In Pursuit of Knowledge

Recent Amendments to Central Sales Tax Act, 1956

Nikita R. Badheka, Advocate & Notary


Union Budget – 2007

          In the budget speech the Hon’ble Finance Minister declared that rate of CST will be reduced to 3% w.e.f. 1-4-2007. The relevant amendments are already made to section 8 of CST Act by Central Sales Tax Amendment Act. Salient features of the amendments are as under:

          The amendments in the Act discussed herein below are all effective from 1-4-2007.

          Regarding C form: Major amendments are made to section 8 of CST Act. Sections 8 (1) & (2) are substituted where as some consequential amendments are made in other sub sections. The effect of the amendments are as follows:–

  1. The rate of tax on sales of goods against C form will be 3% with effect from 1-4-2007, instead of 4%.
     

  2. The facility of sales against D form to the Central or State Government is withdrawn w.e.f.
    1-4-2007. The Central or State Govt. are now put at par with normal dealer. Thus if such Govt. Departments are registered they will be able to issue C form otherwise sales to such Govt. Departments will be subjected to the tax as mentioned in the chart, as sales without C form
     

  3. The tobacco and tobacco products including cigarettes are removed from the list of Declared goods and hence VAT in excess of 4% can be now levied by the States. The State of Maharashtra has amended the Schedule Entries w.e.f. 1-4-2007. Only unmanufactured tobacco and bidies will be exempt from tax under Entry A-45A. All other types of tobacco (i.e., cigarettes, cigars, cheroots, sniff, jarda, scented tobacco, gutkha, tobacco extracts, and essences including quimaam) will be taxable @ 12.5%.
     

  4. Sales of goods under 6 (2) – Sales in transit Following the amendments made in section 8 of CST Act consequential amendments are made to section 6(2). Now it is provided that if the sale or purchase of such goods under the Sales Tax Law of the appropriate State is exempt from tax generally or taxable at a rate lower than 3% then C form will not be necessary, provided it is proved that subse-quent sale is by transfer of documents of title to goods in terms of section 6 (2) of CST Act.
     

  5. There are other consequential changes like in section 10 etc. due to deletion of Form D.

    Rate of tax on sales of goods with/ without C form

    Nature of goods VAT 

    rate

    		      CST rate prior to 1-4-2007                           CST rate after 1-4-2007
     
      UnderForm C/D WithoutForm  Under   Form C Without Form
     
    Tax free goods, unconditionally – fully  exempt
         		 0%
         		 0%
         		 0%
         		 0%
         		 0%
     
    Precious metals,  jewellery and articles made of precious  metals, diamonds, pearls, etc
         		 1%
         		 1%
         		 10%
         		 1%
         		 1%
     
    Declared goods (Iron & steel, cotton, coal,  crude oil, oilseeds etc.)
         		 4%
         		 4%
         		 8% (Twice the VAT rate) 
         		 3%
         		 4%
     
    Notified goods  (Like industrial inputs)
         		 4%
         		 4%
         		 10%
         		 3%
         		 4% (i.e. VAT rate) 
     
    Foreign liquor, country liquor, imported  liquor, molasses, rectified spirit 
         		 20% or more
         		 4%
         		 20% or more as applicable
         		 3%
         		 20% or more as applicable 
    under VAT
    Other goods which are not covered in any Schedule
         		 12.50%
         		 4%
         		 12.50%
         		 3%
         		 12.50% (VAT rate)
     
    Goods notified under section 8 (5) of CST Act
         		 As  applicable
         		 4% or notified rate whichever  is lower 10% VAT rate, whichever is higher @ 3% or notified Rate whichever is lower @ VAT

    rate
    Inter-State sales to SEZ developer/ Unit 
         		 Not applicable
         		 0% against Form ‘I’
         		 10% or VAT rate, whichever  
    is Higher     		 0% under Form‘I’
         		 @ VAT rate