CENTRAL SALES TAX ACT 1956

1. It extends to the whole of India.

2. Every dealer who makes an inter-state sale must be a registered dealer

a certificate of registration has to be displayed at all places of his business.

3. There is no exemption limit of turnover for the levy of central sales tax.

4. Under this act, the goods have been classified as:

# Declared goods or goods of special importance in inter-state trade or commerce and
# Other goods.
The rates of tax on declared goods are lower as compared to the rate of tax on goods in
the second category.

5 The tax is levied under this act by the Central Government but, it is
collected by that state government from where the goods were sold.

6 The rules regarding submission of returns, payment of tax, appeals etc. are not given in
the act but are formulated by the state in respect of its own sales tax law.

IMPORTANT DEFINITIONS:

APPROPRIATE STATE [SECTION 2 (A)]-

It means the state where a dealer has his business situated.

BUSINESS [SECTION 2 (AA)] –

Any trade, transaction, commerce or manufacture or any adventure or concern in the
nature of trade, commerce or manufacture whether or not it is carried on with a motive to
make gain or profit and whether or not any profit or gain accrues from it.

DEALER [SECTION 2(B)]

Any person who carries on (whether regularly or otherwise) the business of buying,
selling, supplying or distributing goods, directly or indirectly, for cash for
commission or other consideration. It includes -

1 A local authority, a body corporate, a company, any cooperative society, firm,

HUF association of persons which carries on such business

2 A broker, commission agent who carries on business of buying, selling or

distributing goods

3 Government
Registered dealer [Section 2 (f)]
This means a dealer who is registered under Section 7 of the Act.
Place Of Business [Section 2 (dd)]
Central sales tax is collected by that state Government where the dealer has place
of business.
Declared Goods [Section 2(c)]
It includes those goods which are considered to be of special importance in
interstate trade or commerce under section 14. Some of these goods are Cereals,
Coal, Cotton, Crude Oil, Jute, Oilseeds, Pulses, Sugar.
Goods [section 2(d)]
This includes all material articles or commodities and all kind of movable
property excluding newspapers, actionable claims, stocks, shares, and securities.

TURNOVER [SECTION 2 (J)]

It is the aggregate of the sale prices received and receivable by the dealer
in respect of sales of any goods in the course of inter-state trade or
commerce made during a prescribed period. Prescribed period is the
period in which sales tax return is filed.

RATES OF TAX:

The rate of central sales tax is 4 % or local state rate whichever, is lower on the first
point of inter-state sale if, the goods are sold to the government or to a registered
dealer, and on the fulfillment of specified condition, subsequent sales during the
movement of same goods will be exempted from tax.
But, if any of the dealers in these subsequent sales is or an unregistered dealer
then the last registered dealer will collect tax @ 10% from an unregistered dealer to
whom goods have been sold.

COLLECTION OF TAX SEC. 9 A:

The central sales tax can be collected from the buyers only by the registered dealers
on the inter-state sale effected by them. According to rules prescribed under this
Act., Dealers who are not liable to pay tax under general sales tax law the period of
filing the return in a financial year is

n Quarter ending on 30 June

n Quarter ending on 30 September
n Quarter ending on 31 December
n Quarter ending on 31 March

REGISTRATION:

Every dealer who is liable to pay Central sales tax should make an application for
registration under the Act to appropriate authority in his state.
 Advantages of Registration
A registered dealer has to pay actual sales Tax @ 4% only on goods purchased by
him for manufacture or resale otherwise he will be charged @ 10%.

VALUE ADDED TAX (VAT)

VAT is a tax paid at each point of exchange of goods where value is added starting
from production till final consumption.

Difference between VAT and Sales Tax:

In case of VAT consumer pays tax on the value of product only once while in case of
sales tax he pays tax on some parts of the product more than once.

Basic VAT Rates:

n There are four rates 0%, 1%, 4% and standard rate of 12.5%.
n On natural and unprocessed products of the unorganized sector that are
legally excluded from taxes, VAT is 0%.
n 1% VAT is payable on gold and silver ornaments, precious and semiprecious
stones.
n 4% VAT is payable on basic necessities (including medicines and drugs)
declared goods, capital goods consisting of 270 items and all industrial and
agricultural raw materials.
n 12.5% VAT is payable on most consumer goods.

Benefits of VAT

VAT will lead to increase in tax collection. Revenue so generated will help in
providing more and better facilities and services for the citizen

Earlier traders were not issuing cash memos while making sales and
customers were also not asking for cash bills because then they had to pay more on
account of sales tax. Thus huge part of undisclosed income was leading to tax
evasion. But with the introduction of VAT, to claim the difference in VAT he has
paid to his supplier and the VAT he has collected from his customer, a business will
issue cash bill. As a result the system of trading without sales documents and not
paying tax will be over.
CUSTOMS ACT 1962

Customs duty is a duty or tax, which is levied by Central Govt. on import of goods
into, and export of goods from, India. It is collected from the importer or exporter
of goods, but its incidence is actually borne by the consumer of the goods and not by
the importer or the exporter who pay it.

