When is Sales Tax payable?

Central Sales tax is generally payable on the sale of all goods by a dealer in the course of inter-state Trade or commerce or, outside a State or, in the course of import into or, export from India.

What is interstate sale?

According to S3, a sale or purchase shall be deemed to take place in the course of interstate trade or commerce in the following cases:
  • when the sale or purchase occasions the movement of goods from one State to another;
  • when the sale is effected by a transfer of documents of title to the goods during their movement from one State to another.

Where the goods are delivered to a carrier or other bailee for transmission, the movement of the goods for the purpose of clause (b) above, is deemed to start at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Also, when the movement of goods starts and terminates in the same State, it shall not be deemed to be a movement of goods from one State to another.

To make a sale as one in the course of interstate trade, there must be an obligation to transport the goods outside the state. The obligation may be of the seller or the buyer. It may arise by reason of statute or contract between the parties or from mutual understanding or agreement between them or, even from the nature of the transaction, which linked the sale to such transaction. There must be a contract between the seller and the buyer. According to the terms of the contract, the goods must be moved from one state to another. If there is no contract, then there is no inter-state sale.

There can be an interstate sale even if the buyer and the seller belong to the same state; even if the goods move from one state to another as a result of a contract of sale; or, the goods are sold while they are in transit by transfer of documents.

To whom is Sales Tax payable? By whom is it payable?

Sales tax is payable to the sales tax authority in the state from which the movement of goods commences. It is to be paid by every dealer on the sale of any goods effected by him in the course of inter-state trade or commerce, notwithstanding that no liability to tax on the sale of goods arises under the tax laws of the appropriate state.

What are the possible offences, which may be committed, that are liable to be penalized? What are the penalties for such offences?

The offences that may be committed and, the penalties, prescribed for can be summarised as under. Offences, under section10, are punishable with simple imprisonment (up to 6months) with or without fine.
  1. Giving false declaration in Form C, E-I, E-II, F or H, which he knows or has reason to believe it to be false.
  2. Not getting registered under the CST Act, when required to be registered or not complying with provisions relating to security.
  3. False representation by a registered dealer that the goods, purchased are covered under his certificate of registration for a concessional rate.
  4. Falsely representing that he is a registered dealer, though he is not.
  5. Misusing or using for different purpose, the goods, obtained under C form at a concessional rate.
  6. Having possession of form C, which is not obtained as per provisions of the CST Act.
  7. Collecting any amount, representing as sales tax, by an unregistered dealer or by a registered dealer in contravention of the provisions of the CST Act.



  1. What is the liability of the directors of a private company with respect to payment of Central Sales Tax?

    If a private limited company is in liquidation and, any tax, assessed on the company, cannot be recovered, it becomes the personal liability of the directors, jointly and severally.

    Directors can however avoid this liability; if they prove that the non-payment of tax was not on account of neglect, misfeasance or breach of duty on the part of the directors, in relation to affairs of the company.