Important Provisions of CST Act

BY CA JANAK VAGHANI

Important Provisions of CST ActImportant Definitions- Section 2

Sale in the course of

Inter-State Trade- Section 3

Situs of Sale- Section 4

Sale in the Course of

Import or Export-Section 5

Definition of term Business-S.2(aa) The term business includes;-

Any activity of buying or selling of goods

Any transaction in the nature of trade or commerce

Whether carried with profit motive or not

Any transaction incidental or ancillary to business trade or commerce

Whether sale of capital goods is business?

Whether charitable trust or NGO or service provider is covered?

Whether job worker is covered?

Important Definitions -Section 2(g) Term Sale

Sale- Section 2(g)The term Sale means any transfer of property in goods from one person to another for cash or deferred

payment or for any other valuable consideration and includes following deemed sales;- (i)a transfer, otherwise than in pursuance of a contract, of property in any goods   (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of

a works contract;  (iii) a delivery of goods on hire-purchase or any system of payment by installments;  (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for

cash, deferred payment or other valuable consideration;  (v) the supply of goods by any unincorporated association or body of persons to a member thereof for

cash, deferred payment or other valuable consideration; (vi) a supply, by way of or as a part of any service or in any other manner whatsoever, of goods, being food

or any other article for human consumption or any drink(whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration,

 but does not include a mortgage or hypothecation of or a charge or pledge on goods.

Important Definitions- Section 2 (g) -Term Sale Thus the definition of term sale is at par with local act

All deemed sales are taxable under the act

All provisions of act including sections 3, 4, 5, 6, 8 9 etc. shall apply to deemed sales

As per section 6 tax is payable under the act

By any dealer on inter-State sales which will include

deemed sales also

Section 2(h)- Sale Price Sale Price means all amount payable to selling dealer

Includes any sum charged for anything done

On or before delivery of goods but excludes;-

cash discount

cost of freight and installation

When charged separately

It includes excise duty

Whether service tax or octroi will be included in sale price?

Whether cost of transit insurance will form part of sale price?

Sale Price – works contract- section 2(h) Proviso to Section 2(h) of the act provides for

determination of sale price in case of works contract sales

Accordingly power is conferred upon parliament to prescribed deduction for labour etc., by way of rules

No rules are made till date

Till then Provisions of local act shall apply?

Inter-State Sale- Section 3(a) and (b) Section 3 of the Act provides when a sale or purchase of goods is

deemed to have effected in the course of inter-State trade or commerce

Section is divided in two sub sections (a) and (b)

Accordingly, a sale or purchase shall deemed to have effected in the course of inter-State trade or commerce, if the sale or purchase;-

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of document of title to the goods during their movement form one State to another

Inter-State Sale- Section 3(a) and (b) Test to determine inter-State sale is movement of goods

and not the ;-

place of buyer or seller, or

Place of preparation of sale bill, or

Place of buyer mentioned in sale bill, or

Place where payment is made, or

Place where books of accounts are mentioned

Place where property in goods passes

Inter-State Sale- Section 3(a) and (b) Another test is while goods are in transit from one State to

another sale is effected by transfer of document of goods

During their inter-State movement

Explanation 1 provides when inter-State movement of goods shall commence or terminates

Accordingly the movement of goods shall deemed to have commence when goods are delivered to a carrier or bailee for transmission

And it terminates when delivery of goods is taken from him.

Inter-State Sale- Section 3(a) and (b) Thus sale by transfer of document of title to the goods

should take place

while goods are in custody of the transporter

Once delivery is taken form the transporter thereafter sale takes place

Then it will be a local sale and not inter-State sale

It is not necessary that inter-State movement of goods should have commence as a result of sale and then sale by transfer of document of title to the goods

Even inter-State movement of goods is otherwise then sale say branch transfer

and sale is effected by transfer of document of title to the goods then it will be an inter-State sale

Inter-State Sale- Section 3(a) and (b) Explanation 2 provides that if the goods move from

one State to another and

Ultimately the movement terminates in the same State then

It will not be deemed to be an inter-State sale .

Certain Issues Inter-State sales between dealers in same State

possible?

Sales to ONGC Off Shore whether inter-State sale?

Inter-State sale in case of deemed sales when?

Inter-State sale of intangible or incorporeal goods?

Dispatch of goods to branch or agent or HO under specific contract whether branch transfer or inter-State sale?

Situs of a sale or Purchase –S. 4 States have power to levy tax on sale or purchase of goods,

Which takes place inside the State

Section 4 Provides when a sale or purchase of goods takes place inside the State

A sale or purchase of goods shall deemed to take place inside a State, in case of specific or ascertained goods if at the time of contract of sale is made are within the State

In case of unascertained or future goods if the goods are within the State at the time of their appropriation to the contract by the seller or buyer.

Sale in the Course of Export s. 5(1),(3) and (5) Under article 286(3), States or Union have no power to

levy tax on sale or purchase of goods deemed to have effected in the course of import or export

Section 5 provides when a sale or purchase of goods shall deemed to have effected in the course import or export

Sub sections (1) (3) and (5) provides when a sale or purchase shall deemed to have effected in the course of export and

Sub section (2) provides for import

Sale in the Course of Export s. 5(1) Sale or purchase of goods shall deemed to have

effected in the course of export of goods outside the territory of India only if it,

Either occasions export, or

Is effected by transfer of document of title to the goods after such goods have crossed the custom frontiers of India

Sale in the Course of Export s. 5 (3) Sub section (3) provides that the last sale or purchase of any

goods

Preceding the sale or purchase occasioning the export of those goods

shall also be deemed to have effected in the course of export, if it took place

after and was for the purpose of complying with the agreement or order or in relation to such export

Sub section (4) read with rule 12(10)provides for production of H form mandatorily.

Purchase of Aviation Turbine Fuels. 5(5) Sub section (5) provides that purchase of aviation

turbine fuel by designated Indian carrier

for the purpose of its international flight

Shall be deemed to have taken place in the course of export

Designated Indian carrier means any carrier notified by the Central Government by way of Notification in official gazette

Sale in the Course of Imports. 5(2) Sub section (2) provides when sale or purchase of goods is deemed

to have taken place in the course of import

A sale or purchase of goods is deemed to have taken place in the course of import of the goods in to the territory of India only if it,

Either occasions such import, or

Is effected by transfer of document of title to the goods

Before the goods have crossed the customs frontier of India

Certain Issues Whether it applies to sale of goods at shops outside the custom area?

Whether it applies to sale at Free Trade Zones?

Whether high seas sale is possible when the goods are in Bond?

Whether Air way bill is document of title to the goods?

What are the evidences to prove high seas sales?

Sale of Goods to ocean going ship or airlines for service of food to the customer in inter-national flight is export?

THANK YOU