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CST Act, 1956 & Entry Tax

May 2011

Draft for discussion


CST Act - At a glance
Section
 Provisions

Sec 2
 Definitions – Sale, Declared Goods, Turnover, etc

Sec 3
 When is a sale/ purchase deemed to be an inter-state sale/ purchase

Sec 4
 When is a sale/ purchase said to take place outside a State

Sec 5
 When is a sale/ purchase said to take place in the course of export/ import & high seas sale

Sec 6(2)
 In-transit sales

Sec 6A
 Inter-state movement of goods otherwise than by way of sale (eg. branch transfer)

Sec 7
 Registration

Sec 8
 Rates of tax, State specific exemptions

Sec 8 -A
 Determination of turnover

Sec 9(1)
 Levy and collection of Tax and Interest Payable

Sec 10
 Penalities

Draft for discussion


PwC Slide 2
Definations
“Sale” with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to

another for cash or for deferred payment or for any other valuable consideration, and includes ,-
(i)
 a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other
valuable consideration;
 (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works
contract;

(iii) a delivery of goods on hire-purchase or any system of payment by installments;
 (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred
payment or other valuable consideration;
 (v) the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration;
(vi)
 a supply, by way of or as a part of any service or in any other manner whatsoever, of goods, being food or any other
article for human consumption or any drink(whether or not intoxicating), where such supply or service, is for cash, deferred
payment or other valuable consideration,
 but does not include a mortgage or hypothecation of or a charge or pledge on goods.

“Declared goods” means goods declared under section 14 to be of special importance in inter-State trade or commerce

“Turnover” used in relation to any dealer liable to tax under the CST Act means the aggregate of the sale prices received and

receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed
period and determined in accordance with the provisions of this Act and the rules made there under.

PwC Slide 3
Sale or purchase of goods in the course of inter-State trade
or commerce (Section 3)

 A sale or purchase of goods shall be deemed to take place in the course


of inter-State trade or commerce if the sale or purchase-
 occasions the movement of goods from one State to another;
or
is effected by a transfer of documents of title to the goods
during their movement from one State to another.
 Seller Movement of Buyer
Goods
Purchase of State A Sale of State B
Goods Goods

PwC Slide 4
Sale or purchase of goods outside a State (Sec 4)

 (1) Subject to the provisions contained in section 3, when a sale or


purchase of goods is determined in accordance with sub-section (2)
to take place inside a State, such sale or purchase shall be deemed to
have taken place outside all other States.
 (2) A sale or purchase of goods shall be deemed to take place inside a
State, if the goods are within the State-
in the case of specific or ascertained goods, at the time of the contract
of sale is made; and
in the case of unascertained or future goods, at the time of their
appropriation to the contract of sale by the seller or by the buyer,
whether assent of the other party is prior or subsequent to such
appropriation.

PwC Slide 5
Sale in the course of import and export (Sec 5)
 Import
 Sale in the course of import is exempt from CST. For this purpose ‘sale in the course of import’ is defined
as:
• A sale which occasions movement of goods from outside India to a place in India; or

• A sale is effected by transfer of documents to title of the goods before the goods have crossed the customs frontiers of India
 Export
 Sale in the course of export is exempt from CST. For this purpose ‘sale in the course of export’ is defined as:
• A sale which occasions movement of goods from India to a place outside India; or

• A sale is effected by transfer of documents to title of the goods after the goods have crossed the customs frontiers of India
 Penultimate sale in the course of exports to an exporter also exempt from CST. The conditions to be
satisfied for this purpose are as follows:
• Sale should be for complying with an existing export order

• Same goods which are sold in penultimate sale should be exported


 The principles relating to ‘occasions movement of goods’ and ‘transfer of documents to title’ discussed in the
case of inter state sale would equally apply to sale in the course of imports


Slide 6
Sale in course of import – basic scenarios
Seller A
UK

Import of Goods

Importer/ Seller B
India

Sale of Sale of
Goods Goods

Buyer C Buyer D

•Import
•Import of
of goods
goods by
by B
B in
in India
India from
from AA in
in UK
UK
•Further
•Further sale
sale of
of imported
imported goods
goods to
to buyers
buyers in
in India
India for
for monetary
monetary consideration
consideration
•No
•No VAT/
VAT/ CST
CST implications
implications on
on goods
goods imported
imported from
from UK
UK
•VAT/
•VAT/ CST
CST applicable
applicable on
on domestic
domestic sales
sales to
to C
C&& D,
D, depending
depending upon
upon the
the movement
movement of
of goods
goods

