Full Form of CST – Central Sales Tax
The full form of CST is Central Sales Tax. CST can be defined as a tax levied by the Central Government of India upon the inter-state sale of goods and services, and this type of tax is not applicable on import or export or sales that are made within one state, and it is required to be paid in the state where the goods or services are sold.
Features of Central Sales Tax are as follows:
- Central Sales Tax is the tax levied on sales of goods and services. The Central Government of India levied the CST.
- Central Sales TaxSales TaxThe government levies sales tax on the consumption of various goods and services as the percentage added to the product and services from which the government earns revenue and does the company's welfare. In the United States, 38 different states have different taxes, from Alaska (1.76%) to Tennessee (9.45%). is not applicable to sales that are made within a particular state, and it does not apply to the import or export of goods.
- It applies to inter-state trade only. It is monitored by the sales tax department of each state.
- Central Sales Tax is required to be paid in the state where the trade actually takes place.
- The state that collects the Central Sales Tax on inter-state trade will get to retain the same.
- Central Sales Tax is assessed and collected by the sales tax officer. They can be regarded as an indirect tax levied on the customers. It is applicable all over India.
- Dealers must be registered dealers for executing interstate trade transactions, and it is required for them to present their certificate of registration at each and every place of their business.
- They do not provide any exemption limit.
- CST Act classifies goods as declared goods and other goods. The taxes imposed on declared goods are lower than the taxes imposed on other goods.
- The Central Government of India has developed the CST Act, but it also gives the State Governments the right to reframe rules as and wherever it may deem fit.
The objectives of a Central Sales Tax are as follows:
- Construct and provide principles in order to determine if the sales taking place are:
- Inter-state trade, or
- Import or export of goods from India, or
- Outside a particular state trade.
- Guide for the levyThe LevyA levy is a lawful process where the debtor's property is seized when the debtor cannot pay the outstanding debts. It is different from liens, as a lien is only a claim against a property, whereas a levy is an actual property takeover to fulfill the obligation., collection as well as distribution of taxes on interstate trade.
- Classify goods as declared goods or other goods. Declared goods are goods that are regarded as special importance in interstate trade. The tax imposed on declared goods is lower while the tax imposed on other goods is higher.
- They also aim at settling and resolving disputes that arise during an inter-state trade.
- CST also ensures that the taxes are collected if the company is about to or goes into liquidationLiquidationLiquidation is the process of winding up a business or a segment of the business by selling off its assets. The amount realized by this is used to pay off the creditors and all other liabilities of the business in a specific order..
Rules of CST
An individual must abide by the following rules of CST if he or she is executing an inter-state trade:
- He or she must be a registered dealer.
- A dealer must submit Form A in order to apply and get registered under Sec. 7 of the CST Act. The proprietor must authorize the Form, and the concerned authority must also verify it.
- If an applicant has more than one place of business in a particular state, just one form must be submitted.
- A dealer must keep his registration certificate at his or her chief place of business and must necessarily produce copies of the same at other business venues.
- The applicant will be required to make payments via court fee stamps if he loses his registration certificate and is seeking to receive a copy of the same.
CST Transaction Forms
The type of transaction forms issued by the dealers to their buyers and sellers are:
- Form C: The buyer in an interstate trade is eligible to receive goods at a concessional rate if he or she submits Form C to the seller.
- Form D: The government that is at the purchasing front in an interstate trade is eligible to receive goods at a concessional rate if it submits Form D to the seller.
- Form E1: A dealer who is participating in an interstate transaction for the first time is responsible for the issuance of Form E1.
- Form E2: A dealer who is participating in an interstate transaction for the second time is responsible for the issuance of Form E2.
- Form H: Form H is issued by the exported against the purchase of goods.
- Form I: Form I is issued by a dealer who is located in SEZ or Special Economic Zone.
Central Sales Tax Rate
The following are the rates of CST:
- Form C: The rate of Central Sales Tax for an interstate trade to a registered dealer would be the lower of the two:
- 4 percent, or
- The local sales tax rate
- If the trade is covered under the purview of local sales tax laws, then the same exempted to be taxed for CST.
- Form D: The rate of Central Sales Tax for an interstate trade to the government would be the lower of the two:
- 4 percent, or
- The local sales tax rate
- Declared Goods: The rate of central sales tax for an interstate sale of goods that are of special importance or declared goods in the absence of Form C or Form D will be twice the tax rates applicable in the local trade of goods.
- Other or Non-Declared Goods: The rate of Central Sales Tax for an interstate sale of other or non-declared goods would be the higher of the two:
- 10 percent, or
- The local sales tax rate applicable.
CST stands for Central State Tax. It is a tax levied by the Central Government of the country upon the sale of goods. CST is concerned only with interstate trade or commerce and does not cover trade within the state or export or import of goods. It is regulated by the Sales Tax department of each state. Central Sales Tax must be paid in the state where the trade actually takes place. Form C, Form D, Form E1, Form E2, Form F, Form H, and Form I are the forms used in a CST.
This has been a guide to the Full Form of CST, i.e. (Central Sales Tax) and it’s meaning. Here we discuss CST rules and forms of the transaction along with its rates, characteristics, and objectives. You may refer to the following articles to learn more about finance –