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B.Com 1st Sem. Subject- M.P. VAT & Central Sales Tax

45, Anurag Nagar, Behind Press Complex, Indore (M.P.) Ph.: 4262100, www.rccmindore.com

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SYLLABUS

Class – B.Com. I Sem.

Subject – M.P. VAT & Central Sales Tax

UNIT – I Taxation on sales of goods: Concept of value added tax,

features, merits-demerits and imposition of VAT introduction

and main features of M.P. value added tax. Important terms:

Goods, dealers, sales, turnover.

UNIT – II Registration under MP VAT compulsion for registration, procedure, amendment and cancellation of registration, tax free goods. Tax rates applicable on taxable goods. Computation of taxable turnover.

UNIT – III Calculation of VAT payable on taxable turnover, input tax rebate, composition declares, furnishing of return, payments of tax, assessment procedure, VAT authorities and their power.

UNIT – IV General introduction of central sales tax, declared goods, interstate sales determination. Impact of sales of declaration, rules regarding from ‘C’. Tax rates of central sales tax and calculation tax.

UNIT – V Computation of gross sales, net interstate sales and taxable turnover under central sales tax. Central procedure registration under CST. Furnishing of return and assessment procedure under CST.



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UNIT-I VALUE ADDED TAX

Meaning of VAT: The value added tax has been levied on the value added by the dealer. The value added means the selling price of goods (excluding the amount of tax) less the cost of goods sold. VAT allows set off for taxes paid on preceding purchase. Vat allows credit for tax already paid on its purchase of business inputs which is called as input tax rebate. VAT is a multiple point tax imposed by state govt. on sale of goods but not on manufacturing of goods. Salient features of VAT system

1. VAT is an indirect tax. 2. VAT is a multipoint tax 3. VAT is levied by state govt. 4. VAT is chargable on value addition 5. Amount of VAT should be shown separately in invoice 6. Composition facility is available under VAT Act. 7. Registration under VAT is compulsory for dealers. 8. Self assessment system is applied under VAT 9. There is an administrative set up for imposition & collection of VAT 10. VAT is applicable on sale of goods within the state

Merits or Advantages of VAT Demerits or Limitations of VAT (1) Not cascading effect (2) Easy implementation (3) Lesser cost of compliance (4) Less complications (5) Minimum possibilities of litigation (6) Facility of Input tax Rebate (7) Check on tax evasion (8) Limited self assessment (9) Payment in various stages (10) Restriction on under relaxations and exemptions.

(1) Long term process (2) Difficulty in set off (3) Problem in refund (4) Multiple rates of tax (5) Accounting problems (6) Conflict between CST & VAT (7) Higher price (8) Unresolve problem of CST (9) More formalities (10) Corruption

MP VAT – In the state of Madhya Pradesh VAT has been partially applied since 1st May 1997. There was no separate act for implementation of VAT. M.P. commercial tax was applied at that time. From 1st April 2006 M.P. govt. Adopted VAT in place of M.P. Commercial Tax act & this act is known as “M.P. Vat act 2002”. Main feature of MP VAT

(i) Mp VAT is applicable in the state of MP on sale of goods (ii) All the registered dealers are liable to pay Vat under M.P. VAT act. (iii) Threshold limit for registration :- Rs. 5.00 lacks (iv) Declared goods will liable for vat @5% (v) The element of VAT is to be shown separately on the invoice. (vi) The CST will be discontinued in phased manner. (vii) The audit is compulsory if turnover exceeds Rs. 40 lakhs (viii) Interest on late payment - 1% per month (ix) Time barring for assessment will be one calendar year (x) Tax liability will be subject to self assessment except in case of a dealer having a turnover

more than 40 lakhs who is to submit the audited statement. (xi) Input tax rebate will be allowed for tax paid on goods purchased by dealer.



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(xii) Quarterly return is to be submitted by dealers within 30 days from the completion of quarter inform no. 10

DEFINITIONS

Business - Sec. 2 (D) Business is basis of VAT. Any activity which is in a nature of trade, commerce manufacture whether it is performed with a motive to make profit or not will be called as business. In this activity volume, frequency, continuity or regularity is immaterial. Business may be established and run by a person firm society, company or any other form of organization Any activity/transaction of sale or purchase of goods in connection with or incidental or ancillary to the trade, commerce, manufacture, adventure or concern will be treated as business.

Place of Business - Sec. 2 (Q)

Place of business means any place where a dealer purchases or sells a goods or stores goods or keeps

accounts of his purchases or sales or both and a includes-

(i) The place of business of an agent where a dealer carries on business through an agent; (ii) Any place or building whether any business is carried on therein not, in which the person carrying on the business, states that any his books of accounts, documents, stocks or other things, relating his business are kept. (iii) Any vehicle or vessel or any other carrier where goods or stored used for transporting goods

DEALER - SEC. 2(I) Dealer means any person who carries on the business of buy, selling supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment or for commission, remuneration other valuable consideration.

GOODS - SEC. 2 (M)

The term “goods” includes all types of movable property materials articles and commodities. It also includes materials and articles used in construction, fitting out, improvement or repairs of movable or immovable property. It also includes growing crops, trees, plants and things attached to or forming part of land. But it does not include –

a. Newspapers b. Shares c. Securities d. government stamps

DECLARED GOODS - SEC. 2 (J) Some goods are declared as a special importance in course trade and commerce u/s 14 of Central Sales Tax Act. The state govt. cannot levy on such goods not more than 5% under the some restrictions.

TAX PAID GOODS [SEC. 2 (Y)]

Under VAT Act only the goods specified in Part III of Schedule II shall be treated as tax paid goods. These type of goods are liable to tax only at the point of first sale in Madhya Pradesh. Therefore, on subsequent sale such goods are not liable to tax. Such goods are also not eligible for input tax rebate.

PURCHASE PRICE - SEC 2 (S)

Purchase price includes: Consideration, Packing, Transport Cost, Trade Commission, Handing Charges, Insurance Premium, Local Taxes, Excise Duty, Cost of Packing material, Other Cost

SALE - SEC. 2 (U)

Sale means any transfer of property in goods for cash or deferred payment or other valuable consideration and includes- (i)A transfer, otherwise than in pursuance of contract, of property in any goods for cash, deferred payment or other valuable consideration;



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(ii) A transfer of property in goods whether as goods or in some other form, involved in the execution of a works contract; (iii) A delivery of goods on hire purchase or any system of payment by installments; (iv) A supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (v) A supply, by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration; (vi) A transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

SALE PRICE - SEC. 2 (V)

Sale price means the amount payable to a dealer as valuable consideration for the sale of any goods less any sum allowed as cash discount accord ordinary trade practice but inclusive of any sum charged for anything done dealer in respect of the goods at the time of or before delivery thereof other than the cost of freight or delivery or the cost of installation when such cost is see; charged.

TAXABLE TURNOVER - SEC. 2 (X)

Taxable turnover in relation to any period means that part of a d turnover for such period which remains after deducting therefrom- (i) The sale price of goods declared tax free under Section 16. (ii) The sale price of goods which are in the nature of tax paid (petrol, Diesel etc.) in the hands of such dealer; (iii) The amount arrived at by applying the following formula- Rate of tax Aggregate of sale prices 100 + Rate of tax Provided that no deductions on the basis of the above formula shall be if the amount by way of tax collected by a registered dealer, in accordance the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.

IMPORT (SEC. 2 - N) Import means the bringing or causing to be brought of goods in. State of Madhya Pradesh from any place outside the State;

INPUT TAX (SEC. 2-O) Input tax means an amount paid or payable by way of tax under S 9 by a registered dealer in respect of the purchase of any goods sped: Schedule II, to a selling registered dealer and who is liable to pay tax under the said Section on the sale of such goods;

MANUFACTURE (SEC. 2 - P)

Manufacture includes any activity that brings out a change in an article or articles as a result of some process, treatment, labour and results in transformations into a new and different article so understood in commercial parlance having a distinct name, character and use, but does not include such activity of manufacture as may be notified.

COMMERCIAL TAX OFFICE (SEC. 2 - F)

Commercial Tax Office means an office of any officer appointed under Section 3 of this Act;

COMMERCIAL TAX OFFICER (SEC. 2-G) Commercial Tax Officer means a Commercial Tax Officer appointee under Section 3 and includes an Additional Commercial Tax Officer.



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COMMISSIONER (SEC. 2-H)

Commissioner means the Commissioner of Commercial Tax appointee en 3;

DEPUTY COMMISSIONER (SEC. - K) Deputy Commissioner means a Deputy Commissioner of Commercial Tax appointed under Section 3 and includes an Additional Deputy Commissioner of Commercial Tax;

DOCUMENT (SEC. - 2-1)

Document means title deeds, writings or inscriptions and includes record" and "electronic form" as defined in the Information; Act, 2000 (21 of 2000) and the like that furnishes evidence:

VAT (SEC. A-L) VAT (Value Added Tax) means tax on sale or purchase of goods payable under this Act.

