Under the Central Sales Tax Act,1956 (in short CST), registered dealers are eligible for certain concession or exemption of tax on inter-State transactions if dealer is able to comply with certain conditions. Submission of statutory forms is one of such condition which allows the dealer for concessional rate of tax. There are so many forms like Form C, Form F, Form H, Form-I , Form E-I or E-II etc. etc.However before dealing with the procedural issues involved in obtaining or submitting these Forms it is more important to understand few concepts like what is ‘ intra-State transaction’ or ‘Inter-State transaction’ because once nature of transaction is established, it would be very easy to know that whether VAT is applicable of central Sales Tax (CST)and then procedural compliance can be done easily.
As per constitution, tax on inter State sale/purchase can be levied only by Union Government while tax on ‘sale within State’ can be levied by the State Government.
In general, sale where seller and buyer both are from same state is called as intra state sale for example “ seller of Kanpur (U.P.) sells goods to a dealer of Noida (U.P.)” but when buyer and seller are in different States, it is Inter-state sales. For example a seller of Chennai (Tamil Nadu) sells goods to dealer based at Allahabad (U.P.) however location of seller & buyer is immaterial and both can be located in same State but goods should be moved from on State to another.
Section 3(a) of the Central Sales tax Act, 1956 provides definition of nature of inter-State sale. The said section reads as under:
A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase –
(a) occasions the movement of goods from one State to another; or…."
The section provides that if movement of goods from one state to another (i.e. inter-state movement) happened because of pre agreed sale or as pre condition of sale then such movement of goods shall be deemed to be inter-state sale/purchase.
For a sale to be an inter-State sale, it must satisfy three essential ingredients:-
(i) There must be a contract of sale, incorporating a stipulation, express or implied, regarding inter-State movement of goods;
(ii) The goods must actually move from one State to another pursuant to such contract of sale, the sale being the proximate cause of movement; and
(iii) Such movement of goods must be from one State to another State where the sale concludes.
Where the transaction of sale/purchase stands completed within the State and the movement of goods takes place thereafter independently of the contract of sale, the transaction would not have an inter-State element. Where the movement of goods is the result of a covenant in the contract of sale or is an incident of the contract, the sale may be regarded as an inter-State sale and it is immaterial whether the property in goods passes in one State or another. What is important is that the movement of goods and the sale must be inseparably connected. It is not necessary that there should be an existence of contract of sale incorporating the express or implied provision regarding inter-State movement of goods.
(Bold matter is from the decision given by Hon’ble High court-Chhattisgarh)
In CST v. Suresh Chand Jain - (1988) 70 STC 45 (SC), Hon’ble Supreme Court held that a sale can be said to be in the course of inter-state only if two conditions concur viz.
(i) sale of goods and
(ii) a transport of those goods from one State to another.
Thus transaction must be a completed sale. Location of buyer and seller is immaterial. Thus, even if buyer and seller are within the same State, sale will be inter-state, if sale occasions movement of goods from one State to another. e.g. the buyer may have construction site in another State and may ask seller to dispatch goods directly to the site.
Thus in conclusion it can be inferred that:-
(i) There should be sale of contract
(ii) There must be movement of goods from one State to another in pursuance of such contract
(iii) Seller & buyer may be located in same State and it will not affect the nature of transaction
In next Article, I will try to take some issues on “nature of Form C and it’s procedural compliance”
Thanks & regards
CA Chandra Kishore Bajpai
M.Com,FCA, DISA (ICAI), Certificate in International Taxation