Slide 7
Sale in course of import – basic scenarios
Seller X
UK

Import of Goods

Importer/ Seller Y
India

Sale of
Goods
Buyer Z

•Contract
•Contract of
of sale
sale between
between Y
Y and
and Z
Z in
in India
India to
to sell
sell goods
goods to
to be
be purchased
purchased from
from UK
UK for
for aa
monetary
monetary consideration
consideration
•Goods
•Goods imported
imported from
from UK
UK for
for such
such contract
contract of
of sale
sale
•No
•No VAT/
VAT/ CST
CST implications
implications on
on import
import of
of goods
goods byby Y
Y from
from UK
UK
•Domestic
•Domestic Sale
Sale between
between YY and
and ZZ deemed
deemed to to be
be sale
sale in
in the
the course
course of
of import
import (Refer
(Refer Section
Section
5(2) of CST Act)
5(2) of CST Act)
•Such
•Such sale
sale is
is also
also termed
termed as
as sale
sale occasioning
occasioning import
import

Slide 8
Sale in course of import – basic scenarios
Seller X
UK

Movement of
Goods
Importer/ Seller Y
Endorsement of document
of title of goods in favour of India
Buyer
Sale of
Goods
Buyer Z

 Contract of sale of goods between X in UK and Y in India for a monetary consideration


 Contract of sale of such imported goods between Y and Z
 Transfer of document of title of goods in favour of Z before goods have crossed the custom frontiers of
India
 No VAT/ CST implications on import of goods from UK
 Sale between Y and Z deemed to be sale in the course of import (Refer Section 5(2) of CST Act)
 Such sale is also termed as High Sea Sales

Slide 9
Sale in course of export – basic scenarios
Buyer X
UK

Export of
Goods
Exporter Y
India

Sale of
Goods
Seller Z

 Contract of sale (export) of goods between X in UK and Y in India for a monetary consideration
 Purchase of goods by Y from Z for the purpose of export agreement for a monetary consideration
 Sale of goods between Z and Y deemed to be sale in the course of export (Refer Section 5(3) of the CST
Act)
 Exporter Y to issue Form H to seller Z for such penultimate sale

Slide 10
Liability to tax on inter-State sales (Sec 6)

 A dealer shall be liable to pay tax under this Act on a sale of any goods
effected by him, in the course of inter-State trade or commerce
notwithstanding that no tax would have been leviable (whether on
the seller or the purchaser) under the sales tax law of the appropriate
State if that sale had taken place inside that State

PwC Slide 11
Transfer of goods otherwise than by way of
sale( Sec 6-A)
Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the

movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to
any other place of his business or to his agent or principal, as the case may be and not by reason of sale, the burden
of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may
furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for
sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business,
or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained
from the prescribed authority, along with the evidence of dispatch of such goods 26 [and if the dealer fails to furnish
such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been
occasioned as a result of sale.]

Branch X Branch Y Company Y


State A State B State B
Movement of Sale of
Goods Goods

Conditions for issue of Form F

PwC Slide 12
Statutory forms under CST Act
 Forms:

Form C To make interstate purchases of goods @ 2% for specified
purposes by registered dealers

To make Interstate transfer of goods between branches.


Form F Receiving branch to issue the form, else treated as
Interstate Sale

To make purchases of Goods for exporting in pursuance of


Form H a identified contract (penultimate sale). Final exporter to
issue the form.

Form E - 1 / To make interstate purchase by transfer of documents to


II title during the movement of goods

Form I To make purchases without CST by Units located in SEZ &


SEZ developers. Purchaser to issue the form

PwC Slide 13
Statutory forms under CST Act
 f
Form J To make purchases without tax by Diplomats

Forms
Forms toto be
be submitted
submitted with
with the
the department
department within
within three
three months
months from
from the
the end
end
of the respective Quarter.
of the respective Quarter.
§§

PwC Slide 14
Registration (Sec 7)
Compulsory Voluntary

Every dealer liable to pay Central Sales Tax has to register himself with sales tax

authority.
Registration under CST is required only when inter-state sale is

a.To Government OR
b.To Registered dealer
There is no Compulsory Registration required if interstate sale is to unregistered dealer

or to a registered dealer in respect of goods for which he is not registered.


A dealer may voluntarily apply for registration under CST Act so as to avail the

concessional tax rates on inter state trades.