YEAR (SEC B - A)

Year means the twelve months ending on the 31st day of March.



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UNIT-II

REGISTRATION OF DEALERS (a) Compulsory registration (b) Voluntary registration Compulsory Registration - Every dealer whose turnover during 12 months immediately preceeding the commencement of this Act exceeds Rs. 5 Lakhs shall get registered within 30 days of commencement. of this Act, else if his turnover in a year first exceeds Rs. 5 Lakhs he has to get himself registered. W.e.f. from 1st April the dealer who is not importing goods to the state, limit shall be Rs. 10 Lakhs. Procedure for Registration (a) Application: - In form 6 to the Registering Authority within 30 days from the date on which the

limit exceeds. (b) The required documents duly signed should be attached along with the copy of challan of Rs. 1000. (c) Grant of Registration certificate:- In form 7 (d) After granting certificate, the authority can visit the place of business to verify correctness of the

details. The a/cs & other support documents can be asked and if still unsatisfied the Registering Authority may proceed for cancellation of registration.

Voluntary Registration u/s 17 (i) Who is not liable to pay tax can obtain registration voluntarily u/s 17 (c). (ii) Intends to establish manufacture of goods for sale of value exceeding Rs. 1 lakh p.a. & is registered

under Industrial department of the State Govt. u/s 17(d) Registration Certificate - Two certified copies of certificate for every additional place of business is to be issued. - The certificate is to be displayed at each Place Of Business. - If lost, destroyed, defaced or becomes unintelligible, duplicate can be issued on an application with a fees of Rs. 50. - Certificate can be amended on an application - If Registering Authority is not satisfied about the correctness of the application for amendment he can reject it within 30 days of the application & intimate to the dealer within 7 days of rejection else the dealer is entitled to have amended certificate. Cancellation of registration: On the basis of application from dealer in Form 8 or by the Commissioner if

(a) Dealer discontinues / transfers his business (b) Liability of tax ceases for 2 consecutive years. (c) If the certificate is granted by mistake.

- If on the application for cancellation no order is passed/communicated to dealer within 6 months it is deemed to be cancelled and the dealer is required to submit the certificate along with the certified copies within 7 days from the date of deemed cancellation. - A reasonable, opportunity of being heard shall be given to the dealer if the Commissioner wants to cancel registration on the following grounds -

(a) Arrears of Tax/Penalties/ Other dues (b) Any other reason (to be recorded in writing).



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EXEMPTED GOODS UNDER M.P. VAT

Definition of Tax free goods (U/S-16) Under section – 16 the following provisions made to exempt goods from commercial tax –

1. No. Tax shall be payable on the sales/purchases of goods, specified in the second column of schedule. I.

2. The state government may in respect of any goods, by notification amend schedule-I. Schedule – I of M.P. Vat Act u/s 16. Contain list of 87 such goods which are exempted. The state government amends this list from time to time. Important Points regarding exemption under section -16(A) by notification – Following point should be kept in view in respect of exemption-

1. Exemption may be fully or partly. 2. Exemption for a certain period U/S 16 A. 3. Notification is effective from the date of its publication 4. Exemption may be retrospective/prospective effect 5. Withdrawal of exemption

Schedule – I Tax Free Goods under VAT (effective for 2013-14) Description of goods

1. Agricultural equipment – (Notified) list given separately. 2. Aids and implements used by handicapped persons, that is to say –

1. Artificial limbs 2. Crutches 3. Calipers 4. Correct shoes 5. Various kinds of spinal braces 6. Wheel chairs 7. Denis brown splints 8. Various kinds of splints 9. Braille (Various type of Braille equipments) 10. Hearing Aids 11. Tricycle for handicapped persons.

3. Aquatic feed, poultry feed and cattle feed, including feed supplements, concentrates and additives, grass, hay, straw, de-oiled cake including soya meal and cotton seed oil cake.

4. Betel leaves 5. Books, periodicals, journals, maps, chart, globe, panchangs and almanacs. But Exercise books,

Diaries Books of Accounts Calendars etc. will be taxable. 6. Charakha, Amber Charakha, handlooms, implements used in production of khadi/khaddar and

parts thereof, handloom, fabrics, khadi cloth and Gandhi Topi, garments and made-ups of khadi/khaddar, cotton/polyester and roving.

7. Charcoal 8. Food grains, cereals and pulses 9. Flour, Maida suji ,Besan etc. 10. Condoms and contraceptives including contraceptive pills 11. Cotton and silk yarn in hank. 12. Curd, lussi, butter milk and separated milk 13. Earthenware including clay lamps made by (potters) 14. Electrical energy 15. Firewood excluding casuarinas and eucalyptus timber 16. Fishnet and Fishnet fabrics



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17. A. All kind of footwear/chappals and straps thereof when manufactured in State of Madhya Pradesh and sale price (maximum retail price printed on the label) of which does not exceed Rs. Two 250/- per pair.

18. Fresh milk and pasteurized milk. 19. Fresh plants, samplings and fresh flowers. 20. Fresh vegetables and fresh fruits include potato, onion and sugarcane 21 Garlic, Sighada and ginger excluding dried ginger. 22 All kinds of bangles excluding those made of ivory or precious metals 23 Human blood and human blood plasma. 24 Indigenous handmade musical instruments, hand made paper, hand made soap, Dantamajan. 25 Kumkum, bindi, alta, sindur, kajal, mehandi, bichhia, mangalsutra, rakhi and ornaments of

kathir, german silver or aluminum. 23. (a) Lac and Shellac 26 Meat, fish, prawn and other aquatic products, eggs, livestock, animal hairs and

fish/prawn/shrimp seeds. 27 National Flag, Niwars 28 Organic manure including dung (Gober) and products of dung and bio-fertilizer. 29 Cartridge paper, non-judicial and judicial stamps of all types used for payment of stamp duty or

court fees, postal items and philatelic stamps 30 Raw wool (except branded wool) 31 Semen including frozen semen 32 Cocoons of all types including silk worm laying and raw silk 33 Slate, Slate pencils and chalks sticks 34 Tender green coconut 35 Toddy, Neera and arak 36 All types of bread 37 Salt 38 Water other than –

(i) Aerated, mineral, distilled, medicinal, ionic, battery, demineralised water and (ii) Water sold in sealed container

39 All certified and truthfully treated seeds, other than methi, dahia and the seeds 40 Papad, badi, hand made and umbranded 41 Sirali, Bageshi, barro, date leaves, baskets , tattas, fans, curtains, mattings and other goods

made thereof, handmade sooma and germa, handmade barathi of lether, utensils and decorative articles made only of bamboo and fibrous plants like sabai/shisal.

42 Bamboo matting. 43 Muddas made of sarkanda, phool buhari jhadoo 44 Leaf plates and cups – pressed or stitched 45 Poha, murmura and lai 46 Husk of oil seeds, grains and pulses and bran of cereals 47 Handicrafts, incense sticks (agarbatti, Dhoopkadi, Dhooppatty, Hawan Samagri, Lobhan, Gugal.) 48 Flour, atta, maida, suji, besan, rawa, daliya and chuni 49 Country liquor and foreign liquor 50 Fabrics, Towel, (Sale price upto Rs. 100), Gamcha, Bhaddar, Quit cover, Bed cover, handkerchief

and unbranded pillow covers 51 Sugar khandsari, gur, jiggery and edible variety of rab gur 52 Omitted 53 Yagyopavit or janeu 54 Kite 55 Sabai grass and it’s rope 56 Canteen stores



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57 Animal shoe-nails 58 Basket made of bamboo 59 Camphor 60 Cooked dalia 61 Cow urine and its products 62 Edible gum 63 Ghamela, tasla and tagadi rnade of iron and steel. 64 Hand made candles 65 Hath ka kada (retail price of which does not exceed Rupees Five hundred) 66 Kerosense lantern, kerosene lamp, kerosene chimney and parts thereof. 67 Kirpan 68 Misri, batasha 69 Prasad,/roistered/fried grams 70 Prasad, bhog or mahabhog given by religious institutions. 71 Religious pctirues not for use as calendar 72 Sattu, murmura (ready to eat food) and panjiri 73 Renewable energy devices or equipments, including their parts. 74 Sprinklers and equipments used in drip irrigation (other than pipe and motor) 75 Tatpatti 76 Umbrella and parts thereof 77 Unbranded broomsticks 78 Good sold by the Madhya Pradesh State Electricity Board or any one of the companies. 79 Atta chakki 80 Bagasee 81 Feeding bottles and nipples 82 Kerosense wick stove and 83 Raw potato chips, sewai and finger (made by small industries) 84 Sabudana 85 Wet dates 86 Isabgol 87 Products of Research and Training Institutes.

