REGISTRATION OF

DEALERS
(SECTION 7)
 INTRODUCTION
SECTION 2(b) OF CENTRAL SALES TAX,1956 defines DEALER as:

“ Dealer means any person who carries on (whether

regularly or otherwise) the business of buying, selling, supplying or
distributing goods, directly or indirectly, for cash or for deferred
payment, or for commission, remuneration or other valuable
consideration.”

Every dealer is liable to pay tax has to register himself with sales
tax authorities. The procedure for registration includes the law
relating to submission of application, issue of certificates, demand of
securities, cancellation of certificate etc.
 TYPES OF
REGISTRATION

COMPULSOR
VOLUNTARY
Y
REGISTRATI
REGISTRATI
ON
ON
 COMPULSORY REGISTRATION
There is no initial exemption and registration is required even if
sales are of very small amount. Every dealer is liable to pay tax
when he effects an inter-state sale. And to pay tax shall apply for
registration. Registration has to be done with states sales tax
authorities.

VOLUNTARY REGISTRATION
A dealer registered with states sales tax authorities may
voluntarily apply for registration under CST though even if he is not
liable to pay central sales tax. This provision is mainly useful when
the dealer makes purchases in inter-state but all his sales are within
the state. But this way, he can make purchases in inter-state at
concessional rate of tax against ‘form C’.
 APPLICATION
FOR
APPLICATION REGISTRATION
DEEMED TO
FOR
BE LIABLE
CANCELLATION

CANCELLATIO CONDITION
N OF FOR ISSUE OF
CERTIFICATE CERTIFICATE

PROVISIONS
OF SECTION 7
AMENDMENT GRANT OF
IN CERTIFICATE OF
CERTIFICATE REGISTRATION

DEMAND OF
SURETY SECURITY OR
BOND ADDITIONAL
MAXIMUM SECURITY
AMOUNT OF
SECURITY
•APPLICATION FOR REGISTRATION –
Every dealer liable to pay tax under this act shall, within such time
as may be prescribed for the purpose, make an application for
registration under this act to such authority in the appropriate state
as the central government may specify.

•DEEMED TO BE LIABLE –
A dealer shall be deemed to be liable to pay tax under the sale tax
law of the appropriate state not withstanding that under such law a
sale or purchase made by him is exempt from tax.

•CONDITION FOR ISSUE OF CERTIFICATE –

Where it appears necessary to the authority to whom an
application is made, to do for the proper realization of the tax, he
may impose as a condition for the issue of certificate of registration
a requirement that the dealer shall furnish in the prescribed manner
and within such time as may be specified in the written order such
security as may be so specified.
•GRANT OF A CERTIFICATE OF
REGISTRATION –
If the authority to whom an application is made is satisfied that
the application is in conformity with the provisions of this act,
he shall register the application and grant to him a certificate of
registration in the prescribed form which shall specify the class
or classes of goods.

•DEMAND OF SECURITY OR ADDITIONAL

SECURITY –
Where it appears necessary to the authority granting a
certificate of registration to do for the proper realization of tax
payable, he may, any time while such certificate is in force,
require the dealer, to whom the certificate has been granted, to
furnish in the prescribed manner such security, or such
additional security, as may be specified in the order.
•MAXIMUM AMOUNT OF SECURITY –
The amount of security and the amount of additional security shall
not exceed :
1. In case of non-registered dealer – A sum equal to tax payable
under the act on turnover of dealer.
2. In case of registered dealer - A sum equal to tax payable under
the act on turnover of dealer as estimated by the authority under
the act.

• SURETY BOND –
Where the security furnished by a dealer in in the form a surety
bond and the surety becomes insolvent or dies, the dealer shall,
within thirty days of the occurrence of any of such aforesaid
events, inform the authority granting the certification of
registration and shall within 90 days of such occurrence furnish a
fresh surety bonds.
•AMENDMENT IN CERTIFICATE -
A certificate of registration may either on the application of the
dealer to whom it has been granted or where no such application
has been made, be amended by the authority granting it if he is
satisfied that by reason of the registered dealer.

•CANCELLATION OF THE CERTIFICATE –

A certificate of registration granted may be cancelled by the
authority granting it where he is satisfied, after due notice to the
dealer to whom it has been granted, that he has ceased to carry on
business or has ceased to exist to comply with an order under
section 3.
 CANCELLATION
OF
REGISTRATION

BY AUTHORITY
(after giving opportunity of BY DEALER
being heard to dealer)
(must apply 6 months before the
When the dealer: en of the year)
1.Has ceased to exist
2.Has stopped business When the dealer:
3.Has failed to comply with order 1.Has stopped business
(s) under section 7
2.Is not liable to pay tax
4.Has failed to pay tax or penalty
3.Any other sufficient reason
5.Any other sufficient reason
•APPLICATION FOR CANCELLATION –

A registered dealer may apply in the prescribed manner not later

than six months before the end of a year to the authority which
granted his certificate of registration for the cancellation of such
registration, and the authority shall, unless the dealer is liable to
pay tax under this act, cancel the registration accordingly, and
where he does so, the cancellation shall take effect from the end of
the year.
 BENEFITS OF REGISTRATION TO THE
PURCHASING DEALER
Registration under CST Act, 1956 is beneficial to a dealer as he can
buy the goods against “C” Form. The dealer, would be entitled to
pay tax on sales price of goods sold at concessional rate of tax.

