Goods And Service Tax India

A number of goods including cereals, coal, cotton, certain cotton fabrics, crude oil, iron and steel, etc are declared to be of special importance in Inter State trade or commerce by Sec 14 of the Central Sales Tax Act, 1956. Collectively these goods are called Declared Goods.

Sec 15 of the CST Act, 1956 imposes certain restrictions on the powers of the states to levy tax on declared goods.

The restrictions are :

01) The tax payable under the local law shall not exceed 4% and the tax shall not be levied at more than one stage.

02) If such goods are purchased within the state and tax is paid thereon and subsequently such tax suffered goods are sold interstate and CST is paid thereon, the dealer shall be entitled to refund of local tax paid on such goods.

03) local tax paid on paddy shall be reduced from the tax on rice procured from such paddy

04) each of the pulses referred to in Clause (via) of Sec 14 of the CST Act, 1956, whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of tax under the local law.

Disputes have arisen in many assessments on the meaning of the phrase “tax payable”.

Normally, tax is payable at the first or the last point of sale. If the dealer selling goods at that point enjoys an exemption from tax, can the assessing officer treat the next sale as taxable sale and levy tax thereon?

This interesting question was decided by the Supreme Court in Peekay Re-rolling Mills (P) Ltd vs The Assistant Commissioner & Anr on 20th March 2007.

More in Local tax on declared goods - Part 2