RATES OF M.P. VAT

Tax rates of M.P. value added Tax are given under schedule – II which is divided in four parts according to rates of Tax on various taxable goods applicable. The rate Applicable under VAT schedule II – Part – I 1% Tax rate applicable on goods which comes under part-I

(a) Articles of gold and silver including coins ,bullions, species (b) Gold and silver ornaments (c) Precious and semi precious stones (d) Noble metals such as platinum,Iridium

Part – II 5% Tax rate applicable on goods which comes under part-II Part – III

S.No. Name % 1 Diesel (23% up to 19-12-14) 27 2 Petrol (27% up to 19-12-14) 31 3 Tendu leaves 25 4 Cigarettes 13 5 Cigars, Cheroots, Cigarettas, Bidies and Tobaccoo products 27 6 Natural gas including compressed natural gas 13 7 Timber 13 8 Liquor when sold by other than license holder 13



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S.No. Tax paid goods (Single Point Tax) %

1 Raw opium 13 2 Kerosene sold through public distribution system 5 3 Old and second hand motor car 1.5 4 Capital goods (other than plant & machinery) 1.5

Part – IV 13% Tax Rate applicable on goods which comes under part IV.

TAXABLE TURNOVER UNDER VAT & VAT PAYABLE The Turnover under M.P. VAT shall be computed in the following manner –

I. Gross Turnover – Firstly sums of all types of sales of relevant period (except Newspaper, stamps, shares and securities) and cash discount and fright separately changed shall be reduced from sale price (separate deduction shall not be allowed)

II. Deductions – Following deductions shall be allowed 1. Sales return with in 6 months. 2. Tax free goods 3. Tax paid goods 4. Inter state sale 5. Sales out side M.P. 6. Export out of India 7. Send to Branch/Agent

III. If Tax include in the sales price shall be deductable from Gross Turnover. IV. After the deduction of Tax and sales except in M.P. output comes is Taxable Turnover. V. Tax Payable – VAT shall be calculate on Taxable sales during the period and then in second stage

Input Tax Rebate Shall be deducted in respect of tax already paid to registered dealer of M.P. Net result shall be net VAT payable by the dealer.

Computation of Taxable Turnover under VAT

Ist Step : Gross Turnover (G.T.O.) …………….. Gross turnover means a sum of all types of sales,

i.e. taxable sales, exempted sales, interstate sales, export etc.

Note : (1) Cash discount given in the invoice itself shall be excluded from the

sale price and any other ex-factor discount, incentive or rebate shall not be deductible from the sale price.

(2) Freight and delivery charges separately charged shall be reduced from sale price.

IInd Step: Deduction from G.T.O. (1) Sales Return within six months …………….. (2) Sales of tax paid goods, …………….. (3) Sales of Tax free goods …………….. (4) Inter State Sales …………….. (5) Sale outside the state(Purchased and sold out of M.P.) …………….. (6) Export out of India …………….. (-) ……………..

Taxable Turnover Including Tax …………….. Less: VAT on taxable sale (1%, 5% or 13% as case may be)

Taxable Sales Including Tax x Rate of VAT (100+Rate of VAT)

(-) …………….. Taxable Turnover ……………..



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UNIT-III INPUT TAX REBATE & INVENTORY REBATE

A registered dealer is eligible to get input tax rebate in respect of tax paid on purchases from registered dealers. Under M.P. VAT act, input tax rebate (ITR) shall be available for full amount of tax paid on purchase of raw material, packing material incidental goods, consumable stores & plant & machinery. MAIN PROVISIONS & RULES REGARDING (ITR) Input Tax Rebate)

1. Eligible dealer for input tax Rebate- ITR shall be available only to a registered dealer. It shall not be available to an unregistered dealer & dealer who have opened for composition.

2. Goods entitled for ITR- ITR shall be available in the following cases- Goods purchased for resale, packing material, plant machinery etc.

3. ITR shall not be available in the following cases- Free sample or gifts. Tax paid goods, like petrol, diesel, purchase from composition dealer

purchase from unregistered dealer etc. 4. ITR in respect of plant & machinery - Plant & machinery, equipments & parts thereof shall

also be eligible for input tax rebate 5. ITR in case of sale through commission agent- ITR shall also be available in respect of such

transfer of goods to commission agent. 6. ITR in case of manufacture of goods for others on job basic- ITR shall be available even in

case of job processing/ manufacturing, because there is no condition for sale by the manufacturer himself.

7. Availability of ITR- ITR shall be available immediately on purchase of goods & one need not to wait till disposal of said goods.

8. How and when to claim ITR- In case of a dealer liable to pay quarterly tax, the ITR is to be claimed and adjusted against the tax payable for each quarter. In case a dealer is liable to pay monthly tax, the amount of ITR . Calculated for each month and should be adjusted against the tax pc that month.

If ITR in respect of any month/quarter is not adjusted in the quarter due to any reason, it can be adjusted against the tax payable next month/quarter.

In case of goods purchased in one financial year, but received in the next financial year, ITR should be claimed in the financial year in which such purchases are recorded 9. How to calculate the ITR- ITR need not be calculated on one basis. Rather it will be calculated

on total sales & total purchase basis. 10. Carry forward/ refund of ITR- Except in case of ITR pertaining to export of goods or

pertaining and machinery, refund of ITR shall not be allowed in the same year. The amount of ITR shall be adjusted towards the tax payable dealer under this Act or under CST Act. But, there is no provision for adjustment of ITR against the entry tax payable by the dealer.

Any unadjusted ITR shall be carried forward to the next year. The ITR dealer remains unadjusted even after 2 years from the close of the relevant financial year shall be granted by way of refund.

COMPOSITION OF TAX

To provide a relief to small dealers and works contractors. Section 11 and 11A prescribes schemes for composition of tax. Composition of tax means paying tax on total turnover at lump sum rates specified in Sections 11 and 11A instead of paying tax as per Sections 9 and 10 of this Act. Composition schemes under MP VAT Following are two composition schemes under provisos of MP VAT Act:



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1. Composition scheme for all registered dealers having a turnover upto Rs. 1 Crore 2. Composition scheme for works contractors irrespective of turnover.

Optional Composition Scheme is optional not mandatory COMPOSITION SCHEME FOR DEALERS OTHER THAN WORKS CONTRACTORS Only registered dealers eligible for composition Turnover limit 1 Crore Composition in case of dealers engaged in trading as well as manufacturing If a dealer is engaged both in trading as well as manufacturing of goods, he can opt for composition on combined turnover and not on trading or manufacturing turnover separately. Turnover limit of Rs. 60 lacs shall apply on cumulative turnover of trading as well as manufacturing activities. Relaxed condition for manufacturer A manufacturer dealer, the condition of purchasing goods from a registered dealer shall be limited to goods specified in Parts III and IV of Schedule II. It means that a manufacture dealer can purchase goods stated in Part I and Part II of Second Schedule even from a dealer who is not registered under this Act. Dealer should not make purchases from a place outside the State of Madhya Pradesh.

1. Condition for bill, cash memo or invoice Stating that he has opted for composition under Section 11. The statement as per Rule 8(5) shall be recorded by affixing a rubber stamp, which reads as follows: “Goods sold by a dealer opting for composition of tax under 11”.

2. Cannot make purchases but can make sales in course of inter-state trade or commerce 3. No input tax rebate on purchases. 4. Payment of input tax rebate already claimed or adjusted towards tax payable to paid along with

tax payable by him. 5. Not to collect tax from customers A composition dealer is prohibited from collecting any amount by way of lump sum of or tax. Such dealers are also prohibited from showing separately in bill or invoice Rate of tax Other than goods specified in Part III of said Schedule at following rates of tax: 1. Other than Part III goods (Trading Turnover)

½ % of turnover of resale of goods purchased

2. 4% of turnover of goods manufactured.

3. 3% of turnover in case of cooked food. 4. Shall not exceed the rate mentioned in corresponding entry in column (3) of Schedule II.

5. Form 4- A dealer opting composition shall intimate his option by submitting Form 4 to the Commercial Tax Officer Within one month of the commencement of the year. Time limit for dealers obtaining registration during an year



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A dealer who obtains registration during an year can submit the option for composition within 30 days from the date of registration for the part of the year wherein registration in granted. Filling Form 4 is sufficient for opting composition However, the CTO may reject composition application for delay or where delay is not condoned in absence of sufficient and reasonable cause for delay. Option against rejection of composition application Assesse File an appeal against such rejection as per provisions of Section 46 of the MP VAT Act, 2002. 1. Compulsory exit from composition 2. Exit from composition as per option of dealer

Remain valid till end of the financial year. If does not submits his option in Form 4 for next year he shall be out from compositions. Input tax rebate for stock held at exit from composition He shall eligible for input tax rebate thereon Return A dealer opting composition shall submit quarterly return in Form 5 long with copy of challan as proof of payment. The due date for furnishing the return to the appropriate Commercial Tax Officer is within 30 days from expiry of the quarter.