For example, Bhisam has a factory in Shimla and sells all goods
produced within Himachal Pradesh. He however buys from Punjab
some raw materials required for the manufacture of goods in his
factory. In this case, although Bhisam is not obliged to get himself
registered, nevertheless it would be advantageous for him to do so,
since the raw material that he purchased from Punjab would be
charged to tax only at 2 %.
 BENEFITS OF REGISTRATION TO
SELLING DEALER
It is compulsory for selling dealer who makes inter – state sale to
get himself registered. There is only indirect benefit to selling
dealer.

The indirect benefits are as under:

He can recover C.S.T payable by him from the purchasing dealer,

He can make the subsequent sale of goods purchased by him

which will be exempt from CST, subject to following :
a)The sale is effected by transfer of documents of goods while
goods are in movement from one state to another.
b)The transferee is a registered dealer.

He can send the goods on consignment basis to branches/ offices

outside the state on form ‘F’, without payment of tax.
 CERTIFICATE OF REGISTRATION
(IMPORTANT PROVISIONS)

CERTIFICATE TO
REMEDY FOR
BE KEPT AT THE REGISTRATION
ERRORS IN
PRINCIPAL CERTIFICATE NOT
RESIGTRATION
PLACE OF TRANSFERABLE
CERTIFICATE
BUSINESS
•REMEDY FOR ERRORS IN REGISTRATION
CERTIFICATE
Where it is found subsequently that the certificate of registration
was not in accordance with the actual orders passed by the
registering authority then such an error which is apparent from
record can be rectified within a period of two years. The authorities
who refuse to rectify the mistake can be compelled by appropriate
writ to correct such mistake or error retrospectively.

•CERTIFICATE TO BE KEPT AT THE PRINCIPAL

PLACE OF BUSINESS
Rule 6 provides that the certificate of registration shall be kept at
the principal place of business and the copy of such certificate is to
be kept at the additional places of business situated in the state.
•REGISTRATION CERTIFICATE NOT
TRANSFERABLE

When a certificate of registration is issued, under sec. 7(1) or 7(2)

to a dealer, then it is issued to a dealer who has applied for
such certificate in form ‘A’. The registration certificate is non –
transferable. In case of transfer of business, the transferee
steps in to the shoes of the transferor and all the liability and
rights of the are available to the transferee even then the
transferee has to apply for fresh certificate of registration.
 (OTHER IMPORTANT PROVISIONS)

APPLICATION
PRESCRIBED SEPARATE TIME LIMIT TO
TO BE MADE
LIMIT OF REGISTRATION APPLY FOR FEE
TO NOTIFIED
TURNOVER IN EACH STATE REGISTRATION
AUTHORITY

POWER TO CANCELLATION
SCOPE AND SOU-MOTU
REJECT OF CERTIFICATE
NATURE OF AMENDMENT
APPLICATION OF
ENQUIRY OF THE
FOR REGISTRATION
CERTIFICATE
REGISTRATION

CANCELLATION
OPPORTUNITY
OF
TO SHOW-
REGISTRATION
CAUSE
PROSPECTIVELY
•PRESCRIBED LIMIT OF TURNOVER
State sales tax laws prescribe turn over limit for liability to tax for
obtaining the registration certificate. Under the local sales tax acts,
the dealers are classified as importers manufacturers and resellers.
CST act 1956 prescribes no minimum taxable quantum. In case of
importers and manufacturers the turn over limit prescribed is much
lower than the prescribed limit for resellers.

•SEPARATE REGISTRATION IN EACH STATE

A dealer who has several branches in the state has to apply and
get himself registered by making a single application with the
appropriate registering authority for its principle business place
only. If the dealer has branches in other states, the dealer has to
get itself registered in a state by making an application in form A to
the registering authority under whose jurisdiction such place of
business is situated.
•TIME LIMIT TO APPLY FOR REGISTRATION.
The time limit for making an application for registration has been
provided in rules 4(1) and 4(2) of the CST rules, 1957. Rule 4(1)
provides that an application for registration under section 7(1) by
any person liable to pay tax under this act shall be made not later
than 30 days from the date of on which he become liable to pay tax.
Rule 4(2) provides that an application for registration under sub
section (2) of section 7 may be made at any time after the
commencement of CST act 1956.

