LIABILITY TO TAX CHAPTER-5

INTRODUCTION Every dealer engaged in inter state sales is liable for tax even if no tax is leviable under state laws. Exception to above :- If sale amounts to exports from india Electric energy Liability of tax is on the dealer, levy of tax is by Govt. of India and tax is collected by the registered dealer in the State.

LIABILITY TO TAX ON INTER STATE SALES (SECTION. 6) Section 6 is known as charging section as it imposes levy on sale of goods on inter state sales irrespective of quantum of turnover, liability to CST attaches to every dealer. Every dealer is liable to pay tax under inter state sales except if sale amounts to exports from India and electric energy. In the case of inter state sale of goods which may not be liable to tax, if sold within the state should be brought to tax.

SUBSEQUENT SALES (Sec. 6(2)) Where a Sale of any goods in the course of Inter-State trade or commerce has either occasioned the movement of such goods from one state to another or is effected by transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods, to a registered dealer is exempt from tax under this Act provided:- The first sale must be a Inter state sale Subsequent sale must take place during the movement under the first sale Subsequent sale must be to a registered dealer Goods are of description referred to in Sec8(3) (Goods which are purchased for resale, manufacturing and packing) 4) Subsequent sale is effected by transfer of documents of title to goods 5) The dealer making subsequent sale has to produce Form E-I or E-II, as the case may be, obtained from the dealer from whom he purchased goods and also produce Form C obtained from the dealer to whom the subsequent sale is effected.

M N O P Example:- M sold the goods to N N sold the goods to O without stopping the inter state movement of goods. Goods sold by way of transfer of title documents. O further sold the goods to P by way of transfer of title documents, without taking the possession from the carrier P took the delivery of goods There after, P sold the goods to ultimate customers. COMMENTS: First sale b/w M &N is inter state sale &is chargeable to CST Subsequent inter state sale b/w N & O is exempt subject to: N should procure Form C/D from buyer O Further N should procure Form E1 from his supplier M M N O P Ultimate customers State X State Y

Continued… Again Inter state sale b/w O & P is exempt in the hands of O, subject to: O should procure Form C/D from buyer P. Further O should procure Form E2 from his supplier N Sales b/w O and ultimate customers are all local sales inside the State Y, chargeable to local Vat & not CST (Concessional Form D- provision rescinded w.e.f. 01/04/2007

EXEMPTION FROM CST Subsequent sales by transfer of documents of title. SEZ units or SEZ developer– Form I is issued. Exemption to supplies to foreign missions/ UN etc.- Form J Sale in the course of export Penultimate sale of export- Form H Sale in the course of import Exemption from Submitting Form C: Sale/purchase is exempt under local VAT law or subject to lower tax Subsequent sale

IMPORTANT POINTS REGARDING LIABILITY TO TAX Three stages in imposition of tax- declaration of liability, assessment and method of recovery Liability to pay tax when accrues Liability is annual Filling of forms and returns Furnishing of false certificate is an offence STOCK TRANSFER CONSIGNMENT TRANSFER WORKS CONTRACT

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