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Under the Central Sales Tax law, C form is required to avail concessional rate of tax. Till recently, full rate of tax was 10% and concessional rate was 4%. Today, the full rate is 4% and concessional rate is 2%. For most business transactions, concessional rate is applicable for which the buyer is obliged to submit a declaration as C Form which he gets from his Commercial Taxes Deptt. This C form only proves to the seller’s Commercial Taxes Deptt (CTD) that the goods have indeed been sold in the course of interstate trade, and not intra-state trade. There is absolutely no other purpose this C form serves.

Since conversion of conventional sales tax into VAT, there is no incentive for any intrastate buyer to disguise his purchase as interstate because intrastate purchases entitle him to take credit for the VAT paid whereas CST paid on interstate purchases is not creditable and thus, an additional cost.

Untill Yashwant Sinha became Finance Minister, C form was compulsory only in cases where the CST tax rate was higher than the local tax rate and in other cases, C form was not mandatory. This gentleman made C form compulsory for any inter-state transactions. Earlier, C form was required one for whole year’s transactions. He made it quarterly such that four C forms are required for a year and there are additional hassles of one quarters’ sale being inadvertently put into another quarter and so on. The CTD have suddenly found great value in concentrating on these C forms at the receiving end, and thus, become more sluggish at the issuing end.

Earlier, blank C forms were issued to a dealer who could fill in the required details and release the same to his supplier. Now most states have stopped issuing blank C forms. Instead, they are asking for complete details of all interstate purchases, many in soft form for uploading on website. CTDs are in the process of national level uplinking so that one dealer’s interstate purchases could be verified with another dealer’s interstate sales. Upon such verification, their system would allow C forms to be printed for ultimate release to the supplier. Currently, in most cases, CTDs are issuing C forms by filling in the required information for a specific purchase from a specific supplier only. Consequently, there is enormous amount of time and attention this whole exercise of C form is entailing on the business community.

All the states seem to have decided to monitor all interstate transactions with a view to check evasion of taxes. They have already introduced a road permit system under which a dealer has to submit a particular declaration form, called way bill or road permit, in advance to his supplier who will attach such declaration with his invoice and lorry receipt, and then, dispatch the material. Most state borders have erected check posts where all trucks are checked for such waybill. This is happening for last decade or so. States like UP and Haryana are so serious on this waybill that even mistakes in its filling up, threatens costly consequences for the supplier and the transporter. Needless to say, staff posted at such checkposts have become rich and there are newspaper reports that postings at these places are auctioned just like RTO staff postings at the check posts.

In my humble view, C form is quite an insult to Indian intelligence, and the intention to monitor interstate business is criminal. On one hand, India is signing Free Trade Agreements with other countries to facilitate free movement of goods between India and SAARC, ASEAN or other such blocks, and on the other, movement of goods between two states within India is being restricted. There is an urgent need for an FTA among all states of India to facilitate free movement of goods for which both, way bill and C form be abolished with immediate effect.


Anil Garg

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CA Anil Garg
Category VAT   Report

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