(ON THE BASIS OF ABOVE, WE COMPUTE THE TAXABLE TURNOVER AS PER RETURN FORM 5. &NET VAT PAYABLE

UNDER COMPOSITION OF VAT)

Gross Turnover Less - Deduction –

Tax-Free Goods Tax paid goods Turnover of goods specified in Part II of Schedule II

Net Taxable Turnover Net Taxable Turnover * ½% = Net Tax Payable by Composition Dealer

COMPOSITION FOR WORKS CONTRACTORS Section 11A provides for composition for a works contractor. Accordingly, any registered dealer engaged wholly or partly in the business of supplying goods in the course of execution of works contract in State of MP can opt to pay in lieu of tax payable under Act, a lump sum at such rate prescribed by the Government. Works contractors eligible to opt for composition All registered dealers i.e., registered works contractors whether engaged wholly or partly in the business of supplying goods in the course of execution of works contract within the State of MP can opt composition scheme. This scheme is not available for works contractors who are not registered dealers under this Act. Composition can be opted for contract entered into



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Within 30 days from commencement of the execution of works contract or contracts. It simply means that the works contractor need not make application for opting composition till he commences execution of works contract.

1. Works contractors commencing execution of more than one contract at different dates Sub-section (1) of Section 11A requires the contractor to intimate the composition option within 30 days from commencement and not from the date of award of the contract. Therefore, whenever a contractor starts execution, he shall intimate his option within 30 days of starting execution.

Is linked to date of commencing execution and not to any turnover limit 2. Choice to opt composition for one or more works contract

It can be inferred from Section 11A that a dealer engaged in execution of works contract has the option to choose composition for any contract or for which such dealer opts for.

Turnover of works contractor eligible for composition As per Section 2(1) (z) turnover of a works a contractor shall be the aggregate of sale price received or receivable by the contractor during a period. After deducting the turnover of tax-free goods involved in execution of works contract. Non-applicability of certain provisions of MP VAT Act, 2002 on works contractor granted permission of composition under Section 11A Section 18 - Section 18 deals with returns. These provisions shall not apply for a works contractor opting composition. Section 20 - Section 20 deals with the manner of assessment of tax of a registered dealer. These provisions shall not apply for a works contractor opting composition. Section 20A - Provisions of self-assessment as contained in Section 20A shall not apply for a works contractor opting composition. Section 39 - Provisions as to the accounts as contained in Section 39 shall not apply to a works contractor opting composition. Section 40 - Provisions as to issuing bills, invoices and cash memorandum as contained in Section 40 shall not apply for a works contractor opting composition. Restrictions and conditions for lump sum payment of tax by a works contractor.

1. Contractor must be registered under MP VAT Act, 2002 2. Non to avail or claim input tax rebate

How to opt composition

1. Form of application A registered dealer can opt for composition by making an application in Form 4A to the appropriate Commercial Tax Officer. 2. Time limit for filing application (i) For contracts whose execution commenced prior to 14-06-2006.

If the execution of works contract (s) has commenced before the date of Notification No. F-A-5-/2006/1/V(40), dated 14-06-2006 shall be made by 30th June, 2006. [Rule 8A(2)]

(ii) For contracts whose execution commences after 14-06-2006.



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Work contractor shall make an application within 30 days from the date of commencement of execution of works contract.

3. Delay in filing composition application Composition application made within the time limit cannot be rejected and the applicant dealer shall be deemed to have been granted the composition approval. However, the CTO concerned may reject the composition application if it is filed late that is beyond the prescribed time. The dealer has the right to explain the sufficient cause for delay and if the CTO is satisfied, he may condone the delay and grant approval for composition.

4. Option if composition application is rejected If the composition application is rejected, the applicant contractor has the right to file an appeal as per the provisions of Section 46 of the MP VAT Act, 2002.

5. Grant of composition permission The Commercial Tax Officer shall on receipt of composition option application in Form 4A shall verify the correctness and on being so satisfied by an order in writing grant composition permission.

Rate of tax Sr. No. Types of contract Rate of

lump sum 1 Civil works like construction of building, bridges, roads, dams, barrages,

canals, diversions excluding: (i) Supply and installation of air conditioners, air coolers or air conditioning equipments. (ii) Supply and fitting of electrical goods, supply and fitting of electrical equipments. (iii) Fabrication, supply and installation of elevators, lifts and escalators.

2%

2 Supply and installation of : (i) Air conditioners, air coolers or air conditioning equipments including deep freezers, cold storage plants and humidification plants. (ii) Weighing machines and weigh bridges. (iii) Elevators (lifts) and escalators.

10%

3 All other contracts not specified in Sl. Nos. 1 and 2 above. 4% Some privileges to works contractor opting composition

1. No restriction on purchases Where a composition dealer can purchase goods specified in Schedule II only from a registered dealer, a works contractor opting composition under Section 11A is free to make purchases from any dealer i.e., a registered dealer as well as an unregistered dealer.

2. Not liable to pay tax on purchases under Section 10 A works contractor opting composition under Section 11A can make purchases from another

composition dealer or from an registered dealer. These are the two primary conditions to attract levy of tax on purchase of goods stated in Schedule II Under Section 10. As none of the Clauses of Section 10 i.e., Clauses (a) to (e) prescribe tax on purchases by a works contractor, provisions of Section 10 are not applicable on a works contractor whether opting for composition or not.

3. Can collect tax - There is no restriction under the provisions of the Act or rules made there

under from collecting tax. Therefore, a composition works contractor can collect tax/lump sum and also disclose it in the bill/invoice.

4. Sub-contractor not barred from opting composition Sub Contractor not to pay tax if contractor opts for composition



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RETURNS AND ASSESSMENT PROCEDURES Types of Returns Note :- Presently there is not requirement to file monthly returns by any dealer, unless any dealer or class dealer is required by the commissioner to file monthly returns. (i) Quarterly Return:- Every registered dealer has to file quarterly return in form 10 within 30 days from the end of the quarter. (ii) Annual Return:- After the permission of Commissioner, the application for permission has to be made in form 13 within 30 days of commencement of year annual return is to be filed within 90 days of expiry of the year & the order shall be passed before the expiry of the first quarter of the year. NO PERMISSION TO FILE ANNUAL RETURN SHALL NOT BE GIVEN TO A DEALER :-

(a) Who is required to file monthly return? (b) Fails to pay any tax payable. (c) Fails without reasonable cause to furnish returns under the act. (d) Is convicted of an offence punishable. (e) Has not furnished all returns for the year immediately preceding the year in respect of which

the application is made. (f) Revised Returns: (Rule 23) If turnover does not exceed Rs. 40 Lakhs - before 31st July else 31st

October.

RULES REGARDING RETURN Mention TIN Number Challan Accompanied in form – 26/ E-challan in form 26-A List of purchase of schedule II goods exceeding Rs. 25,000/-

EXEMPTION FROM FURNISHING RETURN

Application to the Commissioner for the exemption within 30 days after the commencement of the year for which exemption is applied for.

Permission may be granted by the Commissioner if he is satisfied that:- (a) The dealer is not a manufacturer or import and (b) The dealer is not likely to make any taxable purchases or sales during the year

The application for renewal should be made at least one month before the expiry of earlier exemption certificate.

ASSESSMENT OF TAX

The assessment should be completed within one calendar year from the end of the period for which assessment has to be made. The period can be extended by the State Government.

The assessment can be made at any business premises or any other place. If it is the case of refund, the dealer can make an application for assessment & then assessment

shall be completed within 3 months from the date of receipt of application. If not completed within the said period then they will be entitled to the refund according to their return submitted.

TYPES OF ASSESSMENT 1. Self Assessment: He has to file all the returns/revised returns. Pay tax and interests as for the return. Has filed returns within prescribed time. Out of the dealers who are deemed to be self-assessed, few shall be selected for regular assessment. 2. Scrutiny Assessment:-



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The Commissioner shall serve a notice on a registered dealer, selected out of self assessed dealers, After hearing the dealer or his agent & examining the evidences produced, he shall assess or

reassess his tax. 3. Best Judgment Assessment:

If the dealer has not furnished returns or knowingly furnishes incomplete returns or has not maintained proper accounts then the best judgment assessment can be done by the concern after issuing a notice to the dealer.

4. Re-assessment If the dealer has been under assessed or escaped assessment or assessed at lower rate or availed wrong deduction or input rebate then the Commissioner, within 5 calendar years from the date of order of assessment or reassessment may assess or reassess to tax. The assessment shall be made within one calendar year from commencement of the proceeding.

PAYMENT, RECOVERY & REFUND OF VAT.

PAYMENT OF TAX (i) Dealer liable to pay tax more than Rs. 15,000 per quarter or Rs. 60,000 p.a. but less than Rs.

25 lacs p.a. The tax related to first & second month of the current quarter has to be paid before 10th of the month following the relevant month & the remaining can be submitted before 30th of the month following the said quarter. If the quarter is the last quarter then the tax of 25 days of last month (March) or 1/3 of the tax deposited in the last quarter of the preceding year shall be deposited by 31st March.

(ii) If the dealer is liable to pay tax of more than Rs. 6.25 lacs as per quarter or Rs. 25 lacs p.a. then the tax of 1st & 2nd month has to be paid on actual basis.

