Central Sales Tax (CST)

The Central Sales Tax (CST) is a levy of tax on sales, which are effected in the course of inter-State trade or commerce. According to the Constitution of India, no State can levy sales tax on any sales or purchase of goods that takes place in the course of interstate trade or commerce. Only parliament can levy tax on such transaction. The Central Sales Tax Act was enacted in 1956 to formulate principles for determining when a sale or purchase of goods takes place in the course of interstate trade or commerce. The Act also provides for the levy and collection of taxes on sale of goods in the course of interstate trade and commerce and to declare certain goods to be of special importance in the interstate commerce or trade.

The central sales tax is an indirect tax on consumers. Though CST is a central levy, however it is administered by the concerned State in which the sale originates. The seller or a dealer of goods in a State has to collect State Sales Tax on the sale of goods within the State as well as central Sales Tax on sales that takes place in the course interstate trade or commerce.

The objects of the Central Sales Tax Act, 1956 are given in the preamble of the Act which says that it is an Act to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-state trade or commerce or outside the a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject.

Value Added Tax

VAT is the indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit.

All over the world, VAT is payable on the goods and services as they form a part of national GDP. It means every seller of goods and service provider charges the tax after availing the input tax credit. It is the form of collecting sales tax under which tax is collected in each stage on the value added of the goods. In practice, the dealer charges the tax on the full price of the goods, sold to the consumer and at every end of the tax period reduces the tax collected on sale and tax charged to him by the dealers from whom he purchased the goods and deposits such amount of tax in government treasury.

Currently, the implementation is only confined to the State/UT.

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