 or the Central Sales Tax (Punjab) Rules, respectively.
[1] Note that the 2% rate is applicable if the purchasing dealer issues C form to selling dealer.
[2]The Central Government can declare certain goods to be of special importance for the purpose of inter-state trade or commerce pursuant to Section 14 of the Central Sales Tax Act. Cotton yarn, cereals, sugar, coal and aviation turbine fuel are some examples of declared goods under this provision.

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