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CENTRAL SALES TAX ACT

Ministry of Law and Justice

Act nº 74 of 1956


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Chapter V. Liability in Special Cases
  • Chapter VA
  • Chapter VI
  • Amending Acts
  • Act nº 74 of 1956

Preamble

THE CENTRAL SALES TAX ACT, 19561

[Act, No. 74 of 1956]

[21st December, 1956]

PREAMBLE

An Act to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject.

BE it enacted by Parliament in the Seventh Year of the Republic of India as follows:--

1. The Act has been extended to Goa, Daman and Diu (with modifications) by Reg. 12 of 1962, section 3 and Sch., to Kohima and Mokokchung districts of Nagaland (as in force on 5-8-1971) by Act 61 of 1972, section 14 (1) w.e.f. 30-11-1972. The amendments made to the Act 61 of 1972, came into force in the said districts w.e.f. 1-4-1973 vide section 14(2), Act 61 of 1972.


Chapter I

Section 1. Short title extent and commencement

(1) This Act may be called the Central Sales Tax Act, 1956.

(2) It extends to the whole of India1**]

(3) It shall come into force on such date2as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act.

1. The words "except the State of Jammu and Kashmir" omitted by Act 5 of 1958, section 2.

2. Came into force on 5-1-1957, all sections except section 15, vide S.R.O. 78, dated 4th January, 1957, Gazette of India, Extra. 1957, Pt. II, Section3, p.57; and section 15 with effect from 1st October, 1958, vide G.S.R. 897, dated 23rd September, 1958, Gazette of India, Extra. 1958, Pt. II, Section 3 (i), p. 476.


Section 2. Definitions

In this Act, unless the context otherwise requires,-

(a) "appropriate State" means--

(i) in relation to a dealer who has one or more places of business situate in the same State, that State;

(ii) in relation to a dealer who has 1 [***] places of business situated in the different States, every such State with respect to the place or places of business situated with in its territory;

2 [***]

3 [(aa)] "business" includes--

(i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern;

(ab) "crossing the customs frontiers of India" means crossing in the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.

Explanation.- For the purposes of this clause, "customs station" and "customs authorities" shall have the same meanings as in the Customs Act, 1962 (52 of 1962);]

4 [(b) "dealer" means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash or for deferred payment, or for commission remuneration or other valuable consideration, and includes--

(i) a local authority, a body corporate, a company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business;

(ii) a factor, broker, commission agent, del credere agent, or any other mercantile agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of buying, selling, supplying or distributing, goods belonging to any principal whether disclosed or not; and

(iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal.

Explanation 1.--Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as--

(i) a mercantile agent as defined in the Sale of Goods Act, 1930 (3 of 1930). or

(ii) an agent for handling of goods or documents of title relating to goods, or

(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarters whereof is outside that State, shall be deemed to be a dealer for the purposes of this Act.

Explanation 2.-- A Government which, whether or not in the course of business, buy, sells, supplies or distributes, goods, directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration, shall except in relation to any sale, supply or distribution or surplus, un-serviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act;]

(c) "declared goods" means goods declared under section 14 to be of special importance in inter State trade or commerce;

(d) "goods" includes all materials, articles, commodities and all other kinds of movable property, but does not include 5 [newspapers] actionable claims, stocks, shares and securities.

5 [(dd) "place of business" includes--

(i) in any case where a dealer carries on business through an agent by (whatever name called), the place of business of such agent;

(ii) a warehouse, go down or other place where a dealer stores his goods; and

(iii) a place where a dealer keeps his books of account;]

(e) "prescribed" means prescribed by rules made under this Act;

(f) "registered dealer" means a dealer who is registered under section 7;

(g) 6 ["sale", with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,--

(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;

(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(iii) a delivery of goods on hire-purchase or any system of payment by instalments;

(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

(v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

(vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods]

(h) "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged;

7 [Provided that in the case of a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, the sale price of such goods shall be determined in the prescribed manner by making such deduction from the total consideration for the works contract as may be prescribed and such price shall be deemed to be the sale price for the purposes of this clause.]

