Meaning of CST
- Central Sales tax refers to the tax levied on sales generated during inter-state trade and commerce in a country.
- It is an indirect, origin-based tax.
- Central sales tax is a subject of the Union List in the Constitution of India and is therefore, the prerogative of the Central Government to levy the same. However, it is administered by the state in which a particular sale originates.
- It is charged only on inter-state transactions and any transaction within a state or import-export of goods does not fall under its purview.
- The State Government Sales Tax officer, who was responsible for the assessment and collection of local (state) sales tax was also made to assess and collect CST.
- CST was collected as a percentage of the sale price of the commodity.
- The statute governing sales tax is Central Sales Tax Act, 1956.
- But this tax is no longer in force in the territory of India. Sales Tax has been replaced by the Goods and Services Tax (GST) starting 1 July 2017.
Differences Between Tax on Sale in CST and GST regimes
CST Regime
- Tax on interstate commerce and trade was an origin-based tax.
- There is a cascading effect on taxes as credit of CST was not available.
- The system worked on a post-facto and not real time basis.
- Tax compliance is complex.
GST Regime
- The tax levied under this regime is a destination-based tax system.
- There is complete removal of the cascading effect with the input credit mechanism.
- The system works on a real time basis with continual uploading of invoices and credit details. Even mismatch reconciliation is done on a real time basis.
- Tax compliance has been simplified.
Please note:
Even though GST subsumed Central Sales Tax, the Act of 1956 still governs the purchase or sale of goods in the course of inter-state trade and commerce, to the extent of the goods prescribed under the definition of “Goods” under Section 8(3)(b). currently, the GST Act excludes from its ambit, six goods, namely, High Speed Diesel, Aviation Turbine Fuel, Liquor for Human Consumption, Natural Gas, Petroleum Crude, and Petrol which will fall under the CST and State Sales Tax.
