Inter-State Transaction & Form C under central Sales Tax Act 1956

[CHANDRAKISHORE BAJPAI]

State Government cannot levy the tax on inter-State Transactions however all such transaction are administered by the State Government that’s why provisions relating to State’s VAT in many situations are applicable even in such transactions.

Although CST Act 1956 is on the verge of its end with the advent of GST as it is knocking at the door even since long and waiting to change the whole picture of Indirect Taxation in India. But still it is worth to understand & keep the discussion continue relating to the Form-C because of the fact that lot of assessment are pending for completion.

As per section 8(1) (b) of CST Act 1956 sales tax liability on inter-state sales is at the rate of 2 percent or ‘rate of tax for sale within State’ whichever is lower, provided such sale is affected to a registered dealer and goods are covered in the registration certificate of the purchasing dealer. Otherwise the rate of tax would be the rate which is applicable on the goods sold within that State.

Thus CST rate at the rate of 2 percent (i.e. concessional rate) can be claimed if :-

(i)    Sale has been made to registered dealer; and

(ii)   Goods sold are covered in the registration certificate (RC) of the buying dealer.

Such concessional rate of tax would be applicable if selling dealer produces the proof to Tax authorities that the purchasing dealer is eligible to get these goods at concessional rate. Form C is the evidence which is provided by the buying dealer to selling dealer for the said purpose, section 8(4)(a) of the Act provides that concessional rate is applicable only if purchasing dealer submits a declaration in prescribed form C to selling dealer.

Thus inclusion of goods or class of goods in the RC has important role and it must be included in RC before the goods are actually purchased and such goods must be of nature which is allowed under section 8(3) of the Act.

As per the section following type or for following purpose goods are eligible for the inclusion in RC.

Purpose for which Goods can be purchased under concessional rate (Ref; Sec 8(3))

(i)      Goods as being intended for re-sale

(ii)     For use in the manufacture or processing of goods for sale,

(iii)    For use in telecommunication network or in mining or

(iv)    For use  in generation or distribution of electricity or any other form of power

(v)     Container or other  materials intended for the packing of goods for sale ( i.e. primary packing materials )

(vi)    Container or other materials used for packing of any goods mentioned in para (i) or (iv) above  ( i.e. Secondary packing materials)

Whether Goods need to specified in Registration certificate

Yes, such goods can be purchased, only if these are mentioned in the registration certificate of purchasing dealer. It is a mandatorily condition to avail concessional CST purchase.

Dealer should give complete list of product dealt with by him to the department while filing application for registration or for amendment in RC and he can also submit the soft copy of the list on the CD so that the same details can be uploaded by the department because in most of the States information is uploaded online now a days.

When goods should be get inserted in RC?

Before the goods are purchased. The goods must get included in the certificate of registration, before the goods are actually purchased. There are instances where even if the insertion is made at a later date but application for amendment in RC moved before purchase and the Courts have held that the amendments in R C should be from the date of application.(Orient paper mill 1968 (9) TMI 104 - MADHYA PRADESH HIGH COURT and Larson & Toubro Limited Versus Commissioner of Commercial Tax, Bihar, Patna and Another 1994 (12) TMI 313 - PATNA HIGH COURT )

Number of Transactions per C forms

One declaration in C form can cover all transactions in one quarter, irrespective of total amount/value of transactions during the quarter. (Quarter means period of three months). If a transaction covers more than one quarter, separate C form is required to be issued for each quarter.

Whether Form C can cover transactions for more than one quarter?

In general ,answer is no but The Hon’ble Gujrat VAT Tribunal in the case of Sainest Tubes Pvt.Ltd Vs State of Gujrat SA NO.431/2001 judgment dated 25.03.2010, directed to authorities that if applicant produce “C-Form” covering transactions of more than one quarter, the same will be considered to be legal and valid and in accordance with law.

Whether submission of Form is mandatory?

Yes, it is mandatory and no concession can be availed unless Form C is submitted.

Whether state Government can waive or relax from submission of the Form-C.

No, section 8(5) of the Act empowers the state government to provide relief or exemption from tax on inter-State transaction but State Government cannot waive or relax from fulfillment of compliance of Form C because it may give relief to dealer only on fulfillment of requirement of section 8(4).

Sale made to dealer located in SEZ

Sale would be exempt from tax If Inter-State sale has been made to dealer located in Special Economic Zone (SEZ) (i.e. SEZ Units), but Form-I (instead of form C) need to collected from SEZ unit. [ref :sec-8(6),8(7),8(8)]

Original, Duplicate and Counterfoil copy of C forms

The C form has been prescribed in three parts Original, Duplicate and Counterfoil. All three parts are identical in contents.