8 (i) "sales tax law" means any law for the time being in force in any State or part thereof which provides for the levy of taxes on the sale or purchase of goods generally or on any specified goods expressly mentioned in that behalf, and "general sales tax law" means the law for the time being in force in any State or part thereof which provides for the levy of tax on the sale or purchase of goods generally and includes value added tax law;]

(j) "year", in relation to a dealer, means the year applicable in relation to him under the general sales tax law of the appropriate State, and where there is no such year applicable, the financial year.

1. The words "One or more" omitted by Act 31 of 1958, section 2 w.e.f. 1-10-1958.

2. Explanation omitted by Act 31 of 1958, section 2, w.e.f. 1-10-1958.

3. Inserted by Act 103 of 1976, section 2 w.e.f. 7-9-1976.

4. Substituted, by Act 103 of 1976, section 2, for clause (b) w.e.f. 7-9-1976.

5. Inserted by Act 31 of 1958, section 2 w.e.f. 1-10-1958.

6. Substituted by Finance Act, 2002 w.e.f. 13-05-2002. Prior to substitution clause (g) read as under:

""sale", with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instruments, but does not include a mortgage or hypothecation of or a charge or pledge on goods;"

7. Inserted by the Finance Act, 2005, w.e.f. 13.05.2005.

8. Substituted by the Finance Act, 2005, w.e.f. 13.05.2005. Prior to its substitution, it read as under:

" (i) "turnover" used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in accordance with the provisions of this Act and the rules made thereunder];"


Chapter II

Section 3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce

A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase--

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation 1---Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.

Section 4. When is a sale or purchase of goods said to take place outside a State

(1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States.

(2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State--

(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and

(b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.

Explanation.-- Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places.

Section 5. When is a sale or purchase of goods said to take place in the course of import or export

(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.

(2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.

1 [(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.]

2 [(4) The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority.

(5) Notwithstanding anything contained in sub-section (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposes of its international flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India.

Explanation.-- For the purposes of this sub-section, "designated Indian carrier" means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf.]

1. Inserted by Act 103 of 1976, sec. 3 w.r.e.f. 1-4-1976.

2. Inserted by the finance Act,2005 w.e.f. 13.05.2005


Chapter III

Section 6. Liability to tax on inter-State sales

1[(1)] Subject to the other provisions contained in this Act, every dealer shall, with effect from such date2as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales3[of goods other than electrical energy] effected by him in the course of inter- State trade or commerce during any year on and from the date so notified:

4[Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5 is a sale in the course of export of those goods out of the territory of India.]

5[(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State.]

9[(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected toy a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act:

Provided that no such subsequent sale shall be exempt from tax under this subsection unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,--

(a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and

(b) if the subsequent sale is made to a registered dealer, a declaration referred to in sub-section (4) of section 8:

Provided further that it shall not be necessary to furnish the declaration referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,--

(a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent, or such reduced rate as may be notified by the Central Government, by notification in the Official Gazette, under sub-section (1) of section 8 (whether called a tax or fee or by any other name); and

(b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in this sub-section.]

8[(3) Notwithstanding anything contained in this Act, if--

(a) any official or personnel of--

(i) any foreign diplomatic mission or consulate in India; or

(ii) the United Nations or any other similar international body, entitled to privileges under any convention to which India is a party or under any law for the time being in force; or

(b) any consular or diplomatic agent of any mission, the United Nations or other body referred to in sub-clause (i) or sub-clause (ii) of clause (a), purchases any goods for himself or for the purposes of such mission, United Nations or other body, then, the Central Government may, by notification in the Official Gazette, exempt, subject to such conditions as may be specified in the notification, the tax payable on the sale of such goods under this Act.]

1. Section 6 re-numbered as sub-section (1) of that section by Act 31 of 1958, section 3 w.e.f. 1-10-1958.

2. 1st July, 1957, vide S.R.O. 940-A, dated 26th March 1957, published in the Gazette of India, Extra. 1957, Pt. II, section 3, p.1233/1.

