CST

CST – Requirements and CST Requirements and Practical Issues

Presentation byCA Rajat Talatirajat@talatico [email protected] 13.07.2013 Ahmedabad branch of WIRC of ICAI

DefinitionsSec 2(g) SalesSec 2(g) Sales

Transfer of property in goods by one person to another for cash or deffered payment or any other valuable consideration, and includes :,

Transfer other than in pursuance of a contract Transfer of property in goods involved in execution of works contractHi h l i t ll t lHire purchase sale or installment salesTransfer of the right to use any goods for any purposeSupply of goods by any unincorporated body to membersmembersSupply + service of food at restaurant

Excludes : Mortgage , hypothecation, Charge, pledge

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Definitions

S 2(h) S l P iSec 2(h) Sales PriceSales Consideration For Goods xx

( )Cash Discount (xx)(-)Cash Discount (xx)(+)Charges for anything done at xx

the time of or before the delivery yof goods (Excl. cost of freight or delivery or cost of installation when separately charged)

Sales Price xxSales Price xx

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Definitions

Sec 2(h) Sales Price I f t f Sec 2(h) Sales Price : In case of transfer in property in goods involving the execution of works contract

Total Consideration for the xx works contract

(-) Deductions as may be (xx)prescribed Sales Price xxSales Price xx

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Definitions

S 2(j) T f S l I Sec 2(j) Turnover of Sales : It means

aggregate of the Sales priced d bl b h d lreceived and receivable by the dealer

in respect of any goods in the course of inter-State sales

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Goods Of Special Importance In Inter State Sales

Sec 14 Declared GoodsSec 14 Declared GoodsIt includes goods like

Cereals – paddy , rice , wheat, J p y , , ,jowar,bajra,maize,ragi etcCoal (excl. charcoal)Cotton (excl cotton Waste)Cotton (excl. cotton Waste)Cotton Yard (excl. cotton yarn waste)Crude Oil

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Hides & Skin (raw or dressed state)Hides & Skin (raw or dressed state)Iron and steelLPG for domestic use OilseedsLPG for domestic use OilseedsPulsesAviation Turbine Fuel sold to an Aviation Turbine Fuel sold to an aircraft operated by scheduled airlines (subject to certain

diti )conditions)

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Goods covered under the prescribed Goods covered under the prescribed headings of the CET Act 1985 such as

Man made fabrics Sugar Woven fabrics Cotton fabrics Cotton fabrics Crude Oil Hides & Skin (raw or dressed state)( )Iron and steelLPG for domestic use

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Sec 15 Restrictions on sale or purchaseSec 15 Restrictions on sale or purchaseTax payable on intrastate sales and purchase of declared goods shall not exceed four percentTax paid on sales and purchase in the course of Tax paid on sales and purchase in the course of inter state sales of declared goods which are purchased locally shall be reimbursed to person making such interstate sales T l i d l f i hi h i d t Tax levied on sale of rice which is procured out of paddy as referred in prescribed clause of section 14 shall be reduced by the tax paid in such paddysuch paddy

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Recognition of interstate sales and purchase

Sec 3Sec 3Interstate sales or purchase is deemed to take place when :

Occasions the movement of goods from Occasions the movement of goods from one state to another; orTransfer of documents of title to the goods during their movement from state goods during their movement from state to another

10C.A. RAJAT TALATI, MUMBAIC.A. RAJAT TALATI, MUMBAI

Recognition of interstate sales and purchase

Sec 3Sec 3Exp 1.