(iii) If liable to pay tax of less than Rs. 15,000 per quarter or Rs. 60,000 p.a. shall pay tax quarterly. (iv) If the dealer is filing monthly return then pay tax before 15 days after the end of the month.

METHOD OF PAYMENT Dealer shall pay any amount due from him under the Act directly to the Government treasury or to any branch of SBI or SB Indore in cash/cheque/DD. If the dealer is the Government or their departments, then payment can be made through book entries & intimation are send to CTO with in 30 days. - The payment shall be made by challan in Form 26. - The TDS shall be deposited in form 27. - Out of 5 copies 2 are returned to the dealer, 3rd is send to CTO, 4th is forwarded to treasury office

5th is retained by the bank. RECOVERY OF TAX AND OTHER DUES (SEC. 24) Where on an appeal the appellate authority stays the recovery of any amount and on decision of such appeal the stay has been maintained, wholly/partly, the dealer shall be liable to pay interest on such amount @ 2% per month from the date of stay by the appellate authority to the date of its payment after the decision in appeal. The dealer may apply to Commissioner in writing to grant him time for payment of due amount or to permit him to pay in installments. If such permission is granted, on conditions as deemed fit by the Commissioner, the dealer will also have to pay interest from the last date on which the amount was due @ 18% p.a. If the dealer fails to pay tax, the Commissioner, after giving an opportunity of heard of the dealer may impost a penalty of a sum equal to 1.5% of amount due for every month for the period of delayed. If the Government is of the opinion that undue hardship is caused to the dealer, the Government may grant additional time for payment or may grant facility to pay in installment, the government may stay the recovery of the due if enquiry is pending.



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If a dealer has been given a facility of installment payment, and he has properly complied with the order granting him such facility, the Commissioner, may if he feels interest is undue hardship remit portion of interest on tax or penalty or the penalty to be recovered. Where tax or other dues is not paid within the time allowed in the notice of demand or order but is paid within a period not exceeding one year then State Government may remit the penalty payable in respect of the said amount. In case of default, the outstanding sum shall be recoverable as arrear of land revenue according to the provision of MP land revenue code 1959. REFUNDS U/S 37 Refund of excess payment- where an order directing refund of any amount has been made by a

competent authority then at the option of the dealer the same shall be refunded to him in cash through refund payment order in form 52, after adjustment of such excess towards the amount of Tax due in respect of any other year from him. If the refund payment order exceeds Rs. 5000 such shall be crossed & made ‘A/c payee”.

If the CTO is satisfied that due to error by the dealer, the amount credited into Government treasury cannot be accounted for the purpose, the same shall be refunded or at the option of the dealer, adjusted towards dues of any other year from him.

The authority empowered to grant refund, is required to apply the refundable amount towards recovery of tax, penalty, interest or any other amt. Refund Adjustment Order in Form 40 has to be passed for the same.

If the refund is not made or applied for recovery/ adjustment within 90 days from the date of order, interest @ 1% p.m. is to be paid to the dealer for the period beyond 90 days.

If the dealer desires payment of refund by adjustment against any amount subsequently payable by him, Refund Adjustment Order is passed by him. Refund Adjustment Order is passed by the assessing authority in Form 53. The order is made in 3 copies, one issued to the dealer, second marked as for treasury only & third is retained by the assessing authority.

In support of any claim for payment of tax payable according to any return by adjustment, a copy of the refund by adjustment, a copy of the refund adjustment order to such return shall be attached.

Order sanctioning interest on delayed refund- when refund order is passed under rule 48 the authority issuing such order shall simultaneously pass order for interest payment for the period of delay in payment of refund & the same shall be communicated to the dealer.

Interest payment order – in Form 41 Assessment Procedure The assessment of every registered dealer shall be made separately for every year. The following points are important in this regard – 1) Under VAT Act the limitation for completing the assessment has been reduced from 2 calendar

years to 1 calendar year from the end of the period for which assessment has to be made. 2) If the assessments for any year cannot be completed within the prescribed period, the State Govt.

can by notification, for reason to be recorded in writing, extend the period for competing such assessments.

3) If the assessment is not made within the prescribed period or within extended period, the dealers who have filed the returns shall be deemed to have been assessed, and in case of dealers who have not furnished any return returns the assessment shall become time barred.

4) Under VAT Act it is not necessary that the assessment should be in the office of the assessing authority. It may be at the business premises of the assessee or at any other place.

Types of Assessment – 1) Self Assessment (Sec.-20) 2) Scrutiny Assessment



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3) Best Judgement Assessment 4) Re-assessment (Sec.-21) Tax Audit – The commissioner or an agency authorized by him shall, on previous intimation to the dealer, undertake tax audit of the records, stocks in trade and the related documents of the dealer. Dealers for tax audit shall selected by him in the manner as he may deem it. Manner of Tax Audit – 1) A registered dealer, who is selected for tax audit under Section 19 shall be intimated by issue of a

notice, as far as may be, in Form 17 specifying the date and place for audit. 2) The tax audit report under sub-section (5) of section 19 shall be prepared and if required, the

notice under sub-section (6) of section 19 shall be issued in Form 18.

VALUE ADDED – TAX AUTHORITIES An administrative set up is required for implementation of any tax law; thereof the state Govt. of M.P. sets effective administrative machinery regarding effective implementation of M.P. VAT. Taxing authorities and other officers

I. Commercial Tax Commissioner Commissioner of commercial tax is chief authority of M.P. VAT. It is appointed by the state Govt. Power of Commissions- a. Rights regarding appointment b. Transfer of proceedings c. Power to take evidence on oath etc. d. Power to call for information in certain cases. e. Furnishing of information by bank and clearing and forwarding agents. f. Control on clearing and forwarding agents to prevent or check erosion of tax. g. Right of imposing fines. II. Director of Commercial Tax Its appointment is made by the state govt. but he works under the commissioner. Rights & duties- 1. To do work of commissioner 2. To accept the witness on oath. 3. To inspect the goods at the time of loading & unloading 4. Right for inspection, searching

III. Additional Commissioner or Deputy Commissioner 1. To accept the witness on oath. 2. To check the places of loading & unloading of goods 3. Checking. Searching and withholding the books of accounts and documents. 4. To hear the appeals against the tax assessment by the A.C.

IV. Assistant Commissioner They are appointed by the state govt. or by any other authority. They having rights to inspection & checking and all rights & duties like additional commission V. Commercial tax officer His appointment is made by the state Govt. or by any other authority takes P.S.C. Function & Powers of Commercial a. Granting the Registration certificate b. Cancellation of Registration certificate c. Granting composition d. Granting permission to submit annual return e. Assessment of dealers



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f. Doing best judgment assessment g. Permission to contractors h. Sanction of refund i. Issuing various declaration forms j. To impose penalty

VI. Assistant Commercial Tax officer The rights & duties of assistant commercial tax officer are same like commercial tax officer.

VII. Commercial tax Inspectors They are appointed by commissioner. The inspector has to work under the control of commercial tax officer as per instruction.



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UNIT-IV CENTRAL SALES TAX

INTRODUCTION Central Sales Tax is applicable on sales of goods from one state to another. This tax is imposed by the Central Govt., but it is collected by the states and the amount collected is also used by state govt. For example sale of goods from a Regd. Dealer of M.P. to a dealer of Bihar is inter-state sale, therefore Central Sales Tax Act is applicable. Though it is a central tax but the tax on such inter state sale will be collected and retained by M.P. Govt. The central sales tax Act, 1956 is a fiscal legislation, which imposes a levy of tax on sale of goods –

(a) In the course of inter state trade and commerce, or (b) Outside the State, or (c) In the course of import into or export from India.

BRIEF HISTORY OF CST- At present CST Act is applicable on interstate sale. To know why it was implemented, it is important to know its brief history.

1. Sales Tax was started in 1935 in India. 2. The Indian Constitution came into existence from 26th Jan, 1950. This constitution provided the

right of levying sales tax to the states. 3. Due to the decisions of courts State Govt. has to return previous tax on the Inter state sales. This

order was called “Sales Tax Validity Act 1956.” 4. Appointment of taxation enquiry commission 5. Central Govt. accepted the suggestions by the commission and passed Constitution (VI

amendment) Act 1956. For same amendments - Central Govt. give the power for collection of tax to state on Inter State sales. Distribution of this tax to the state from where it was collected. Parliament was given the right to make law in this sense.

6. Central Govt. passed CST Act 1956. Entry 92A of the List-1 (Union List) to the seventh schedule of the constitution of India Empowers the Union Govt. to levy tax.

7. Central Govt. amended the CST Act from time to time to make it more practicable in 1958,1968,1972,1976, 2002, 2007 and 2009.

8. Sale to dealer of Special economic zone will be exempted. OBJECTS OF THE CST ACT 1956 This Act has been passed and implemented for the following objects –

1. Defining the inter state trade – To define the principles by which it could be decided as to when shall the sale or purchases of any goods be treated as inter state sale, sale outside the state or as import in or export from India.

2. Laying down the principles regarding the levying and collection of tax on Inter state sales – To decide the principles regarding the sales of goods under the interstate trade and the distribution in the states.

