Sales Tax Review

May  2007

Important Trade Circulars

No. CST-1007/1/Adm-3

Gentlemen/Sir/Madam,

The Central Sales Tax Act, 1956 has been amended by The Taxation Laws (Amendment) Act, 2007 (Act No. 16 of 2007).  The Amendment Act has come into effect from the 1^st April 2007.  A Trade Circular dated the 30^th March 2007 (Trade Circular No. 28 T of 2007) has been issued explaining the effect of the amendments.  After the circular was issued, certain queries have been received regarding the scope of the amendments.  The queries are answered below:-

2. In the Trade Circular referred to above, it has been stated that,“2.  The net effect of the amendments is as follows :-

1. The rate of CST on inter-State sale to registered dealers (against Form-C) shall stand reduced from 4% to 3% or the rate of VAT applicable in the State of the selling dealer, whichever is lower.
    

2. The rate of CST on inter-state sale other than sale to registered dealers shall be the rate of VAT applicable in the State of the selling dealer.”

3. The queries are regarding clause (b) above.  It is now clarified that if an inter-State sale is made to:-

1. a person other than a dealer or

2. an un-registered dealer or

3.  a registered dealer who has not issued the declaration in Form ‘C’ then, the applicable rate of CST shall be the VAT rate applicable in the State of the selling dealer.  In other words, if the local rates of tax applicable to any commodity are NIL, 1%, 4% or 12.5% and the commodities are sold inter-State without ‘C’ Form, then the applicable rates of tax under CST will be NIL, 1%, 4% and 12.5% respectively.

4. The next query is regarding the effect of the amendments on Section 8(5) of the CST Act.  It may be noted that Section 8(5) will apply only when the purchasing dealer issues a declaration in Form C.  But the rates prescribed by any Notification issued under section 8(5) will not apply if the purchasing dealer has not issued the declaration in Form “C”.  This has been the correct position since 2002.  This position remains unchanged.

5. This circular cannot be made use of for legal interpretation of provisions of law, as it is clarificatory in nature.  If any member of the trade has any doubt, he may refer the matter to this office for further clarification.

6. You are requested to bring the contents of this circular to the notice of all the members of your association.

Yours faithfully,
(SUNIL SONI)
Commissioner of Sales Tax
Maharashtra State,
 Mumbai.