Understanding Central Sales Tax (CST)
Central Sales Tax (CST) is a tax that is levied on the sale of goods that are transported from one state to another in India. It is levied by the Central Government of India under the Central Sales Tax Act, 1956. The tax is collected by the state government where the goods are delivered. In this blog, we will discuss the Central Sales Tax in detail, including its definition, applicability, and calculation.
Applicability of Central Sales Tax
The Central Sales Tax is applicable to any sale of goods that takes place between two states in India. It is also applicable to the sale of goods that are made to or by the government or to a registered dealer. However, if the sale of goods takes place within the same state, it will not attract the Central Sales Tax. The CST is applicable to both, the sale of goods within India, and the sale of goods that are exported out of India.
Calculation of Central Sales Tax
The Central Sales Tax is calculated as a percentage of the sale price of the goods that are being transported from one state to another. The rate of CST varies depending on the type of goods being sold and the state where the goods are being delivered. Currently, the maximum rate of CST is 2% of the sale price.
For example, if the sale price of goods being transported from one state to another is Rs. 10,000 and the rate of CST is 1%, then the Central Sales Tax would be Rs. 100 (1% of Rs. 10,000).
Exemption from Central Sales Tax
Certain goods are exempt from Central Sales Tax. These include goods that are used in the manufacture of other goods, goods that are sold to the United Nations, goods that are sold to an exporter who is registered under the Export Promotion Council, and goods that are sold to a dealer who operates from a Special Economic Zone (SEZ).
History of Central Sales Tax
The Central Sales Tax was introduced in 1956 as part of the Constitution of India. The tax was implemented to ensure that the revenue collected from the sale of goods was distributed among the central and state governments in a fair manner. The tax was initially set at 10% of the sale price of goods, but it was later reduced to 4% in 1991. The tax rate was further reduced to 3% in 2002, and then to 2% in 2005.
Changes in Central Sales Tax over the years
Over the years, there have been several changes made to the Central Sales Tax. One of the most significant changes was the introduction of the Value Added Tax (VAT) system in India in 2005. The VAT system replaced the Sales Tax system in most states, but the CST continued to be levied on inter-state sales of goods. In 2017, the GST (Goods and Services Tax) was introduced, which replaced all other indirect taxes in India, including the CST.
Impact of Central Sales Tax on businesses
The Central Sales Tax has had a significant impact on businesses that operate in multiple states in India. Businesses that sell goods across state borders are required to pay the CST, which can increase their costs. This can make it difficult for businesses to compete with other businesses that operate only within a single state.
Conclusion
The Central Sales Tax was an important tax that was levied on the sale of goods that were transported from one state to another in India. It was collected by the state government where the goods were delivered. The tax rate varied depending on the type of goods being sold and the state where the goods were being delivered. However, with the introduction of GST, the Central Sales Tax was abolished. The GST replaced all other indirect taxes in India, including the CST. This has simplified the tax system in India and has made it easier for businesses to operate across state borders.
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Frequently Asked Questions (FAQs)
What is Central Sales Tax?
Central Sales Tax (CST) is a tax levied by the Indian government on the sale of goods that are transported from one state to another in India.
Who is liable to pay Central Sales Tax?
Any registered dealer who sells goods from one state to another in India is liable to pay Central Sales Tax.
What is the rate of Central Sales Tax?
The rate of Central Sales Tax varies depending on the type of goods being sold and the state where the goods are being delivered. Currently, the maximum rate of CST is 2% of the sale price.
How is Central Sales Tax calculated?
The Central Sales Tax is calculated as a percentage of the sale price of the goods that are being transported from one state to another.
Is Central Sales Tax applicable to exports?
Yes, Central Sales Tax is applicable to the sale of goods that are exported out of India.
Is Central Sales Tax applicable to the sale of goods within a state?
No, the Central Sales Tax is not applicable to the sale of goods that take place within the same state.
What are the goods exempt from Central Sales Tax?
Goods that are used in the manufacture of other goods, goods that are sold to the United Nations, goods that are sold to an exporter who is registered under the Export Promotion Council, and goods that are sold to a dealer who operates from a Special Economic Zone (SEZ) are exempt from Central Sales Tax.
How is Central Sales Tax collected?
The Central Sales Tax is collected by the state government where the goods are delivered.
What is the purpose of Central Sales Tax?
The purpose of the Central Sales Tax is to ensure that the revenue collected from the sale of goods is distributed among the central and state governments in a fair manner.
Is Central Sales Tax still applicable?
No, Central Sales Tax was abolished after the introduction of Goods and Services Tax (GST) in India in 2017.
