Central Sales Tax Act, 1956

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The Central Sales Tax Act, 1956 is an important Indian Act under Tax Law.

Contents

History

Britishers enacted the Government of India Act, 1935 to formulate India as a Federal State.

First Sales Tax Act

The Madras State Government imposed the first sales tax in India in the year 1939 via the Madras General Sales Tax Act, 1939. The intention of this tax is to fill up the budget deficit that arose due to prohibition of liquor. The tax was in the rate of 1/2 paise in the rupee. Soon other states began to levy sales tax and there was no co-ordination between states in the tax levy.

Considerable developments in the area of taxation occurred after Indian independence. The Government took the recommendations of the Taxation Enquiry Commission that gave a broad view on what to be taxed and what shouldn't be taxed.

Introduction

The original Central Sales Tax Act, 1956 had 18 sections in 5 chapters. The Central Sales Tax (Registration and Turnover) Rules 1957 explained about the provisions of the implementation of the act. The Act was amended in 2001. The Value Added Tax system was later implemented.

Preamble

An Act 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 provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject.

Sections

  • Section 2: Definitions
  • Section 14: A list of such declared goods is provided. Ex: Cereals, Rice, Milk, Salt, Oil, Coal including coke in all its forms but excluding charcoal; Cotton, Cotton fabrics, cotton yarn but not including cotton yarn waste, Aviation turbine fuel, hides and skins, iron and steel, sugar covered under certain headings etc.
  • Section 15: Imposes restrictions and conditions in regard to tax on sale or purchase of declared goods within a state. Restriction on the States that they should not levy sales tax (now VAT) not more than 4% on the declared goods. The rationale behind this is that there should not vary from State to State.
  • Section 3: Deals with formulation of principles for determining when a sale or purchase of goods take place in the course of inter-State trade or commerce.
  • Section 4: Deals with formulation of principles for determining when a sale or purchase of goods take place outside of a State.
  • Section 5: When is a sale or purchase of goods said to take place in the course of import or export
  • Section 6 and 6A: Imposes the liability to pay tax upon the person who sells goods in the course of inter-state trade or commerce
  • Section 7 of Central Sales Tax Act, 1956: Registration of Dealer
  • Section 8(1): Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods in the course of inter-State trade or commerce, shall be liable to pay tax under this Act, which shall be three per cent of his turnover or at the rate applicable to the sale or purchase of goods inside the appropriate State under the sales tax law of that State, which ever is lower.
    • The selling dealer shall furnish to the prescribed authority by stating the Rule 12 of the CST (R&T) Rules, and in the prescribed Form-C and that declaration should be duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in order to get the 3% rate of tax.
    • Exemptions: Exemption from the CST is given to the SEZ.
  • Determination of Turnover
  • Section 9 explains about Levy and Collection of Tax and Penalties.
  • Section 19: Central Government is empowered to constitute the Central Sales Tax Appellate Authority
    • Comprises of Members appointed by the Central Government
      • A Chairman who is a retired judge of the Supreme Court of India or a retired Chief Justice of a High Court.
      • An officer of the Indian Legal Service who is, or is qualified to be, an Additional Secretary to the Government of India
      • An officer of a State Government not below the rank of Secretary or an officer of the Central Government not below the rank of Additional Secretary, who is an expert in sales tax matters.
  • Section 19A: Vacancies etc not to invalidate proceedings
  • Section 20: Appeals and the procedure to be heard by the Central Sales Tax Appellate Authority
  • Section 21: Procedure on receipt of Application in the Appeal
  • Section 22: Powers of the Authority. Powers of Court under Code of Civil Procedure, 1908.
  • Section 23: Procedure of the Authority
  • Section 24: Advance Rulings to function as Authority under this Act
  • Section 25: Transfer of pending procedure
  • Section 26: Orders passed by the authority are binding on each State Government, the assessing authorities and other authorities created by or under any law relating to general sales tax.

Recent Cases / Related Cases

  • Stainless steel wire is not covered within entry (ix) of clause (iv) of section 14 of Central Sales Tax Act
    • The Expression "wire rods and wires" which is mentioned in item no.(xv) would not and cannot cover the expression "tools, alloy and special steels" of entry no.(ix) nor it would refer to the expression "Iron & Steel" as each item used in entry nos.(ix) and (xv) are independent - [2011] 10-354 (SC)
  • It is inappropriate for Courts to issue a mandate to legislate an Act and also to make a subordinate legislation in a particular manner
    • Where the High Court issued directions for inserting certain additional words into a notification of exemption issued by the U.P. Government, it exceeded its jurisdiction in passing said directions - [2011] 10-344 (SC)

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