Objectives of customs duty:

The customs duty is levied primarily:

1. To raise revenue.
2. To regulate imports of foreign goods into India.
3. To conserve foreign exchange, regulate supply of goods into domestic market.
4. To provide protection to the domestic industry from foreign competition by restricting
import of selected goods and services

Scope and Coverage of Customs Law:

There are two Acts which form part of Customs Law in India:
1. The Customs Act, 1962
The Customs Act. 1962 is the basic Act for levy and collection of customs duty in
India. It contain various provisions relating to imports and exports of goods and
merchandize as well as baggage of persons arriving in India.

2. The Customs Tariff Act, 1975

The Customs Duty is levied on goods imported or exported from India at the rates
specified under the Customs Tariff Act, 1975.

Types of customs duties:

l Basic Customs Duty ( levied under Custom ACT on all goods coming to India at
the rate specified by Finance Act)

l Auxiliary Duty of Customs( this duty is levied under the Finance Act and is
levied on all goods imported into the country at the rate of 50 per cent of their
value).

l Additional Duty of Customs

This duty is levied as additional duty on goods imported into the country and the rate
structure of this duty is equal to the excise duty on like articles produced in India.

l Export Duties
Under Customs Act, 1962, goods exported from India are chargeable to export duty
The items on which export duty is chargeable and the rate at which the duty is levied are
given in the customs tariff act as amended under Finance Acts
 l Cesses
Cesses are levied on some specified articles of exports like coffee, coir, lac, etc. These
cesses are collected as parts of Customs Duties and are then passed on to the agencies in
charge of the administration of the concerned commodities.

l Anti Dumping Duty on dumped articles

DUTY DRAWBACK PROVISION

Drawback means the rebate of duty chargeable on any imported materials or excisable
materials used in manufacture or processing of goods which are manufactured in India
and exported. Export means taking out of India. Duty Drawback is equal to
(a) customs duty paid on imported inputs plus
(b) excise duty paid on indigenous inputs.
However, if inputs are obtained without payment of
customs/excise duty, no drawback will be paid.

CENTRAL EXCISE LAWS

As per section 3 of Central Excise Act (CEA) excise duty is levied if -

1) There is a good
2) Goods must be moveable
3) Goods are marketable
4) Goods are mentioned in the central excise tariff act (CETA)
5) Goods are manufactured in India

TAXABLE EVENT

Taxable event means the stage when tax is levied / applied. Manufacture or production in
India is the stage of levying tax. However, the government collects tax at the time when
the goods are removed from the factory i.e. goods are taken out from factory.

So excise duty is levied at the time of removal of goods. Excise duty is levied only if
goods are MOVABLE and MARKETABLE. Actual sale is not relevant.

RATES OF EXCISE DUTY

The basic rate of excise duty is 16% while in some cases there is a special duty if 8%
which makes the excise duty in those cases at 24%. There is, at present, a cess for
education called education cess, which is 2% of the excise duty; therefore, the effective
excise duty comes out as 16.32% or 24.48%.
TRADE PARLANCE THEORY

Trade Parlance Theory emerged out of case of Grenfell vs. IRC (1876), where justice
Pollok concluded that no word should be interpreted (understood in its popular sense) in
which people understand it. Also a product should be classified on the basis of its end
use.
Some Examples:
l A mirror is not a glass wear, as glass loses its character after it is converted into
mirror.
l Windscreen of motor vehicle (front glass of car) is not a glass, it is understood as
automobile part.

VALUATION OF GOODS

Excise duty is payable on the basis of:

1. Specific duty based on measurement like weight, volume, length etc.
2. Percentage of Tariff values fixed by Govt.
3. Maximum Retail Price.
4. Compounded levy Scheme for small manufacturers.
5. Percentage of Assessable Value i.e. Final Sales Value

REGISTRATION OF GOODS

According to section 6 of Central Excise Act, every manufacturer or producer, who

produces excisable goods, must get two types of registration:
1. Registration for manufacturer.
2. Registration for warehouse where goods are stored.

DUTY PAYMENT PROVISIONS

Goods cleared from factory are cleared under an invoice. Duty is payable on monthly
basis by 5th of the next month in which duty payment becomes due i.e. the month in
which goods are cleared from the factory.

Small Scale Industry (SSI) is required to pay the duty by 15th of the next month.