PwC Slide 15
Rates of tax, State specific exemptions (Sec 8)


The Rate of tax on interstate trade or commerce against the declaration forms is at the
rate of 2 %(declared goods 5%)

The sale of goods in the course of inter state trade or commerce without any declaration
forms shall be at the rate applicable to the sale or purchase of such goods inside
the appropriate State under the sales tax law of that State

All goods purchased by Registered Dealer are not eligible for concessional rate. He is
eligible to get concessional rate only for those goods which are contained in his
Registration Certificate.

PwC Slide 16
Determination of Turnover (Sec 8-A)

In determining turnover,decuctionof sales tax should be made from the aggregate of sale

price. The total of ‘sale price’ of all Inter State sales effected during the prescribed
period i.e monthly , quarterly as the case may be, less the Central Sales Tax payable is
the ‘Taxable Turnover’ of dealer for that period
i.e if aggregate of sale price is ‘S’ and the rate of tax is ‘R’ , then turnover and tax payable

will be calculated as follows:


Turnover= 100*S/100*R

Taxpayable= S*R/100+R

PwC Slide 17
Levy and collection of tax and Interest Payable
(Sec 9)
The tax payable by any dealer under the CST Act on sales of goods effected in the course
of inter- State trade or commerce, shall be levied by the Government of India and
the tax so levied shall be collected by the Government in the State from which the
movement of goods commenced.
As per Sec 9(2-b) if the tax payable by any dealer under CST Act is not paid in time, the
dealer shall be liable to pay interest for delayed payment.
As per Section 9-A tax cannot be collected by any Unregistered dealer

PwC Slide 18
Penalities (Sec 10)
Penalty will charged if any person

Fails to furnish proper document of proof for sale of goods otherwise than by way of sale
or interstate trade on concessional rate of tax
Fails to get himself registered as required by Section 7
Not being registered dealer, falsely represents when purchasing goods in the course of
inter State trade or commerce that he is a registered dealer
Collect any amount by way of tax in contravention of the provisions contained in Section
9-A
Penalty shall be imprisonment which may extend to six months, or with fine, or both.

If the offence is a continuing offence the penalty will be charged with a daily fine which

may extend to Rs.50 for everyday during which the offence continues.

PwC Slide 19
 www.pwc.com

Entry Tax

Provisions and applicability


across India
Agenda/Contents

 Discussion on

§ Brief provisions of Entry Tax in State of Karnataka


§ Applicability of Entry Tax in different States


§
§ Levy of Entry Tax under different States
§
§ Credit of Entry Tax under different States

PwC Slide 21
Brief provisions of Entry Tax in State of
Karnataka…
§ Section 3(1) of KTEG provides that entry tax shall be levied and collected on entry of
any goods specified in the FIRST SCHEDULE to this Act, into the local area
for consumption, use or sale therein at such rates not exceeding 5% of the value
of goods as may be specified and different rates may be specified in respect of
different goods or different classes of goods or different local areas.
§ Section 2(5) of KTEG defines local area as an area within the limits of a city under
 (i) Karnataka Muncipal Corporations Act, 1976 (Karnataka Act no.14 of 1977),
 (ii) a Municipality under the Karnataka Municipalities Act,1964 (Karnataka Act
no.22 of 1964),
 (iii) a Notified Area Committee
 (iv) a Town Board
 (v) a Sanitary Board or a Cantonment Board constituted or continued under any
law for the time being in force and
 (vi) a Mandal under the Karnataka Zilla Parishads, Taluk Panchayat Samithis,
Mandal Panchayats and Nyaya Panchayats Act, 1983 (Karnataka Act 20 of 1985) and
Panchayat area under the Karnataka Panchayat Raj Act, 1993 (Karnataka Act 14 of
1993).

Presentation On Entry Tax


Slide 22
Brief provisions of Entry Tax in State of
Karnataka
§ Threshold limit for a manufacturer is rupees two lacs per annum
§ Entry tax is a one time tax and hence subsequent entry in any other local area is exempt
– Section 3(3) of KTEG – provided a declaration is obtained from the selling dealer.
§ Levy is on entry of goods and not on sale i.e. stock transfer would be subject to entry
tax.
§ However, entry tax shall not be levied on the goods returned within a period of 6
months from the date of delivery of the goods.
§ Any dealer registered under the local VAT Act does not require a separate registration
under this Act.
Conclusion

When – Tax becomes due on the date when the goods entry into the local area. Payment

is deferred till 20th of the subsequent month. (Section 7(1) of KTEG)


By Whom – The levy of entry tax is on the dealer who brings or causes to be brought

into a local area the goods whether on his own account or on account of his principal or
any other person or who takes delivery or is entitled to take delivery of such goods on
its entry into a local area.