3. Some important goods – Deciding some goods to be of special importance in the interstate trading and laying down restrictions and conditions regarding imposing the sales tax on goods so declared by the state governments.

MAIN FEATURES OF THE CST ACT, 1956

1. Jurisdiction 2. Single point tax 3. Tax collection 4. Important goods 5. Restrictions

6. Rates of tax 7. No minimum tax free limit 8. Process of tax assessment 9. Right to frame rules 10. CST Administration

B.Com 1st Sem. Subject- Business Law


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APPLICABILITY OF CENTRAL SALES TAX ACT- If the some conditions mentioned below are satisfied, then the provisions of CST Act are applicable as follows –

(1) Central Sales Tax shall be levied on Inter State Sales. (2) It shall be levied on inter state turnover which is the aggregate of sales price. (3) It is levied at specified rate. (4) It shall be collected in the state from which the movement of goods commences and by the

registered dealer. IMPORTANT TERMS & DEFINITIONS 1. Appropriate State – Sec. 2 (a) In relation to a dealer who has one or more places of business situated in the same State, appropriate State means that State in which such business is situated. If, however, a dealer has places of business situated in different States, every such State with respect to the place (or places) of business situated within its territory shall be treated as appropriate state. 2.Business – Sec. 2 (aa) Business includes –

(i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern.

3. Place of Business – Sec. 2 (dd) Place of business includes –

(i) In any case where a dealer carries on business through an agent the place of business of such agent;

(ii) A warehouse, go down or other place where a dealer stores his goods; and (iii) A place where a dealer keeps his books of account.

4. Dealer– Sec. 2 (b) Any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash, or for deferred payment or for commission, remuneration or other valuable consideration, is called Dealer under Central Sales Tax Act.

(1) An Individual (2) An authority or organization – A local authority, a body corporate, a company, any co-

operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business.

(3) An agent (4) An auctioneer (5) Branch (6) Government

5. Goods – Sec. 2 (d)

Goods includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks, shares and securities & money”.



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Items covered under goods. It includes animals, objects such as livestock animals and birds in captivity as these are movable property. Goods include uprooted trees, second hand goods, rejected goods, worn out goods, etc. Computer software which is available off the shelf. However, customized software prepared on the basis of the requirement of a particular customer stands on a different footing. Standing trees are not goods and not taxable but standing timber will be taxable under CST if timber is identified, contract is unconditional and timber is in a deliverable state. In such case, it is movable property and thus goods.

6. Declared Goods – Sec. 2c Declared goods means goods declared under Section 14 to be of special importance in inter-State trade or commerce. 1. Cereals 2. Coal – including coke in all its forms, but excluding charcoal. 3. Cotton- that is to say, all kinds of cotton (indigenous or important) in its un manufactured state,

whether ginned or unginned, baled, pressed or otherwise, but not including waste. 4. Cotton fabrics 5. Cotton yarn – but not including cotton yarn waste. 6. Crude oil 7. Aviation turbine fuel 8. Hides and skins 9. Iron and steel 10. Jute 11. Oilseeds 12. Pulses 13. Tobacco and Tobacco refuse 14. Woven fabrics of wool 15. Liquid Petroleum Gas (LPG) 16. Sugar

7. Sale – Sec. 2 (g) any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire purchase or other system of payment by installments, but does not include a mortgage or hypothecation of or a charge or pledge on goods. Transaction regarded as sale -

1. Transfer on Hire purchase system 2. Transfer of any goods without contract. 3. Execution of work 4. Right to use 5. Supply to members 6. Supply of food for consideration

The transactions not regarded as sale – 1. Mortgage 2. Pledge 3. Hypothecation 4. Charge 5. Lease Transactions 6. Branch transfer 7. Works Contracts 8. Job work/Processing



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8. Sale price – Sec. 2 (h) Sale price means the amount payable to a dealer as consideration for the sale of goods. The following shall not be included.

(i) any sum allowed as cash discount according to the practice normally prevailing in the trade;

(ii) the cost of freight or delivery or the cost of installation in cases where such cost is separately charged. This exclusion of freight charges and delivery charges is based on the agreement or understanding to charge freight separately and the dispatch is done at the request and cost of the purchasing dealer.

However, any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof shall be included.

Inclusions:

Following will be included in sales price 1. Cost price of stock 2. Cost of packing material 3. Packing charges 4. Excise Duty 5. Bonus for extra sales 6. Expenses incurred by trader before invoicing of goods 7. Central sales tax (if not shown separately)

Exclusions: However, it shall not include the following :

1. Freight/transport charges for delivery of goods if charged separately, 2. Cost of installation if charged separately. 3. Cash discounts for making timely payment. 4. Trade discounts 5. Insurance charges of goods insured on behalf of the buyer or at the request of the buyer. 6. Goods returned within 6 months of the date of sale, 7. Goods rejected.

9. Turnover – Sec. 2 J Turnover used in relation to any dealer liable to tax under this Act means

the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter State trade or commerce made during any prescribed period.

10. Year – Sec. 2(k) Year in relation to a dealer, means the year applicable in relation to him under the general sales tax law of the appropriate state, and where there is no such year applicable, the financial year. 11. Taxable Turnover – [ Sec. 2 (w) ] – In relation to any period means that part of a dealer’s turnover for such period which remains after deducting there from – 1. Exempted goods 2. Tax paid goods 3. Goods sold on declaration 4. Amount of tax included 5. Any other deduction

Declared Goods [ Sec. 2(c)]-

Meaning List and Restrictions 1. Cereals 2. Coal – including coke in all its forms, but excluding charcoal.



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3. Cotton – that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste.

4. Cotton fabrics 5. Cotton yarn – but not including cotton yarn waste. 6. Crude oil 7. Aviation turbine fuel – Aviation turbine fuel sold to a Turbo Prop Air Craft. 8. Hides and skins – whether in a raw or dressed stage. 9. Iron and steel 10. Jute 11. Oilseeds 12. Pulses 13. Sugar 14. Tobacco and Tobacco refuse 15. Woven fabrics of wool 16. Liquid Petroleum Gas (LPG)

Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State: (Sec. 15.) 1. Maximum tax rate 5% - in respect of any sale or purchase of such goods inside the State shall not

exceed five percent of the sale or purchase price. 2. Single point tax 3 Reimbursement of tax 4. Deduction for tax on paddy – Where a tax has been levied under that law in respect of the sale or purchase inside the state of any paddy the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy as treated as different commodity. 5. Tax on paddy – when exported where a tax on sale or purchase of paddy is leviable under that law and the rice procured out of such paddy is exported out of India, then, the paddy and rice shall be treated as a single commodity. 6. Tax on pulses – Each of the pulses whether whole or separated and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law.

INTER STATE SALES Central sales tax is levied upon the interstate sales. Therefore, it is important to understand clearly the meaning of Interstate sales. Generally, selling of goods by a dealer of one state to the dealer of other state is called interstate sales. I. When is a sale or purchase of goods said to take place in the course of Inter-state Trade

or Commerce (Section 3) 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 [Sec. 3 (a)] (b) Is effected by a transfer of document of title to the goods during their movement from one

State of another. [Sec. 3(b)]

II. Cases where there is no Inter-state sale: There may be a case where goods moved from one State to another but not in pursuance to a contract for sale or purchase. In such cases there will be no Inter-state sale. Such cases are illustrated below: 1. Stock transfer or branch transfer – Transfer of goods to a branch or dispatch of goods to a

consignment agent does not amount to sale and consequently there is no Inter-state sale. a) Sent to Consignment Agent – Goods are dispatched of Consignment Agent by Principal. Goods remain property of the Principal. Agent sells goods on behalf of Principal it is not a sale.



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b) Sent to C & F Agent – A C & F Agent dos not have the right on property in the goods stocked with him by the manufacturer. His duties are confined to stocking the goods and forwarding them to persons and places as instructed by the manufacturer. The right to sell the goods does not vest in him. c) Sent to Branch Transfer – There is no transfer of property when goods are dispatched to branch and hence there is no liability of CST. 2. Movement of goods commences and terminates is the same state Where the movement of goods commences and terminates in the same State, it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement, the goods pass through the territory of any other State. 3. Intra-state sales - When a purchaser from another state comes in a state for purchasing some goods and seller delivers the goods to him directly such sale will not be inter state sale, though purchaser and seller belong to different states. 4. Transfer of Goods from factory to the place of sale – When goods are transferred from factory (which is in one state) to the Godown, other branch unit or sales office (which is in other state), then it is not an inter state sales. Conclusion – Sale can be covered under inter-state sale which fulfils the following conditions : (i) The goods have actually been sold. (ii) The goods have been transferred from one state to other under the agreement or contract of

sale. (iii) The goods have been transferred from one state to the other only for sales, not on any other

ground. III) When a sale or purchase of goods shall be deemed to take place inside a state.

(i) Ascertained Goods. In the case of specific or ascertained goods, a sale is deemed to take place inside the State where such goods are situated at the time when the contract of sale is made.

