MEANING OF CENTRAL SALES TAX :-

Central sales tax is an indirect tax which is imposed by

the central government on taxable turnover of inter
state sale of goods made by a registered dealer during
the prescribed period in the course of business .
FEATURES OF CENTRAL SALES TAX :-

The following are the features of central sales tax act ,

1956 :-
1.Scope – The central sales tax act extends to the whole of
India .
2. Levied by Central Govt.-: The CST is leveied by the
Central Govt. but it is collected by State Govt.from
where goods have been sold.
3. No Exemeption Limit-: CST is levied on turnover and
there is no exemption limit on turnover.
4. Administered by State Govt.-:The sales tax
authorities of State Govt. are authorities for the
purpose of CST.
5. Concessional Rates-: Concessional rates of CST is
applicable if declaration in Form C is issued by purcahser
who is a registered dealer.
6.Sales are exempted-: Certain sales are exempt under
CST if-: a)Sale is within state as it subject matter of VAT
b)Subsequent sale is there c)Sale or purchase in the
course of exports and imports.
7. Types of good – under the act, goods have been
divided into declared goods and other goods. On
Declared goods CST is charged at the rate not more than
5% and not more than once,while tax charged on 0ther
goods is Local State Sale tax.
Objectives of Central Sales Tax-:
 1) To formulate the basis for determining when a sale
or purchase of goods takes place in the course of inter-
state trade or outside state or in the course of import
into and export from India.
 2) To formulate rules for levy of tax, exemptions,
collections of tax, penalties provisions, offences and
penalties.
 3)to specify the restrictions & conditions subject to
which state laws impose taxes on the sale or purchase
of goods of special importance.
 4) To fix liabilities of persons for payment of Sales Tax.
 NEXUS THEORY
 Nexus means connection or link in case, of any state
has a connection with the sale transactions , the states
is competent to impose tax on such transactions i.e. in
case of inter-state sale, both ( Seller & Buyer) States
used to levy tax. Thus, each State having a territorial
nexus with the sale, used to levy tax, with the result
same transaction has to suffer tax in different states
which results into multiple taxation.
 The Law makers introduced 92A and amended
Article 286 of constitution of India, imposing
restrictions on state power to levy tax,on the following
transactions :
 -: Inter State Sale/Purchase
 -: Export Sale/Purchase
-: Import Sale/Purchase
 -: Sale outside the state

 Thus Nexus theory has lost its relevance after

amendments in the constitutions of India. The State
Govt. can levy tax on local sale (intra state sale) only.
Definitions-: Section 2
 Appropriate State-: (Sec.2A) Appropriate State
means-:
 1) in relation to a dealer who has one or more
places of business situated in the same State, that
state
 2) 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.
 Business [Sec. 2(aa)]-: Business Includes-
 1) any trade, commerce or manufacture or any
adventure or concern in the nature of trade, commerce
or manufacture whether or not the same is carried on
with a motive to make gain or profit and whether or
not any gain or profit accrues and
 2) any transaction in connection with or incidental or
ancillary to such trade, commerce, manufacture,
adventure or concern.
Dealer [Sec 2(b)]
 Dealer means any personwho carries on (whether regularly
or otherwise ) the business of buying , selling, supplying or
distributing goods, directly or indirectly for cash or for
deffered payment or for commission remuneration or other
valuable consideration and includes-:
 a) a local authority,a body corporate, a company, any co-
operative society or other society, club,firm.HUF or other
association of persons which carries on such business.
 b) a factor, broker,commission agent del credere agent or
any other mercantile agent by whatever name called and
whether of same description as herein before mentioned or
not who carries on the business of business of buying,
selling, supplying or distributing goods belonging to any
principal whether disclosed or not and
 c) an auctioneer who carries on the business of selling
or auctioning goods belonging to any principal,
whether disclosed or not and whther the offerof
intending purcahser is accepted by him or by the
principal or nominee of the principal.

 The Following are not to be considered as dealer under the

definition-:
 a) Agent securing orders only
 b) Kachha Aditya
 C) Student hostels
 D) Advertising agents
 E) Educational Socities
 F) Doctors dispensing medicines.
Deemed Dealer-:
 The term dealer includes deemed dealer also.Every
person who buys or sells goods on behalf of a dealer
residing outside the state is termed as deemed dealer.

 Registered Dealer-: Every dealer liable to pay tax is to

get himself registered under section 7 for the pupose
of inter state sales.

 Declared Goods [Sec.2 (c)]- Declared goods means

goods declared under section 14 to be of special
importance in inter-state trade of commerce.
Goods [Sec.2 (d)]
 Goods includes all materials articles commodities and
all other kinds of movable property but does not
include newspapers, actionable claims, stocks, sahres
and securities:
 Goods include following-:
a) Standing Crops, grass and things attached to and
forming part of land which is agreed to be severed
(cut) before or under contract of sale and
consequently liable to sales tax.
b) Animals & Birds, old newspapers sold on weight
basis,advance licenses under exim policy, gases,
illegal goods like charas ganja etc.
 C) Intangible as well therefore software/ copyright/
patents etc and thus chargeable to tax
 D) Goods inculde intangible or incorporeal movables.
 E) Air and water may be free goods but once these are
made available these are made available to customer
for cost will be treated as goods.
 F) sales of illegal goods like hashish, ganja also liable
to tax.
 Goods exclude-: X-rays supplied by
radiologist,amulets by spiritual consultant, medicines
by say homeopathic doctor , Electricity.
Place of Business [Sec.2 (dd)]
 Place of business includes-:
 a) in any case where a dealer carries on business
through an agent by (whatever name cxalled) the
place of business of such agent
 B) a warehouse,godown, or other place where a dealer
stores his goods
 C) a place where dealer keeps his books of account.
Sale [Sec.2 (g)]
 Sale with its grammatical variations and cognate expressions means
any transfer of property in goods by one person to another for cash or
deffered payment or for nay valuable consideration and includes:
 A) a transfer of property in any goods for cash,deffered payment or
valuable consideration
 B)transfer of property in goods involved in execution of works contract
 C) a delivery of goods on hire purchase or any system of payment by
installments
 D) a transfer of right to use any goods for any purpose for cash,deffered
payment or other valuable consideration.
 E) a supply by way of or as a part of any service or in any manner
whatsoever of goods being food or any other article of human
consumption or any drink (whteher or not intoxicating) where such
supply or service is for cash ,deffered payment or other valuable
consideration.
Sale Price [Sec.2 (h)]
 Means the amount payable to a dealer as consideration
for the sale of any goods less any sum allowed as cash
discount according to practice normally prevailing in
the 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 frieght or delivery or cost of installation
where such cost is separately charged.
YEAR [SECTION 2(K)
 It means the year applicable in relation to a dealer
under the general sales tax law of the appropriate
state, and if, there is no such year applicable, it is the
financial year.
TURNOVER [SECTION 2 (J)]
 It is the 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
during a prescribed period. Prescribed period is
the period in which sales tax return is filed.