Difference tax applicable on non submission of c form against inter state sales

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This query is : Resolved

K.Balamurugan (Querist)

24 November 2022 Dear Sir

Our dealer has made cst sales @ 2% for commodity code 2025 (capital goods) which is taxable at 5% on normal sales.

During cst assessment we were not able to collect c forms from some of our customers and submit to the sales tax department.

Now the sales tax department has demanded difference tax at 12.5% for the cst sales instead of 3% (normal rate 5% cst paid 2% difference of tax 3% for non submission of c form)

They argue that as we have made sales of some other commodity taxable @ 14.5% so the difference tax will be 12.5%

But all our cst sales has been made for commodity code 2025 only

Kindly advise

Regards
K.Balamurugan

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

06 July 2024 In your situation, it appears there is confusion regarding the correct rate of Central Sales Tax (CST) applicable to your sales under commodity code 2025 (capital goods). Here are the key points to consider and how you can address the issue:

1. **Correct CST Rate for Commodity Code 2025**: Commodity code 2025 typically attracts a CST rate of 5% on normal sales. However, if your dealer has made CST sales at 2% and was unable to collect C Forms, the differential tax would normally be 3% (5% - 2%).

2. **Demand by Sales Tax Department**: The sales tax department has demanded a differential tax at 12.5%, which seems unusually high compared to the standard 3% differential for non-submission of C Forms. They argue that since you have other sales at 14.5% tax rate, the differential tax for CST sales should be 12.5%.

3. **Clarify the Commodity Code**: Ensure that all your CST sales were correctly classified under commodity code 2025 (capital goods). If there was any misclassification or confusion, it should be clarified with the sales tax department.

4. **Documentation and Evidence**: Gather all relevant documents, including invoices, CST declarations, C Forms collected (if any), and correspondence with the sales tax department. This documentation will help in demonstrating the correct application of CST rates and compliance efforts.

5. **Seek Clarification**: Request a detailed explanation from the sales tax department regarding their calculation of 12.5% differential tax. Ask for clarification on how they arrived at this figure, especially if all your sales were indeed under commodity code 2025.

**Consult with a Tax Professional**: If the issue remains unresolved or if you are unsure about how to proceed, consider consulting with a tax advisor or a legal professional specializing in sales tax matters. They can provide specific guidance based on the details of your case and help navigate discussions with the sales tax authorities.

It's crucial to address this issue promptly and with proper documentation to avoid any penalties or incorrect tax assessments. Ensure that all communications with the sales tax department are documented for future reference.

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