(ii) Unascertained Goods. In the case of unascertained or future goods, a sale is deemed to take place inside a State where such goods are situated at the time of their appropriation to the contract of sale by the seller or by the buyer.

IV) Sale or purchase of goods said to take place in the course of import or export (Sec. 5). (a) Sale or purchase occasions export; or sale purchase is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (b) Sale or purchase occasions import; or sale purchase is effected by a transfer of documents of

title to the goods before the goods have crossed the customs frontiers of India. (c) Last sale or purchase of any goods immediately preceding the sale or purchase occasioning the

export of those goods out of the territory of India if it took place after, and was for the purpose of complying, with the agreement or order for or in relation to such export. Import – The purchase or sale of any goods in India shall be treated as import, only when the goods have been already purchased or the document of title have been transferred before the goods enter the Indian customs frontiers. Export : The purchase or sale of any goods shall be treated as export for India, only under the following conditions :

(i) Under the purchase or sale, the goods are sent out of India. or

(ii) By transferring the title deeds the goods are sold at the time after the goods have crossed the custom limits of India.



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EXEMPTIONS FROM CENTRAL SALES TAX The following types of sales will be exempted from cst - 1. Sales in course of Export or Import : No central sales tax can be levied if sale is in course of import or export. Constitution of India prohibits imposition of sales tax on import and export. 2. Penultimate sale : Section 5(3) Provided that sale or purchase of goods for complying with an export obligation is also exempt from tax. So if a dealer purchase any goods and sells it to another for export it immediately pervading sale or purchase prior to such export shall also be deemed for the purpose of export and exempt from C.S.T. 3. Exemption from CST if sale to Special Economic Zone (SEZ) : Inter state sale made to a unit in SEZ (Special Economic Zone) will be exempt from Central Sales Tax. Special Economic Zone (SEZ) is set up for export purposes. Such zone is treated as if it is a foreign territory within India. All their products should be exported. Exemption from CST is only if the sale is to unit in SEZ under the following conditions

(i) The registered dealer in SEZ can obtain goods from selling registered dealer outside the zone without payment of CST.

(ii) The goods can be obtained for purpose of manufacture, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as trading or packing material or packing accessories.

(iii) The registered dealer in SEZ should have been authorized to establish such unit in SEZ by authority specified by Central Government.

(iv) The goods which the unit in SEZ can obtain without CST should be specified in the sales tax registration certificate of SEZ unit.

(v) The purchasing dealer has to submit a declaration in prescribed form ‘I’ provided by the Central Government.

4. Exemption from Central Sales Tax on subsequent sale. Exemption is available to the second and subsequent sale effected in the course of Inter state trade or commerce provided the sale is effected by transfer of documents of title to such goods during their movement from one State to another. Important points – The following important points should be kept in view regarding subsequent sales –

a. First sale should be Inter-state. b. Transfer of Documents of Title. c. Meaning of During movement of Goods – The movement commences when goods are handed

over to carrier and movement is deemed to continue till delivery is taken at other end. Goods will be deemed to be in movement even when goods have reached destination and are lying in possession of the carrier.

d. Transfer to Government – The transfer may be to Government Central or State or registered dealer. e. Transfer to Registered Dealer – The subsequent sale is exempt only if it is made to Government

or registered dealer. f. Certificate required – Dealer selling the goods has to issue a certificate in prescribed form to

the purchasing dealer and also subsequent purchaser. g. Various forms applicable regarding subsequent sale – The dealer who makes the first inter

state sale should give Form E-1 to the purchasing registered dealer/Govt. and obtain Form C as the case may be, from him. The registered purchasing dealer, who made the subsequent sale by transfer of documents to title, will issue Form E-II to the subsequent registered purchasing dealer/Government and must obtain C Form from them. Similar procedure will be followed for any subsequent sale which may take place during the movement of such goods.

5. Goods exempted within state, also exempt from CST. 6. Good sent to branch, agent or other office : Under the CST Act, no tax is levied upon the goods sent by a dealer to his shop, agent or a branch, situated in any other state.



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DECLARATION IN FORM C, E-I, E-II, F-I, H AND I

Form Section *Rule Purpose Who shall issue

Who shall claim

concession A Form For Application of Registration Dealers B Form For Certificate of Registration Authority C Form 8(4) 12(1) Registered dealer making inter-State

sale to another registered dealer (including government)

Purchaser dealer

Selling dealer

E-I 6(2) 12(4) Subsequent inter-State sale during movement of goods from a registered dealer to another registered dealer.

First seller First purchaser

E-II 6(2) 12(4) Chain of subsequent inter state sales during movement of goods amongst registered dealers

Each subsequent seller

Each subsequent purchaser

F Form 6A(1) 12(5) (i) Branch transfer outside state (ii) Consignment sales to agent outside State

Dealer receiving goods by transfer

Dealer making such transfer

H Form 5(3) 12(10) Sale of goods for making exports (penultimate to exporter)

Purchasing dealer

Selling dealer

I Form 8(8) 12(11) For certificate of SEZ unit Assessing Authority u/s State Government (Sec. 13)

Selling dealer

LIST OF EXEMPTED GOODS IN THE STATE

Goods exempted in the state, also exempted from central sales tax point of view, some goods are declared exempt from VAT in M.P. summerised list is given below fro convenience to solve the problems -

1. Cloth, Rajai, Pillow, Covers, Towel, Bed Sheets, Umbrella etc. 2. Suger, Gur, Mishri, Batasha. 3. Salt any Type. 4. Food grains (Wheat, Rice etc.), pules, separated pulses, Branded Rice. 5. Agricultural equipments (Motified) 6. Books, Slate, Chawk etc. 7. Flour, Maida, Suji, Basan 8. Liquor (Country or Foreign ) 9. Vegetables, Fruits, Eggs, Meat. 10. Kum-kum, Sindoor, Bindiya, Bichiya, Kajal, mangalsutra. 11. Cattle feed, poultry feed. 12. Papad, Badi, Finger etc. 13. Agarbatti 14. Charcoal & fire wood. 15. Poha, Murmura 16. Betel Leaves 17. Certified seeds, truthfully treated seeds 18. Condoms and contraceptives.



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Chart of Central Sales tax Rates

S.No. 1. Sales to Government (a) Tax free goods

(b) Taxable goods Nil State VAT Rate (1, 5, 13%)

2. Sales to Regd. Dealers - (a) Tax free goods (b) On form ‘C’ (c) Goods without ‘C’ form

Nil 2% or Actual rate (which ever is less) State VAT Rate

3. Sales to unregd. Dealers- (a) Tax free goods (b) Taxable goods

Nil State VAT Rate

4. Sales to Dealer of Special Economic Zone No tax Payable Under CST Note: During the year 2014-15 the central sales tax rates are applicable as under incase of sales against Form ‘C’ – i) If state rate is lower than 2% = Actual Rate ii) If state rate is 2% or more = 2% So, CST shall be charged @2% of state rate whichever is lower regarding the sales on Form “C”.



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UNIT-V Proforma of Computation of Taxable Turnover under C.S.T.

S.No. Particular Amount Amount

1 Gross Sales - Except News Papers, Stamp, Securities and Goods sent to branch at or consignment

Gross Sales

-------------------- -------------------- -------------------- --------------------

2 Less - Items not Taxable under CST i) Sales within state (M.P.) (Taxable & Tax Free Both goods) ii) Export iii) Sales outside state (Purchase and sales both outside M.P.)

Total Inter State Sales

--------------------

-------------------- --------------------

(-) ----------------- --------------------

3 Less - Deductions - i) Sales return within six months ii) Railway freight & delivery charges iii) Cash Discount iv) Subsequent Sales v) Tax free goods to other state vi) Sales to special economic zone

Actual Inter State Sales

-------------------- -------------------- -------------------- -------------------- -------------------- --------------------

(-) ----------------- --------------------

4 Less:- Central Sales Tax As per prescribed rates

Taxable Turnover

(-) ----------------- --------------------

Special Points should be noted:- 1. All types of sales should be included while computing gross sales in first stage either a sale

taxable or not taxable under CST. 2. Sale of newspapers, shares, and securities should excluded in first instance, because these are

not covered under the definition of goods. 3. Goods sent to branch or agent outside the state is not included in gross sales, because it is

transfer of stock, not sales, so it is not interstate sales. If the branch or agent sells these goods, it will pay tax on sales of that state.

4. Exports, sales inside the state (M.P.), sales of exempted goods, sales outside M.P. will be deducted from gross sales to arrive the total interstate sales.

5. It there is no clear indication that a particular goods were sold, with in state or outside the state? In such case it will be assumed that such goods sold inside state and central, sales tax liability will not arise, the provincial tax will be paid according.

6. The following deductions will be allowed from total Inter State Sales - (i) Sales return within 6 months. (ii) Freight & Delivery charges separately charges. (iii) Cash Discount. (iv) Goods transferred by transfer of documents when such goods are in transit, (Subsequent Sales) (v) Goods sold to other state but exempted in M.P.