When goods are delivered to carrier or other bailee the movement of goods for the purpose of clause (b) shall be deemed to commence at the clause (b) shall be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier

Exp 2Exp 2.When the movement of goods commences and terminates in the same state it shall not be regarded as interstate sales if the goods while movement pass through the territory of any other movement pass through the territory of any other state

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Rate of Tax in the course of interstate sales

S 8Sec 8Every dealer who commences interstate sales to a registered dealer of goods described in g gsub-section(3) shall be liable to pay tax at two percent of his turnover or at rate applicable to the sales or purchase of such goods inside the appropriate Sate under the sales tax law of the state whichever is lowerIf interstate sales are not supported by declaration in form ‘C’ sales of such goods will be taxed at a local rate applicable

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Determination of turnover Determination of turnover

Sec 8(A)Sec 8(A)The following deductions shall be made from the aggregate of the sales price:

When no tax is collected by the dealerWhen no tax is collected by the dealerRate of tax*aggregate of sales prices100(+) rate of tax

Goods returned by the purchaserGoods returned by the purchaserwithin six monthsproduction of satisfactory evidence

Such other deductions as prescribed by Such other deductions as prescribed by the Central Government

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Sale or purchase in the course of import or export

S 5(1)Sec 5(1)Sale in the course of export:

S l h i h t ORSale or purchase occasions such export OREffected by transfer of documents of title of goods

After the goods have crossed the customs frontiers of India

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S 5(2)Sec 5(2)Sale in the course of import :

S l h i h i t ORSale or purchase occasions such import OREffected by transfer of documents of title of goods

Before the goods have crossed the customs frontiers of India

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Sec 5(2)Sec 5(2)Sale in the course of import

There should be Agreement of sales in the course of importimportSuch agreement should occasion imports The agreement date should be before the B/L dateThe BOE may or may not be in the name of the importer

High seas salesThere should be High Seas sales Agreement The B/L should be endorsed in favour of the final The B/L should be endorsed in favour of the final purchaserThe BOE should be in the name of high seas buyer

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S 5(3)Sec 5(3)Sale in the course of export (Deemed E t / P lti t l )Export / Penultimate sale):

Last sale or purchase preceding the export export If such sale or purchase is for complying with the agreement or order for or in

l hrelation to such export

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Sec 5(4)Sec 5(4)Declaration forms with regards to sale in the course of export (Deemed Export / Penultimate sale):sale):

the dealer has to furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exporterD t tiDocumentation

Form HExport documents i.e. airway bill , B/LP oof that e po t o de as placed befo e Proof that export order was placed before the purchase i.e. purchase order placed by foreign buyer on the exporterIs copy of the PO of the importer required?py p q

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S 5(5)Sec 5(5)Aviation Turbine Fuel purchased By Indian carrier For its international flight purchases

S h h h ll b d d t t k l Such purchases shall be deemed to take place in the course of exports

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BRANCH TRANSFERBRANCH TRANSFER

S 6A CST A tSec 6A – CST ActTransfer to Branch/ HO/ agent out side the state other wise than salethe state other wise than saleDeduction to be claimed from TOProduction of F Form- 1 for 1 month Production of F Form- 1 for 1 month transactions Non- Production of F form –Deemed as interstate Sale

Deeming Provision – is it constitutionalC f ‘C’ b d d i f di ll

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Can form ‘C’ be produced in case of disallowance

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BRANCH TRANSFER -instancesBRANCH TRANSFER instances

FG to Br. / HOFG to Br. / HOFG to Con AgentRM/FG to factory for processingFixed AssetsFixed AssetsRM / PM to 3TP for processing / job work

Ambica Steel Ltd (24:VST:356)(SC), Maharashtra Cir. No.2T/2010 dt.11.01.2010 w.e.f 11.1.2010 (compulsory)Earlier instructions withdrawn

Mah Cir16T of 2007 dt. 20.02.2007 Mah Cir 5T of 2009 dt. 29.1.2009

For use in W/C in other states

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Br Trf return with in 6 monthsBr. Trf – return with in 6 monthsIs form ‘F’ required?YesYes

Stock transfer OMS – rejection / GR. F from is must for both to & fro movements.

Mah Circular 2T/2010 dt.11.1.2010F form reqd even for G/R and jobwork

STM out to URD agent / Branch F form for URD period

If Subsequently registered


If Subsequently registered


Rate of tax on Br Trf DisallowedRate of tax on Br Trf. DisallowedOn what value? Transfer value?