Presentation On Entry Tax


Slide 23
APPLICABILITY OF ENTRY TAX IN DIFFERENT
STATES…
Sl. No State /Union Territory Whether Date Applicable From SL. STATE /UNION Whether Date Applicable From
Applicable or Not NO TERRITORY Applicable or
Not

1 Andaman and NO NA 11 Goa YES 1st September, 2000


Nicobar Island

2 Andhra Pradesh YES 2nd May, 2001 12 Gujarat YES 1st September, 2001

3 Arunachal Pradesh YES 1st April, 2005 as per 13 Haryana YES 5th May, 2000
section 3(2)(b) of AP
VAT Act
4 Assam YES 1st October, 2001 14 Himachal Pradesh NO 7th April 2010

5 Bihar YES 25th February,1993 15 Jammu & Kashmir YES 3rd April, 2000

6 Chandigarh NO NA 16 Jharkhand YES 1st April, 2006

7 Chattisgarh YES 1st September, 1976 17 Karnataka YES 1st October, 1980

8 Dadar and Nagar NO NA


18 Kerala YES 9th June, 1994
Haveli
9 Daman Diu NO NA
19 Lakshadweep NO NA

10 Delhi NO NA
20 Madhya Pradesh YES 1st September, 1976

Presentation On Entry Tax Slide 24


APPLICABILITY OF ENTRY TAX IN DIFFERENT
STATES
Sl. NoState /Union Whether Date Applicable From SL. NO STATE /UNION Whether Date Applicable From
Territory Applicable or TERRITORY Applicable or
Not Not

21 Maharashtra YES 1st October, 2002 29 Rajasthan YES 14th May, 1999

22 Manipur NO NA 30 Sikkim NO NA

23 Meghalaya NO NA
31 Tamil Nadu YES 2001

24 Mizoram NO NA
32 Tripura NO NA

25 Nagaland NO NA
33 Uttar Pradesh YES 1st November, 1999
26 Orissa YES 1st December, 1999
34 Uttaranchal YES 1st November, 1999
27 Pondicherry NO NA

35 West Bengal YES 1st August, 2001


28 Punjab YES 1999

Presentation On Entry Tax


Slide 25
LEVY OF ENTRY TAX UNDER DIFFERENT STATES…
Sl. No State /Union Territory * Condition 1 * Condition 2 * Condition 3

1 Andhra Pradesh Sale Use Consumption

2 Arunachal Pradesh Sale Use Consumption

3 Assam Sale Use Consumption

4 Bihar Sale Use Consumption

5 Chattisgarh Sale Use Consumption

6 Goa Sale Use Consumption

7 Gujarat Sale Use Consumption

8 Haryana Sale Use Consumption

9 Jammu and Kashmir Sale Use Consumption

10 Jharkhand Sale Use Consumption

*Any one condition needs to be satisfied by the importer

Presentation On Entry Tax


Slide 26
LEVY OF ENTRY TAX UNDER DIFFERENT STATES
Sl. No State /Union Territory * Condition 1 * Condition 2 * Condition 3

11 Karnataka Sale Use Consumption

12 Kerala Sale Use Consumption

13 Madhya Pradesh Sale Use Consumption

14 Maharashtra Sale Use Consumption

15 Orissa Sale Use Consumption

16 Punjab Sale Use Consumption

17 Rajasthan Sale Use Consumption

18 Tamil Nadu Sale Use Consumption

19 Uttar Pradesh Sale Use Consumption

20 Uttaranchal Sale Use Consumption

21 West Bengal NA Use Consumption

*Any one condition needs to be satisfied by the importer


Presentation On Entry Tax
Slide 27
IS ENTRY TAX PAID VATABLE…?
The following are the States where Entry Tax Paid is available, to be set -off against

the Output VAT payable.


§BIHAR
§GOA
§GUJARAT
§MADHYA PRADESH
§MAHARSHTRA
§JHARKHAND
§ORISSA

The following are the States where Entry Tax Paid is not available, to be set
-off against the Output VAT payable.
§CHATTISGARH
§JAMMU AND KASHMIR
§KARNATAKA
§UTTARANCHAL
§PUNJAB

Presentation On Entry Tax


Slide 28
Thank You

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refers to PricewaterhouseCoopers Private Limited which is a member firm of
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entity.

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