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written by | April 25, 2022

Sales Tax – Latest Sales Tax Collection

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Table of Content


Businesses require the transportation and movement of goods and services from one state to another or within these states. The government has imposed several taxes on transportation and trading of goods and services to use the revenue generated in the country's growth, development, and advancement. 

The sales tax is imposed on the end-user only; therefore, several individuals must have their legal documentation to prevent the payment of the sales tax as they are not categorised as the end-users. There are different types of sales tax, several structures of transaction forms, and procedures for filing sales tax. However, these sales taxes are determined on various goods, and the rate of these sales taxes is also different as the state government decides these.

Did you know?

Sales tax is an indirect tax, meaning the tax is paid by the end consumers who purchase the products.

What is Sales Tax?

Sales tax is defined as the tax paid by an individual to purchase or sell a good. These sales taxes are only applicable to specific individuals as the purchasing and trading go through different stages. Therefore, the tax is not liable for every step of the business. Each member involved in the trade and business of a particular item must have their legal documentation, which proves that they are not liable for paying it. The sales tax is paid directly to the governing bodies over the sale of all particular goods and services, including medicines, education, food, etc.

Also Read: GST Explained for Everyone

Types of Sales Tax

The sales tax is applied to the end-user of a particular good and service. Therefore, every purchaser who is not an end-user must have a resale certificate to prevent the tax implementation. The sales tax is categorised into different types based on these minor distinctions. There are five types of sales taxes in general use in India:

  • Manufacturers Sales Tax.
  • Wholesale Sales Tax.
  • Retail Sales Tax.
  • Use Tax.
  • Value Added Tax.

Sales Tax in India

Sales tax in India was implemented under the Act of Central Sales Tax Act of 1956. Under the influence of this, the government collects tax on different goods transported, traded, or purchased within the states of India. The primary motive behind this sales tax is to contribute to the tariffs in developing and growing the country's economic condition.

Central Sales Tax Act, 1956

The Central Sales Tax Act of 1956 came into existence for providing a proper plan for collecting the tax on several goods and services. These goods and services traded throughout the country need to be implemented with a certain amount of taxation, contributing to the country's growth and development. Therefore, the government had the power to impose a tax on different goods accordingly. The tax may differ based on the state where these goods are sold.

Interstate Sales

The Inter-State Sales determines the sales tax of the goods and services undertaken within two states, i.e., the transfer of the goods from one state to another, which requires proper legal documentation to prevent the individuals who are not the end-user from paying the sales tax. A dealer must have a resale certificate to avoid implementing these sales taxes.

Central Sales Tax (CST) Transaction Forms

Central sales tax transaction forms are different forms that the government prescribes to the buyers or purchasers to run their business smoothly and seamlessly. These transaction forms give the buyer the authority to implement specific rules and regulations and record the company and trading of the goods and services. Different types of transaction forms are:

  1. Form C: This form provides a provision to the dealer to get their goods and services at a considerable rate from the seller.
  2. Form D: This form is meant for the government, the primary purchaser of a particular group.
  3. Form E1: This form determines an individual as the dealer who is the initial investor in the Inter-State movement of the goods.
  4. Form E2: This form is issued by any dealer when the trading of the goods is done from one state to another
  5. Form F: This form determines that a particular good is sold to a different state.
  6. Form H: This form is implemented by exporters, who are the end purchasers of the good that is being exported.
  7. Form I: The dealers within the Special Economic Zones issue this variety of the transaction form.

State Government Taxes

The state government holds all the power of implementing a sales tax on certain goods and services. Therefore, every state has its specific tax implementation over the goods, so some goods are notably cheaper in one state than others. Thus, detailed legal documentation is essential for the smooth procedure during trading and business between the states.

Sales Tax Exemption

Tax exemptions are provided to specific individuals who are liable for those conditions. A seller who is not the end-user must not be responsible for paying the sales tax. Therefore, the dealer must have a resale certificate to prevent the implementation of this sales tax. Moreover, the products or goods sold under the authority of a charity, school education institute, etc., will be provided with this sales tax exemption. Various local commodities and a list of several essentials are the categories of the entities that have the provision over the exempted sales tax.

Calculation of Sales Tax

The sales tax calculation is relatively easy as the formulation for evaluating a sales tax is quite simple. The basic formula for calculating a sales tax is the product of the cost of an item, and the sales tax rate will give out the total sales tax amount. Mathematically, it can be expressed as:

Total Sales Tax = Cost of an item x Sales Tax Rate

Also Read: Difference Between VAT and GST

Violation of Sales Tax Rules

Some regulations should be followed while initiating the sales tax. These rules are called the sales tax rules, and many individuals break these laws, intentionally or unintentionally. Some of the common violations that are made by an individual while following these rules are:

  1. Providing wrong or misleading information.
  2. Not having the proper registration according to the CST act.
  3. Violating the security provisions of the CST acts.
  4. Falsely presenting yourself as a dealer.
  5. Providing false information regarding the goods that are being purchased.

Conclusion

Sales tax is the tax that is implemented on certain goods and services all over the state to use that contribution to the country's advancement, enhancement, and growth. The sales tax relies on the decision made by the State Government. Therefore, every state has their distinctive sales tax, i.e., the price of the goods will be different in different states. The sales tax is categorised into different groups, and each dealer must have a Central sales tax transaction form as legal documentation for the proper payment of the sales tax.

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FAQs

Q: What is the main objective of the Central Sales Tax Act?

Ans:

The main objective of the central sales tax is to simplify tax collection. However, several other purposes of this Tax Act include the proper collection and distribution of the tax in the Inter-State trading of the goods, providing a special designation to several goods. At the same time, they are being traded from one state to another as well as this tax act implements several rules and regulations that settle down the dispute among the traders.

Q: What is the Central Sales Tax Act of 1956?

Ans:

The Central Sales Tax Act of 1956 was implemented to determine a particular tax on several goods and services. This Tax Act has provided several rules and regulations that need to be met by the dealer, purchaser and exporter during the movement of a good from one state to another or within the state.

Q: What do you mean by central sales tax transaction form?

Ans:

It is the form that the dealer, exporter, purchaser, etc., must fill to describe the legal entity during the trading and business of the good. It is because the sales tax is implemented over the end-user only. Thus, a certification is required to prove the authenticity of a non-end user.

Q: What is sales tax?

Ans:

Sales tax is the tax implemented on the goods and services of a particular trade by the state government. The primary motive behind implementing these tax rules over certain goods and services is to contribute the amount collected from the tax towards the country’s development.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.