Top 17 Sales Tax Interview Questions You Must Prepare 14.Jun.2024

  • The sale should not take place in the course of import into or export from India.
  • There should be a Dealer and such dealer must be registered under the CST Act.
  • He should made a sale to any buyer ( registered dealer and unregistered dealer)
  • He should carry on any business.
  • He should made a sale of any goods ( declared or undeclared)
  • 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.

 @Formulate principles for determining when a sale or purchase of goods takes place :-

  • in the course of interstate trade or commerce, or
  • outside a State, or
  • in the course of import into or export from India.

@Provide for the:-

  • levy of
  • collection and
  • distribution
  • Of taxes on sales of goods in the course of interstate trade or commerce.

@Declare certain goods to be of special importance of inter state trade or commerce.

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.

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations, duties and tariffs.

Under the CST Act, supplies made by a registered dealer to a unit in the Special Economic Zone (SEZ) will not be subject to CST, provided such unit furnishes a declaration in I Form.

Dealers have to issue certain declarations in prescribed forms to buyers/sellers. The type of forms are C, D, E1, E2, F, H and I. Forms C, E1, E2, F and H are printed and supplied by Sales Tax authorities. Dealers have to issue declarations in these forms printed and supplied by the Sales Tax authorities. Form D is to be issued by government organization departments making purchases. These forms are to be prepared in triplicate.

Under CST Act, F Form is used for Branch transfers and Consignment transfers. Goods when transferred from one place to another under the same principal, is known as Branch Transfer and when it is transferred to agents, it is termed as Consignment Sale. Here the dealer has to furnish a declaration in F Form received from the consignment agent or branch office in another state to prove that the interstate movement of goods is not a sale.

"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.

  • 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

A sale during the course of export is exempt from CST and also the penultimate sale is deemed to be in course of exempt from CST under the CST Act. The dealer exporting the goods must have documents in proof of export such as an airway bill, bill of lading, shipping bill, customs documents, bank certificate etc. However, if the penultimate seller is not having any proof evidencing that the sale is exempt, the actual exporter is required to issue a certificate in H Form to the penultimate seller.

There are two kinds of Sales Tax: i.e. Central Sales Tax, imposed by the Centre and Sales Tax, imposed by each state.

Declared Goods means goods declared under Section 14 to be of special importance in inter- state trade or commerce. Some of the important items are cereals, iron and steel, jute, oil seeds, pulses, man-made fabrics etc.

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.

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

Central Sales Tax (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.

Every dealer who carries out the inter-state sales is liable to pay Central Sales Tax. As per the CST Act, every dealer who carries out inter-state sales has to be registered with the Sales Tax Authority. Intermediaries like agents and transporters are not required to be registered, since they do not affect sales. Registered dealers can purchase goods at concessional rates by issuing the C Form. 

Inter-state Sale is deemed to take place if there is:-

  • Movement of goods from one state to another or
  • Transfer of documents of title to the goods during their movement from one State to another. The above two modes are mutually exclusive.

As per CST Act, sales tax on inter-state sales is 4% or sales tax rate for sale within the state, whichever is lower, is applicable, when the sale is made to a registered dealer and the goods are covered in the registration certificate of the purchasing dealer. Otherwise, the tax is higher, i.e

10% or tax leviable on sale of goods inside the state, whichever is higher. This concessional rate is applicable only if the purchasing dealer submits a declaration in prescribed C Form.