Dispatch & receipt in different months Dispatch & receipt in different months Cir. No…….dt…..Valuation of stock transfers

Transaction valueMRP less std %Excise clearance valueNo commercial valueFixed assets


Fixed assets

Br Trf v/s inter-state salesBr. Trf. v/s inter state sales

Status of branch / depot & its functioning Status of branch / depot & its functioning Power to appropriate goods

Order processing Order processing H.O. processes & issues instruction P.O. processing p g

Credit controlReporting of salesmen / field staffReceipt of paymentReceipt of payment



One to one correspondenceOne to one correspondenceStock movementproduct mixproduct mix

Std goods v/s customised goods

Dispatch quantityStd qty dispatchMass dispatches / dispatches in economic qty sizeSeasonal dispatches

Labeling on goodsFloating stock


Floating stock


‘Agreement to sale’ v/s ‘sales agreement’Agreement to sale v/s sales agreementInspection of goods

At factory during mfg processAt factory on completion of mfgTesting before dispatch by ultimate customer3rd party testing – Govt approved agencies

Coloured transactions


6(2) – Intransit sale6(2) Intransit sale

Sec 3(b) of CST r/w sec 6(2) of CST Act Sec 3(b) of CST r/w sec 6(2) of CST Act Section 3(b)Section 6(2)

Trf of documents of title to the goods Documents of title to the goods

L/R R/R B/L Airway bill any other L/R, R/R, B/L, Airway bill, any other documents e.g. courier receiptsSuch documents should be negotiable / transferable.

Airway bill is not negotiable



D i th i t During their movement Endorsement during their movementPracticle difficulties passing of CENVAT Practicle difficulties – passing of CENVAT credit, goods directly getting delivered etcM/s. A & G Projects And Technologies Ltd. / j gVs State of Karnataka [2009] 19 VST 239 (SC) Dated 11/12/ 2008



Exchange of declarations W sales to X , X to Y & Y to ZW taxable sales u/s 3(a) & others exempt U/s W taxable sales u/s 3(a) & others exempt U/s

3(b)

W C X C form Y C Z Win Karnataka

C form

X in MP

C form

E II

Y in West Bengal

C form

Z in Orissa

takaE-I form

E-II form

BengalE-II form



Taxability of 6(2) transactionTaxability of 6(2) transactionNon-receipt of forms – levy of tax

STATUS OF THE TRANSACTION PRODUCT TAX RATE

4% 12.50%TAX RATE APPLICABLE

C & E1 BOTH NOT RECD A th i i l tC & E1 BOTH NOT RECD As per the original trans

C RECEIVED E1 NOT RECD 2% 2%

E1 RECEIVED C NOT RECD 4% 12.50%

C & E1 BOTH NOT RECD 4% 12 5%C & E1 BOTH NOT RECD 4% 12.5%


A & G Projects (SC) –(19:VST:239)???????????

FactsFactsA &G Projects (Karnataka) – PO on manufacturing at TN & supplies directly to KPTCL – KarnatakaAdmittedly, 3 inter-sales covered by sec 3(a) [page 244 Admittedly, 3 inter sales covered by sec 3(a) [page 244 para 9]

HeldAll transactions are interstate sales from TN

Is it setting principals wrt 6(2) sales?No.

Ratio is in respect to Sec 9(1) –appropriate statep ( ) pp pM/s. Ajay Trading Company Vs The State of Maharashtra VAT SECOND APPEAL No. 111 OF 2010 Dated 12/12/2012


FORMS C H E1 EII F & Other FORMS FORMS C,H,E1,EII,F & Other FORMS

For what ‘C’ form could be issued? For what C form could be issued? [Sec8(3)]

To be issued by RD or Central Govt.Specified in registration certificatep gINTENDED FOR

Resale by himF b hi i th f t i For use by him in the manufacturing or processing of goods for sale.