Section 8(4) of and Rule 12(1) do not say that which part of C form should be produced before the assessing authority but State law in many states requires producing original copy of the Form C to tax Authority. It is the form itself which by use of the words ‘Original’ ‘Duplicate’ and ‘Counterfoil given to Assessing Authority gives an impression that original copy should be given to assessing Authority. Rules show that even when the "Original" C Form is lost the Assessing Authority, on the basis of indemnity bond may proceed with the assessment for giving the benefit of exemption under Sub-section 4 of the Section 8 of the Central Sales Tax Act, 1956.

When to submit the C form with the authorities by the selling Dealer

As per rule 12(7) C form can be submitted to the assessing authority within three months after the end of period to which it relates.

Whether Government department can issue Form C for it’s purchase

No, unless the department is a registered dealer. In the absence of Form C Government Department will not get any concession and may be liable for full rate of tax.

Date of Invoice or date of receiving material for issuing Form-C

It is a practical problem that goods is dispatched by the selling dealer in quarter while same is received to buying dealer in next quarter, particularly when goods dispatched on last week of the any quarter. For example, Goods dispatched on December 28, 2013 may reach its destination on or after 1^st January 2014 (date falling in next quarter).

In such situation, what would be the date for issuing of C forms under CST Act, 1956 i.e whether date of invoice or the date on which goods are received by the purchasing dealer?

The usual practice among all the dealers is that seller books his sale in his books of account on the date when invoice is issued, whereas, the purchaser books same purchase of goods in his books of account on the date when he actually receives such goods.

In such case it is obvious for the purchaser to issue C form according to the date on which he received the goods as on such date he enters such purchase into his books of account.

In such cases the question is what is the correct date of inter-state sale for the purpose of issuance of C form. The simple answer to this question is that C form is to be issued after the sale transaction is completed. Sale of goods gets completed when transfer of property in goods takes place.

Section 19 of the Sale of Goods Act provides: “Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.”

Therefore the crucial date for the issuance of C form will be the date on which transfer of property in goods takes place i.e when the title of goods gets transferred in the favour of purchaser i.e when the sales gets completed. When the transfer of property in goods takes place is a question of fact depending upon the terms of the contract and intentions of the parties. It can be inferred that so long as the transfer of property in goods does not take place, the sale does not get completed. The crucial date when sale gets completed is the date when the title passes.

C form is to be issued only for a completed transaction of inter-state sale and therefore date for the purpose of issuing C form will be the date when sale gets completed.

When the transfer of property in goods takes place and consequently sale gets completed, is a question of fact and is to be decided on the basis of intentions of the parties and the terms of the contract

In States like Andhra Pradesh or Maharashtra there are circular clarifying on the issue, which accepts that Form can be accepted as valid based on the date of dispatch or date of receipt of goods.

The primary objective of ‘C’ Form is to ensure that goods are dispatched to other States and same on accounted for by the dealer of other States. As long as this primary object is met, ‘C’ form can be accepted as valid. Accordingly it is clarified that Form-C can be accepted as valid relating to goods delivered in quarter, based on the date of dispatch or date of receipt of goods in other State or date of invoice or combination of all the three. (Ref:-AP-VAT Circular CCT’s Ref. No.IST/D1/ OUT/ 31/2012 Dt:  10 -05-2012.)

Can be reached at :-

CA CHANDRA KISHORE BAJPAI

M.Com, FCA, DISA(ICAI), Certificate in International Tax (ICAI)

cackbajpai at the rate of gmail.com, http://ckbajpai.blogspot.com

Discussions to this article

[shankar narayanan]

Very good article Bajpai..  You have discussed in the article the practical problem faced by the dealer on issue of Form C i.e whether to issue Date of invoice or receipt of the goods. This is invariably every industry is facing with their vendors.  Some vendors who understood the provision of CST won't dispute. however, some public sector dealer or other dealer who are not understanding the when the sale is completed on the date of despatch and LR made to the consignee .   The question is what is the correct date of inter-state sale for the purpose of issuance of C form. your  reply  to this question is that C form is to be issued after the sale transaction is completed. Sale of goods gets completed when transfer of property in goods takes place  which is correct

suggest you to cover in you next article on concessional sale against Form I  sale made to SEZ Developer or co developer or SEZ Unit.

congrts to your contribution on the captioned subject article.  Trust this will be benficial  to all  those person who handle at ground level issue of Form C to all those vendors. 

Look forward to see many such contributions in VAT/CST/WCT area.

Shankaranarayanan

 

 

[Pradeep Khatri]

Well done, you have touched every aspect of ISS and C form.