presentation on central sales tax & vat

7/29/2019 presentation on Central Sales Tax & VAT

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Submitted by:

K. Madhavi

A PRESENTATION ON

CENTRAL SALES TAX


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Central Sales Tax

SALES TAX:-Sales Tax means, tax payable on sale of

goods. The seller of the goods has to pay tax, but it willbe recovered from the buyer of the goods, includingwith price. In other words the seller of the goods willremit the tax to the Government and the burden isshifted to the buyer with price. If the buyer and sellerare tranvocating within the state, then state sales tax is

payable. The state will spending the amount of tax onsocial development and society. When the seller andbuyer from two different states then the provisions ofcentral sales tax is applicable.


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Central Sales Tax

The Central Sales tax act 1956, come into

force from 1-7-1957. It extends to the whole of India. It is

one of the Indirect taxes levied by the CentralGovernment. But the revenue derived from, it will be

taken by the state Government. But the revenue derived

from, it will be taken by the state Government. In respect

of inter-state sale or purchase of goods, the sales tax is

levied under provisions of central sales tax act 1956 and

the entire proceeds are retained by the state only.


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Objectives

According to the preamble of the Act, the

following are the important objectives are:

1. To determine when

a. Sale/purchase of goods takes place as inter state

trade(sec 3)b. Sale/purchase of goods takes place outside a state

c. Sale/purchase of gods takes place as import or export

2. To provide for levy of tax and its collection.

3. To declare some of the goods as specialimportance(sec 14)

4. To specify restriction on state sales tax Acts on

imposing tax on sale/purchase of special important

goods(sec.15)


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Features or Characteristics

By nature it is indirect tax. First it is charged to the

dealer, who will pass on this burden to the consumer by

charging a higher price

It is levied on sale of all the goods (except exemptedgoods) by a trader to another in an inter-state trade

transaction.

It has provisions to levy tax on both single point and

multiple points.

The tax is levied on the turnover of inter state tradingtransactions and there is no basic exemption limit. Every

registered dealer is having the liability to pay tax whether

the sale transaction amount is small or big.


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The power to levy tax is with the Central

Government but it is collected and utilized by the State

Government. In case of Union Territories, the tax is

collected and deposited in the Consolidated Fund ofIndia.

The administrative Rules with regard to

submission of Returns payment of tax, appeals etc.

are framed by the State Government.

Sale must be of goods Sale must be made by a Registered dealer

however the purchser need not be a registered dealer.

Tax is payable in the state from which goods are

sold.


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There is possibility of charging lower rate of CST

on submission of Form C

from 1-62008 onwards the State Government

cannot impose sales tax or VAT more than 2% ondeclared goods of C.S.T.


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Terminology

Appropriate State

Dealer

Declared goods

Goods

Place of business

Sale

Sale Price

Turnover

Business


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Appropriate State

Appropriate State means(sec. 2(a))

In relation to a dealer who has one or more places of

business situated in the same state, that state.

In relation to a dealer who has places of business

situated in different states, every such state with respect

to the place or places of business situated within its

territory.


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Dealer

Dealer means any person who carries on

(whether regularly or therwise) 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, and includes :

A local authority, a body corporate, a company, any

co-operative society or other society, club firm, hinduundivided family, or other association of persons which

carries on such business.


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Dealer

A factor, broker, commission agent, del-credere

agent, or any other mercantile agent, by what ever

name called, and whether of the same description as

herein before mentioned or not, who carries on thebusiness of buying, selling, supplying or distributing,

goods belonging to principal whether disclosed or

not; and

An auctioneer who carries on the business of

selling or auctioning goods belonging to anyprincipal, whether disclosed or not and whether the

offer of the intending purchases is accepted by him

or by principal or nominee of the principal.


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Dealer

Explanation 1: States that a mercantile agent, agent

handling goods, agent for collection of payment and every

branch or office in a state of a firm or company which is

outside the state is also a dealer.

Explanation 2: States that Government is also a dealer

except incase of sale of old and discarded stores or

waste.


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Declared Goods

Sec. 2( c ) of CST Act defines Declared

Goods as those declared u/s 14 of CST Act as

goods of special importance in inter-state trade or

commerce. The State Govt. cannot levy sales tax onthese goods exceeding 4%. If declared goods are

sold inter-state, tax paid within the state is

reimbursed to the dealer.

The following are some of the important

declared goods:

Cereals i.e., paddy, rice, wheat, bajra, barley,

maize etc.,


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Declared Goods

Coal and coke excluding charcoal

Cotton in un-manufactured from but not cotton

waste.

