2 IntroductionThe Central Sales Tax Act, 1956 was enacted to formulate 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 central sales tax is levied only if the goods are traded between two states.
3 IntroductionWhen a sale of purchase of goods is said to take place in the course of inter-state trade or commerce- Section 3When a sale or purchase of goods is said to take place outside a state- Section 4When a sale or purchase is said to take place in the course of import or export- Section 5
4 INTER STATE SALE (Sec-3) Occasions the movement of goods Sec-3(a) Completed sale of goodsAgreement to sell b/w the partiesTransfer of documents of title Sec-3(b)
5 Meaning of Inter-state sale Occasions the movement of goods u/s 3(a)There is completed sale of goods- The basic requirements are:-The transaction must be a complete saleThere must be physical movement of goods from one state to anotherSale and movement of goods must be inseparably connected.The contract need not provide for movement of goods. It is enough that the sale has been the cause of movement.EXAMPLE:SELLER - ASTATE XSTATE YBUYER - BB placed an order with A to supply certain quantity of goods.In consequence to this, A dispatched the goods to B.
6 Agreement to sell between the parties in pursuance of which the goods move and on their acceptance, the price is paid.Buyer and seller can be in same State u/s 3(a)Sale can be inter state even if both buyer and seller are in same State if goods are moving out of State on account of sale.EXAMPLE:B placed an order with the depot of A.Depot was not having ready availability of the stock.Therefore and thereafter, the goods were transferred from the factory to the depot and the depot accordingly delivered the same to B.A’s FACTORYBUYER BSTATE XSTATE YA’s DEPOTA’s DEPOT
7 Sale by transfer of documents u/s 3(b) Inter Stale sale can be by transfer of documents of title during movement of goods from one State to another u/s 3(b) of CST Act. Sale can be inter-state even if buyer and seller are in same State. The three conditions are:There must be movement of goods from one state to another before any contract of sale or agreement to sell have been made.There must be a sale by the transfer of documents of title.Such transfer of title documents must take place while the goods are still in movement or transit.DOCUMENTS OF TITLE INCLUDES:Railway receipt, lorry receipt, Air way Bill, Bill of Lading.
8 In ordinary course, A dispatched a consignment to depot. EXAMPLE Sec3(b) :-In ordinary course, A dispatched a consignment to depot.While the goods were in movement from State X to State Y, buyer B approached depot for the stock.Depot sold the goods to B by transferring the title documents in favour of B, while the goods were still in movement.A’s FACTORYA’S DEPOTBUYER BA’S DEPOTSTATE XSTATE Y
9 Stock transfer/Branch transfer of goods In stock/branch transfer, goods move from one State to another, but there is no ‘sale’. Goods are sent to branch or depot or consignment agent in other State. Stock transfer/branch transfer is not subject to tax since there is no ‘sale’.If buyer is identifiable before goods are dispatched, it is ‘Inter State’ sale and not a ‘stock transfer’.Form F for stock transfer/branch transfer of goodsForm F is required to be submitted to establish stock transfer. Sales Tax Officer can make enquiry regarding truth of contents in form F.
10 SALE INSIDE THE STATE Sec.-4 Section 4(1) defines ‘Sale outside a State’If a sale or purchase is inside a State as per Sec4(2), it is outside all other States.Definition of ‘sale inside State ’is subject to section 3 i.e. it is subject to condition that the sale should not be ‘Inter State Sale’Sec 4(2) states that a sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State.a)Sale in case of specific or ascertained goods, at the time the contract of sale is made.b) In case of unascertained or future goods, at the time of their appropriation to the contract of saleSale inside the State is a ‘residuary sale’If sale is inter-state as defined in section 3 of CST Act, it can never be ‘intra state’ sale. Thus, inter-state sale is a residuary sale.
11 EXAMPLE: A transferred goods to his depot Goods were sold from the depot to the buyers in Delhi.COMMENTS:Transfer from Punjab to depot in Delhi is purely a stock transfer, therefore no sales tax on the sameSale from depot to customers is a local sale of ascertained goods and termed as sale inside State of DelhiAs the sale is inside the State of Delhi, it automatically becomes outside all other StatesA DEALER IN PUNJABBUYERSA’s DEPOTA’s DEPOTDELHIPUNJAB
12 SALE IN COURSE OF EXPORT Section 5(1) A sale or purchase of goods is deemed to be in course of export of goods out of the territory of India, only if.The sale or purchase either occasions such export or.Is effected by a transfer of documents of title to goods after the goods have crossed the customs frontiers of India.Occasions means to be immediate cause of sale and export should constitute part of an integrated activity. Goods should be destined to foreign country. Its actual reaching at the destination is not necessary.EXAMPLES from Book.
13 SALE IN COURSE OF IMPORT Section 5(2) A sale or purchase of goods is deemed to be in course of import of the goods into the territory of India, only ifThe sale/purchase either occasions such import orIs effected by a transfer of documents of title to goods before the goods have crossed the customs frontiers of India
14 Example: B purchased goods from foreign supplier A Goods reached India & lying with customs authorities(Pending clearance)B of Bombay without clearing the goods from customs, sold the same by way of transfer of title documents in favour of C of Chandigarh.Thereafter, C applied for customs clearance, fulfilled the customs formalities and got the goods cleared.COMMENTSSale/Purchase b/w A & B is Import sale u/s 5(2).Sale b/w B & C will also qualify to be in the course of import u/s 5(2)(b) as goods are sold by way of transfer of documents of title before the goods crossed the customs stationNo Sales tax chargeable on sale/purchase in the course of import.AFOREIGNB (in Bombay)C (Chandigarh)CUSTOMS STATIONINDIA
15 Penultimate sale for Export According to Section 5(3) of the Act, the last sale or purchase of goods preceding the sale/purchase occasioning the export of those goods out of territory in India shall also be deemed to be in the course of such export, subject to the condition that the penultimate sale is:For purpose of complying with agreement or order in relation to export.Such sale is made after the agreement of order in relation to export andSame goods which are sold in penultimate sale should be exported.
16 PENULTIMATE EXPORT SALE CFOREIGNPENULTIMATE EXPORT SALEB in Bombay A in ChandigarhINDIACUSTOMS STATIONPre-requisitesConfirmed export order with BAccordingly B places the order with AReceived the consignment from AExport the same goods to CCOMMENTSSale/purchase b/w A & B will also qualify to be deemed in the course of exportSale/purchase b/w B & C is export sale u/s 5(1)No Sales tax on export sale, provided the requisite proofs are submitted i.e.In case of sale/purchase b/w A & B, B should issue a declaration in Form H and forward it to A.In case of sale/purchase b/w B&C, customs document i.e. shipping bill is sufficient proof of export