Central Sales Tax (CST) is a tax on sales of goods levied by the Central Government of India. CST is applicable only in the case of inter-state sales and not on sales made within the state or import/export of sales.

Inter-state sale is when a sale or purchase constitutes movement of goods from one state to another. Accordingly, consignments to agents or transfers of goods to branch or other offices is not a sale as per the CST Act

CST is payable in the state where the goods are sold and movement commences. The tax collected is retained by the state in which the tax is collected. CST is administered by Sales Tax authorities of each state. Thus, the State Government Sales Tax officer who assesses and collects local (state) sales tax also assesses and collects CST.

Sales Tax is a tax, levied on the sale or purchase of goods. There are two kinds of Sales Tax i.e. Central Sales Tax, imposed by the Centre and Sales Tax, imposed by each state.

 What is INTER-STATE SALE

An inter-state sale takes place when a sale or purchase:

  • Leads to movement of goods from one State to another State.

  • Is achieved by the transfer of documents of title while the goods are being moved from one State to another State.

Example 1: “A” in Uttar Pradesh sells and delivers goods to “B” in Maharashtra.

Example 2: “X” in Uttar Pradesh delivers goods to “Y” in Maharashtra. “Y” sells it to “C” in Delhi by transferring the document of title during the goods movement from Uttar Pradesh to Delhi.

Note: Goods that are sold within a state, but while transporting travel through another state is not considered inter-state sales.

 When does CST become applicable?

1.         The sale should not take place in the course of import into or export from India.
2.         There should be a Dealer and such dealer must be registered under the CST Act.
3.         He should make a sale to any buyer ( whether registered dealer or unregistered dealer)
4.         He should carry on any business.
5.         He should make a sale of any goods ( whether declared or undeclared)
6.         The sale should be made in the course of interstate trade or commerce ( i.e. the sale should not be a sale inside a state.

If CST is applicable then – 

1.         The CST Act becomes applicable and CST is levied at the Rate specified.
2.         CST is levied on Turnover, which in turn is computed on the basis of the sale price.
3.         CST is payable by the selling dealer who makes the sale in the course of interstate trade or commerce.
4.         CST is payable in respect of sale of goods effected by him during the year.
5.         CST is payable in the appropriate state in which the selling dealer has a place of business.

RATE OF CST

  • In an inter-state sale to a registered dealer against form C the rate of CST is 4% or local sales tax rate whichever is lower.

  • If under the local sales tax law, sale or purchase is exempt from CST the CST is Nil.

  • In an inter-state sale to government against form D the rate of CST is 4% or local sales tax rate whichever is lower.

  • Rate of CST in case of  inter-state sale of declared goods without  form C or D  is twice the rate of tax applicable to the local sale or purchase of such goods in that state.

  • Rate of CST in case of other goods ( i.e. non-declared goods) is 10% or the applicable local sales tax of that state, which ever is higher.

What is Sale Price for CST purpose?

“Sale Price” means the amount payable to a dealer as consideration for the sale of any goods.

It does not include,

  • Cash Discount ( including Trade Discount, Quantity Discount, Additional Discount ). This sum is deducted from sale consideration.

  • Cost of installation, freight and delivery is excluded ( if such cost is separately charged).

  • Goods returned by buyer within 6 months.

  • Goods rejected by buyer.

It includes,

  • Consideration for sale any goods

  • Excise Duty ( whether included in sale price or separately charged)

  • Sales Tax payable by the dealer ( whether included in sale price or separately charged)

  • Sum charged for anything done by the dealer in respect of the goods at the time of or before the deliver thereof.

  • Cost of packing material and packing charges.

  • Insurance charges if the seller has insured the goods.

  • Bonus Disocunt / Incentive Bonus for attracting Sale Targets.

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