Cotton fabrics, cotton yarn

Crude oil

Hides and skins

Iron and steel

Jute

Oil seeds i.e., groundnut, til, cotton, castor,coconut, sunflower etc.

Pulses i.e., gram, tur, moong, masur, urad etc.


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Declared goods

Man-made fabrics i.e., artificial textile materials,

polyester filament yarn, staple fibre, tyre cord

fabric etc.,

Sugar and Khandsari sugar.

Woven fabrics of wool.

Aviation turbine fuel sold to an aircraft operated

by scheduled airlines (i.e., airlines permitted by

central govt.)

LPG ( Liquid Petroleum Gas ) for domestic use.


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Goods

Sec. 2(d) of CST Act defines that goods includes

all materials, articles, commodities and all kinds of

movable property, but does not include newspapers,

stocks, shares, securities and actionable claims (i.e.,lottery etc ).

Standing trees but not standing timber identified

separately

Plant and machinery assembled at site

Newspapers Stocks, shares and securities

Actionable claims.


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Goods

The following are Goods:

1. Standing timber identified separately.

2. Electrical energy

3. Intangible articles (i.e., copyrights, trademarketc.)

4. Computer software

5. Newspapers sold as scrap.


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Place of Business

Sec. 2(dd) of CST Act defines that place

ofbusiness includes:

i. In any case where a dealer carries onbusiness through an agent by whatever name

called, the place of business of such agent.

ii. A warehouse, godown or other place where a

dealer stores his goods and

iii. A place where a dealer keeps his books of

account.


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Place of the business

Place of business of the dealer is

relevant for application of provisions regarding

jurisdiction of an appropriate state to register a dealer

and to assess him in respect of inter-state sales.


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Sale

As per section 2(g) of CST Act, 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 anyother valuable consideration, and includes deemed

sale but does not include a mortgage or hypothecation

or a charge or pledge on goods.


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Sale Price

As per sec. 2(h) of CST Act, Sale Price means

the amount payable to a dealer as consideration for the

sale of any goods, less any sum allowed as cash

discount according to the practice normally prevailing inthe trade, but inclusive of any sum charged for anything

done by the dealer in respect of the goods at the time of

or before the delivery thereof other than the cost of

freight of delivery or the cost of installation in cases

where such cost is separately charged.


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Sale Price

It includes :

CST

Excise duty

Cost of packing materials

Packing Charges

Incentive bonus for achieving additional sales

insurance charges incurred by seller

Cost of freight (if not shown separately)

Sum charged by the dealer on or before deliveryof goods.


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Sale Price

It excludes:

Cost of freight / transport (If Charged separately)

Cost of installation (if charged separately)

Cash discounts for timely payments

Trade discounts

Insurance Charges on behalf of buyer

Goods returned within 6 months of sale

Goods rejected at any time.


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Turnover

As per Sec. 2(j) of CST Act, Turnover is

aggregate of the sale prices received and receivable

by the dealer in respect of sales of any goods in the

course of inter-state trade or commerce made duringany prescribed period and determined in accordance

with provisions of CST Act and Rules.

Total of Sale price of all inter-state sales

effected during the prescribed period less CSTpayable is the Turnover.

Turnover = No of units sold * sale price per unit


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Business

Section 2(aa) of CST Act defines that business

includes any trade, commerce, manufacture or any

adventure in the nature of trade, commerce or

manufacture whether or not such trade, commerce

,manufacture or adventure is carried on with a motive

to make gain or profit and whether or not any gain or

profit accrues from such trade, commerce,

manufacture or adventure.


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Business

Business includes any transaction

in connection with or incidental or ancillary to,

such trade, commerce, manufacture or

adventure. Adventure implies some

Speculation or occasional transactions.


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INTER STATE TRADE

The CST Act1956 was enacted to formulated

principles for determining when a sale or purchase of

goods takes place in the course of inter-state trade or

commerce or outside a state or in the course of import into

or export from India. To determine when a sale or

purchase of goods takes place in the course of inter-state

trade or commerce is important because the CST is levied

only if the goods are traded between two states. Section,

3,4 and 5 of the act define when a sale or purchase ofgoods is said to take place in the course of inter-state

trade or commerce, when it take place outside a state and

when it takes place in the course of import.


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INTER STATE TRADE

A Sale in intra-state sale when sale

occasions movement of goods within the state. The

powers to levy tax in case of intra-state trade or

commerce are given to state government.