7. After deductions we will find the net interstate sales which is taxable under C.S.T. The central sales tax liability will be calculated on such sales in the following manner -

(i) If the sales figures are included tax amount -



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Taxable Inter State Sales (Including Tax) CST Rate 100 + Rate (ii) If the taxable sales (Tax Excluded) are given - Taxable Sales CST Rate 100 8. In case of without form ‘C’ actual rate of state is applicable. 9. If form ‘C’ not submitted, it is assumed that sales made to unregistered dealer and taxable goods

will be tax at state rate. 10. If there is no clear information that the registered dealer has submitted or not submitted form

‘C’ in such case, purchase will be treated as unregd. dealer and state rate will be applicable. 11. If state rate is below 2%, The actual rate shall be applied, even form ‘C’ not submitted.

REGISTRATION OF DEALERS UNDER C.S.T. ACT

Every such dealer who purchases or sells the taxable goods during the inter-state trade or business would have to compulsory get himself registered. For example, if a trader of M.P. sells his goods outside M.P. then under CST act he has to get himself registered.

Types of registration: Under the CST Act, registration shall be of two kinds: (1) Compulsory registration, (2) Voluntary registration.

(1) Compulsory Registration: If any dealer purchases or sells goods under the inter-state sales, he will be liable to pay the tax howsoever low his sale might be. Hence, he will compulsorily have to get himself registered.

There is no limit for inter-state sale and therefore registration becomes compulsory just after inter-state sale. (2) Voluntary Registration: In the following conditions the dealer may apply for his voluntary registration:

(a) Dealer is registered under sales tax act of the appropriate state; such dealer could get himself, at his discretion registered under the CST Act.

(b) If in any state or in any part of the state where sales tax Act of the state is not applicable and if the dealer's business centre is in such state or any part of such state. Such dealer also could apply for registration under the CST act.

(c) If any dealer does business of tax free goods in the state, he can apply for registration under the CST Act.

Procedure for Registration The following procedure prescribed for Registration of dealers under CST-

(1) Application for Registration: Every dealer who wants to get himself registered under CST Act, will have to apply to the authorized officer who normally is a sales tax or commercial tax officer.

For the purpose of registration FORM 'A' has to be filled and should be submitted to the authorized officer.

(2) Period for Application : A dealer should apply for registration within 30 days of inter-state sale. (3) Signature on application : The application must be signed by the owner or proprietor of the

business, by any partner in case of partnership firm, by the karta in case of HUF; (4) In case of more than one place of Business: If any dealer has more than one place of

business in one state, he shall have to submit only one application form. (5) Fees for Registration: The fees prescribed for the purpose of registration application is Rs. 25.

This fees is paid in the form of affixing the Court fee stamps worth Rs. 25 on the application. (6) Issuance of the Certificate for Reg.: When the concerned officer is satisfied, he issues a

certificate on the form 'B' for registration. This certificate becomes effective from the date of application for registration.

(7) Rejection of application: if the office thinks that the application submitted for registration does not contain all the information required to be given then the officer will grant opportunity to the applicant to furnish the information. If the applicant even after this remains negligent the officer will reject the application.



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(8) Amendments in the certificate: Two types of amendments can be done in the certificate: (a) On application by the dealer. (b) At the discretion of the authorised officer.

Cancellation of certificate of registration

Under the CST Act, the registration certificate of a dealer might he cancelled under the following conditions: (a) By tax assessing officer [ Sec. 7 (4B) ]

(i) If the dealer has closed the business. (ii) If the existence of the company has become extinct. (iii) If the dealer does not observe or follow the instruction as given in sec. 7 (3a) without

suitable causes. (iv) If the dealer doesn't follow the provisions of the section 7 (3-g) and 7 (3-e). (v) If the dealer doesn't clear the tax payable by him or the amount of penalty imposed

upon him, in accordance with the Act. (vi) If the registration is cancelled for the dealer, under the Sales Tax or Commercial Tax Act of

the concerned state, (vii) On the basis of any other reasonable cause.

(b) Cancellation on application of dealer [Sec. 7(5) ] If a dealer thinks he is not liable to pay tax under CST Act, and no tax burden will arise in near

future, he can submit an application for the cancellation of the certificate in front of the assessing officer:

(i) This application should be presented 6 months before the year ending. (ii) No central tax should be outstanding. (iii) Original copy of the certificate should be attached with the application. If the tax assessing officer is satisfied with the application he can cancel the certificate.

MISCELLANEOUS PROVISIONS

I. Assessment Procedure: CST is implemented on the sales of inter state sale. This tax is imposed by central govt. but is collected by state govt. The procedure of assessment of a dealer under CST is as follows -

1. Tax Assessment Authority is working under the CST Act of there own state govt. 2. Submission of the statement of sales by every tax-paying dealer under sales tax law as applicable

to the state. 3. Information (Particulars) to be supplied in the return. Which is given below- (i) Name & Address of dealer. (ii) GIR no & PAN of Income Tax. (iii) Name & Address of the branches of the dealer. (iv) Amount of total sales of the period. (v) Amount of sales with in state, outside the state & exports. (iv) Sales return with in 6 months, cash discount, freight expenses included in sales. (vii) Subsequent sales (viii) Tax free goods Under CST. (ix) The sales proceeds of other goods, besides the declared goods. (x) Amount of CS Tax payable. (xi) Amount of refundable under CST Act. (xii) Amount of Tax paid so for by Treasury Challan, date & number. 4. Signature upon the return and its verification by best of his knowledge. 5. Documents to be enclosed with the return. (i) A copy of Challan regarding tax paid under CST.



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(ii) List of those dealers to whom the assessee has sold the goods in various states in form No. VI with

6. Duration of sales according to rules 11 of CST. 7. Proceeding of tax - Assessment by concerned authority under CST Act. If authority required any

details, information, proof or certificate he may demand for all these.

PENALTY AND PROSECUTION Any law can legally be effective if and only if the persons pertaining to that law follow the rules

laid down under that law, Even if the person doesn’t - follows the rules, then to punish or penalize him are associated with law. Penalties and prosecution motivates a person to follow the rules laid by law. 6 months imprisonment or penalty and 50/- per day penalty till the offense continue

Types of offences

1. Furnishing wrong declaration 2. Giving false information regarding goods mentioned in the certificate of registration. 3. Non registered himself/does not follow the order of tax assessing officer. 4. Submitting false declaration in form ‘C’. 5. Collecting the Tax unlawfully in case any dealers is not registered. 6. Not collecting tax in prescribed way. 7. Furnished false information regarding registration. 8. Goods not used for the prescribe purposes.

Under the above circumstances, the dealer might be sentenced with simple imprisonment up to a maximum of 6 months or be fined, when the offence is repeatedly, committed, he may be fined at the rate of Rs. 50/- per day till the offence continuous.

Imposition of Penalty in Lieu of Prosecution

If any dealer commits the following offences, he may be punished in the form of fines in place of simple imprisonment. -

1. If reged. dealer buying goods by telling lies and without having paid tax, that such goods in mentioned in the registration certificate, while, it is not so.

2. Even on not being registration. Dealer, posing himself to be a registered dealer while purchasing goods under the process of inter state sales.

3. If the dealer, without any reasonable caouse makes use of the things for any other object besides that for which the things were purchased.

In the above circumstances the tax-assessing authority, after granting adequate opportunity to the dealer to present his view, may impose the fine upon him upto 1 ½ times of the amount. He could have been registration to pay in the form of sales tax while purchasing the goods. The authority will have to promulgate such order in writing. Appeals (Sec.-20) The following provisions shall apply to appeals filed by the aggrieved dealer against any order of the assessing authority made u/s 6-A u/s – 9 of this Act – (i) The authority shall adjudicate an appeal filed by aggrieved dealer. (ii) This appeal filed with in 45 days from the date on which the order is served on him - (iii) This appeal may be entertain by authority after expiry of 45 days, but no later than sixty days. by the sufficient cause from filling the appeal in time. (iv) The application shall be made in quadruplicate and be accompanied by a fee of Rs. 5000.



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Procedure on receipt of application (Sec -21) 1. On receipt of an appeal, Authority shall forwarded a copy of it to assessing authority concerned

for call upon the relevant record. 2. The authority shall adjudicate & decide upon the appeal. 3. After the examining the appeal and the records called for, by order, either allow or reject the

appeal with the reasons. 4. The authority shall make an Endeavour to pronounce its order in writing within 6 months of the

receipt of the appeal. 5. A copy of every order shall be sent to the appellant and to the assessing authority.

Power of the authority (Sec -22) The Authority shall have the same powers as are vested in a court under the code of civil procedure, 1908, while trying a suit in respect of the following matters, namely -

(a) enforcing the attendance of any person, examining him on oath or affirmation, (b) Compelling the production of accounts and documents, (c) Issuing commission for the examination of witnesses, (d) The reception of evidence on affidavits. (e) Any other matter which may be prescribed.

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