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For what ‘C’ form could be issued? [Sec8(3)]

To be issued by RD or Central GovtTo be issued by RD or Central Govt.Specified in registration certificateINTENDED FOR INTENDED FOR

Resale by himFor use by him in the manufacturing or processing of goods for sale processing of goods for sale. In the telecommunications networkIn the generation or distribution of electricity or any other form of powerany other form of power.Packing material – intended for being used as packing goods for sale

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C FC FormCST Rules (central)CST Rules (central)12(1)- one C form for one Qtr. (w.e.f. 1.10.06)

Mah Cir no. 28T/2005 dt 24.10.05 – to submit only list of forms not recd. (para 5) – Originals only list of forms not recd. (para 5) Originals to be produced at the time of Assessment.

Above Rule applies to E I & E II also (Rule 9(b))Loss of C form

Elaborate procedure , Indemnity, Notification etc.

C form for URD period?Can be issued from the state where registered [rule 12(7)]

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Form ‘F’

P Purposes Not mentioned in Sec 6AN t id d i R l 12(5)Not provided in Rule 12(5)Form ‘F’

Certificate for receipt & accounted forCertificate for receipt & accounted for.

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Forms - H,I & J

Penultimate sale to exports [Sec 5(3)]Penultimate sale to exports [Sec 5(3)]Form HCan be produced till the Assessment [rule Can be produced till the Assessment [rule 12(10)]

Inter-state Sales to SEZForm IScheme to claim reimbursement of CST paid on purchases from Cent. Govt.pu a o Go

Sales to Diplomatic missionForm J

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Levy and collection of tax and penalties

S 9Sec 9Tax Payable on interstate sales turnover(2)A th it d t ll t d (2)Authority can assess and reassess tax collected, interest , penalty(2B)The dealer does not pay tax in time he shall be t t th l l t l f h to pay tax as per the general sales tax law of each state

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Levy and collection of tax and penalties

Sec 10If any Person

Furnishes declaration forms which he believes to be falseAfter purchasing goods for the specified purpose fails to use those goods for that purpose without reasonable excuseFalsely represents purchasing goods of class covered by his certificate of registrationURD represents himself as RD and collects tax etcShall be liable to Penaltyy

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Penalty in lieu of prosecution (Sec.10A) – Misuse etc. C form

U t & h lf ti th t Upto one & half times the tax as per Sec 8(2)

Fo mis se of fo ms ‘C’ othe than For mis-use of forms ‘C’ – other than the intended purposeGoods not mentioned in registration Goods not mentioned in registration certificateFalsely represents as RDy p

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Authority to settle disputes

S 18A Sec 18A -Appeal to highest authority of stateIssues relating to

Rate of taxComputation of assessable turnover PenaltyTime Limit for appeal -60 days from the date of the orderthe order

Pass appropriate order after giving opportunity of being heardTime Limit for hearing and deciding 6 Mnths from Time Limit for hearing and deciding – 6 Mnths from the date of appeal

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Sec 19Sec 19- Central Sales Tax Appellate AuthorityAuthority to settle inter-state disputes – Central Sales Tax Appellate Authority ConsistConsist ofCo s stCo s st o

Chairman – Retired judge of the SC or a retired chief justice of a HCOfficer of ILSOfficer of SG not below the rank of secretary or officer Officer of SG not below the rank of secretary or officer of CG not below the rank of additional secretary

What Appeals would be filed before CSTAA?Disallowances of Br. Trf – getting taxed in both the statesstatesHow practical is this?Appeal may involve other issues – HSS, C Form Production etc.

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Sec 20Sec 20An appeal shall lie to the authority

against any order passed by the highest appellate a tho it of the stateauthority of the statedetermining the issues relating to inter state stocktransfer Or interstate consignment of goods

Time limitTime limitwithin 90 days from the date of the order served within 150 days if the appellant has sufficient cause from filling the appeal in timecause from filling the appeal in time

Application – Quadruplicate -fee Rs5000/-

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CA RAJAT TALATI

CST

Documents

Transcript of CST