•FEE
Rule 4(3) of central sales tax (registration and turnover) rules, 1957,
provides that a fee of Rs. 25 shall be repayable in respect of every
application for registration under section 7(1) or 7(2). Such fee is
payable in the form of court fee stamps affixed to the application
for registration.
•APPLICATION TO BE MADE TO NOTIFIED
AUTHORITY
The central government has notified under section 7(1) the following
registering authority to whom dealers classified below shall apply
for registration.
S. Description Description of registering
No of Dealer authority
1. Dealer having a single place The authority competent to under the general
of business in a State. sales tax law of the State if he were liable to
be so registered.
2. Dealer having more than one The authority competent to register him in
places of business in a State. respect of the principal place of business (by
whatever name called) under the general
sales tax law of the State if he were liable to
be so registered.

3. Dealer having no fixed The Chief Authority appointed under the

places of business in a State.
general sales tax law of the State to
administer such law, whether called a
Commissioner, Collector or by any other
name,, or such other officer appointed under
that law who may be specified in this behalf
by the Chief Authority aforesaid.
•SCOPE AND NATURE OF ENQUIRY
When an application in form A is made for obtaining the certificate
of registration, whether under section 7(1) or 7(2) to the specified
authority then such authority is expected to examine the form and
also make necessary enquiries as contemplated under rule 5.

•SUO-MOTU AMENDMENT OF THE

CERTIFICATE
Registering authority has power to amend the registration
certificate suo-motu, on the basis of information received from other
source. However, the authority will have to give notice to the
dealer, giving him all such information as has come to the
knowledge of the assessing authority and on hearing him the
authority may take necessary decision.
•POWER TO REJECT APPLICATION FOR
REGISTERATION
•Rule 5(2) provides that if notified authority is not satisfied that the
particulars furnished in application Form A are correct and
complete, it shall reject the application.
•Even where the registration fee as required by Rule 4(3) or security
amount demanded by issue of proper order is not furnished or is
not paid then the application for registration can be refused.
•Before the application for registration is rejected the notified
authority shall afford the necessary reasonable opportunity to set
right the defects in the application or to comply with requirements
as regards fee or security. He must be heard over the issue and
then the notified authority may decide to issue or reject the request
of the applicant for grant of certificate.
•The order of refusal to issue registration certificate is an
appealable order. If the order of rejection is not on proper grounds,
or where the order of rejection does not disclose the reasons which
led the notified authority to reject such application of registration,
then such order is liable to be set aside by the higher authority in
appeal.
•CANCELLATION OF CERTIFICATE OF
REGISTRATION
Clause (b) of sub-section 4 of section 7 gives power, authority and
jurisdiction to the assessing authority to cancel the certificate
of registration under the following circumstances:
•Where the dealer has ceased to carry on the business.
•Where the dealer has ceased to exist.
•Where the business is transferred.
•Where the business is closed or discontinued.
•Where the dealer has failed without sufficient cause to comply with
an order under section 3-a or with provision of sub-section 3-g or
sub-section 3-c
•Where the dealer has failed to pay any tax or penalty payable
under the act.
•Where the dealer registered under sub-section (2) has ceased to be
liable to pay tax under the sales tax act of the appropriate state.
•For any other sufficient reason.
•At the request of the dealer [(section 7(5)].
•Where the dealer to whom registration certificate is issued is found
to be fictitious person.
•OPPORTUNITY TO SHOW-CAUSE

Rule 9 provides that a notified authority shall before amending or

cancelling as the case may be, the certificate of registration of a
dealer, give him an opportunity of being heard over the matter .
In view of the principle of natural justice, it is obligatory on the part
of the Assessing Officer to issue show cause notice to the dealer
and afford a reasonable opportunity of being heard over the issue.
If no such show cause notice is issued before any order of
cancellation is passed then such order will be liable to be quashed.
In a show cause notice, the officer stated only that, ’dealer has
closed the business’ , and it did not indicate that the officer wanted
to cancel the certificate of registration for this reason, the said
notice was held not in accordance with the principle of natural
justice.
•CANCELLATION OF REGISTRATION TO
OPERATE PROSPECTIVELY AND NOT
RETROSPECTIVELY

No law provides that certificate of registration can be cancelled

retrospectively. When no specific provision is made, then it is settled
position of law that such amendment or notification or order would
be effective from the date of issue and not from earlier day. In the
central sales tax act and rules there is no provision indicating from
what date the effectiveness of the order of cancellation shall
operate. So the order of cancellation of certificate has to operate
from the date on which such order is made.