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TAXABLE TURNOVER

U/S 8(A) of the CST Act, the sales

turnover can be determined by the following steps:

1. Computation of Gross Turnover

2. Computation of Gross Inter-State-Sales

3. Computation of Net-Inter State-Sales

4. Computation of Taxable Turnover

5. Computation of Tax


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GROSS TURNOVER

For Computation of Gross turnover thefollowing are included in computing gross turnover:

1. Sale price of goods sold outside the state

2. Sale price of the exempted goods

3. Sale price of the goods sold within the state4. Sale price of goods sold in the course of import or

export.

However the sale price of the

following are not included in computing gross

turnover.

a. News Paper. b. Stock and Share and .c.

Securities.


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GROSS INTERSTATE SALES

To ascertain the gross Inter state sales, the

following sale price is deducted from the gross

turnover.

Sale price of the goods sold inside the state

Sale price of the goods exported outside india


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NET INTER STATE SALES

To ascertain the net interstate sales the

following types of amounts are further deducted:

1. Amount of Sales Return

2. Return of Rejected Goods

3. Cash Discount4. Transaction Charges, Freight and delivery

charges.

5. Deductions Prescribed by the Central

Government.


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Taxable Turnover

To ascertain the taxable turnover, the

following amount of sale of exempted goods under

various sections of the act and amount of sales tax

are deducted from the inter-state sales.

I. Subsequent sale(u/s 6(2)

II. Goods exempt from tax u/s 8(24)

III. Sale of Goods u/s 8(5)

IV. Amount of sales tax if included in sale price

V. Computation of Tax


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Taxable turnover

Computation of tax is calculated by using

the following formulas:

i. If the amount of sales tax is not included in the

sale price:

Amount of Tax = Rate of Tax *Taxable Turnover

100


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Value Added Tax


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VAT

Value added tax is a tax on value added by any

economic activity, like manufacturing , retailing etc..

VAT in manufacturing activity is the difference between

the price at which commodity is sold and the cost of

input. VAT in trading activity is the difference between value of

sales and purchases.

VAT aims at abolishing the burden of existing taxes like

turnover tax, surcharge, special additional tax etc. Vat is collected in stages on transactions involving sales

of goods within a particular state.

Tax paid on purchase(input tax) is rebated against tax

payable on sales(output tax).


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VAT

Tax is leived on sales of all taxable goods.

VAT is not levied if sales of goods are not made in the

course of or in furtherance of business.

VAT is a multi point taxation system i.e. sales tax which

is payable at each stage. State level VAT is a state subject derived from Entry 54

of state list of the constitution, for which the states are

sovereign in taking decision.

Earlier sale stax was levied on purchases and sales ofgoods by the respective state governments.

Central sales tax covers interstate transactions of sale

of goods as well as transactions of import of goods into

and export of goods out of country.


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VAT

The proposal to replace the current sales tax with VAT

in india was agreed upon between sates and the central

government and according the VAT has been

implemented in 25 states from 1st April, 2005. VAT has

been replaced the current sales tax regine and alsocertain other levies.


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Advantages

It reduces cascading effect of taxes on goods

It promotes transparency in law.

It will broaden the tax base

It will create better competitive environment and in

long term consumer will be benefited. It will reduce the tax evasion

State VAT is a important law and a move for the future

when out country will introduce GST.


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Why VAT

An individual, partnership firm, corporation, Hindu

Undivided Family, who sell goods in the course of

business and who is registred or is required to register for

VAT should pay VAT.

It is chargeale if the sale of goods are made by VATdealer in the state and are not specifically exempt or zero

rated.


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VAT RATES

There are six different categories containing

various commodities, which attract different rates of tax.

The unique feature under the present rate structure is a

reference to the Customs Tariff Act 1975 for classification.

The rate schedule is as under.1. Agricultural Products & Essential commodities;

exempted, Industrial Inputs, Packaging Materials, I.T

products - 4%

2. Gold and precious stones - 1 %3. Standard rate - 12.5%

4. Liquors - 20%

5. Motor Spirits - 30%


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VAT

OUT PUT TAX : It is VAT chargeable on all the taxable

sales made by a VAT dealer.

INPUT TAX : It is the VAT charged on purchase of

goods. If a dealer is registered for VAT, he can normallyclaim credit for the VAT charged on most business

purchases.

HOW TO CLAIM INPUT TAX CREDIT:When the dealer completes VAT returns

each month, he cn claim an input tax credit on that return.

If the claim for input.


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Continued


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