3. Inserted by Act 61 of 1972, section 2 w.e.f. 1-4-1973.

4. Inserted by Act 103 of 1976, section 4 w.r.e.f. 1-4-1976.

5. Inserted by Act 28 of 1969, section 3 (retrospectively).

6. Substituted by Act 61 of 1972, section 2, for sub-section (2) w.e.f. 1-4-1973.

7. Substituted by Act 25 of 1975, section 38, for "three per cent." w.e.f. 1-7-1975.

8. Substituted by the Finance Act, 2005, w.e.f. 13.05.2005. Prior to its substitution, it read as under:

"(3) Notwithstanding anything contained in this Act, if-

(a) any official or personnel of-

(i) any foreign diplomatic mission or consulate in India; or

(ii) the United Nations or any other similar international body,

entitled to privileges under any convention to which India is a party or under any law for the time being in force; or

(b) any consular or diplomatic agent of any mission, the United Nations or other body referred to in sub-clause (i) or sub-clause (ii) of clause (a),

purchases any goods for himself or for the purposes of such mission, United Nations or other body, then, the Central Government may, by notification in the Official Gazette, exempt, subject to such conditions as may be specified in the notification, the tax payable on the sale of such goods under this Act.

9. Substituted by Taxation Laws (Amendment) Act, 2007, section 2, for sub-section (2) dated 26-03-2007, w.e.f. 01.04.2007. Prior to its substitution it read as under:

"6[(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods form one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods,--

(a) to the Government, or

(b) to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8,

shall be exempt from tax under this Act:

Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,--

(a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and

(b) if the subsequent sale is made--

(i) to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or

(ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of section (4) of section 8:

Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,--

(a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than7[four per cent.] (whether called a tax or fee or by any other name); and

(b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (a) or clause (b) of this sub-section.]"


Section 6A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale

6A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale.1--

(1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State of another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of dispatch of such goods. 2[and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale]

(2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under sub-section (1) 3[are true and that no inter-State sale has been effected, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration relates shall, subject to the provisions of sub-section (3),] be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale.

Explanation.-- In this section, "assessing authority", in relation to dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act.]

4[(3) Nothing contained in sub-section (2) shall preclude reassessment by the assessing authority on the ground of discovery of new facts or revision by a higher authority on the ground that the findings of the assessing authority are contrary to law, and such reassessment or revision may be done in accordance with the provisions of general sales tax law of the State.]

1. Inserted by Act 61 of 1972, section 3 w.e.f. 1-4-1973.

2. Inserted by the Finance Act, 2002 w.e.f. 13-05-2002.

3. Substituted by the Finance Act, 2010 for the following : -

"are true, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration related shall"

4. Inserted by the Finance Act, 2010.


Section 7. Registration of dealers

(1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed.

1[(2) Any dealer who is liable to pay tax under the sales tax law of the appropriate State or where there is no such law in force in the appropriate State or any part thereof, any dealer having a place of business in that State or part, as the case may be may, notwithstanding that he is not liable to pay tax under this Act, apply for registration under this Act to the authority referred to in sub- section (1), and every such application shall contain such particulars as may be prescribed.

Explanation.-- For the purposes of this sub-section, a dealer shall be deemed to be liable to pay tax under the sales tax law of the appropriate State notwithstanding that under such law a sale or purchase made by him is exempt from tax or a refund or rebate of tax is admissible in respect thereof.]

2[(2A) Where is appears necessary to the authority to whom an application is made under sub-section (1) or sub-section (2) so to do for the proper realisation of the tax payable under this Act or for the proper custody and use of the forms referred to in clause (a) of the first proviso to sub-section (2) of section 6 or sub-section (1) of section 6A or 8[sub-section (4) or section 8], he may, by an order in writing and for reasons to be recorded therein, impose as a condition for the issue of a certificate or registration a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the order such security as may be so specified, for all or any of the aforesaid purposes.]

(3) If the authority to whom an application under sub- section (1) or sub- section (2) is made is satisfied that the application is in conformity with the provisions of this Act and the rules made there under3[and the condition, if any, imposed under sub-section (2A), has been complied with] he shall register the applicant and grant to him a certificate of registration in the prescribed from which shall specify the class or classes of goods for the purposes of sub- section (1) of section 8.

4[(3A) Where it appears necessary to the authority granting a certificate of registration under this section so to do for the proper realisation of tax payable under this Act or for the proper custody and use of the forms referred to in sub-section (3A), he may, at any time while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer, to whom the certificate has been granted, to furnish within such time as may be specified in the order and in the prescribed manner such security, or, if the dealer has already furnished any security in pursuance of an order under this sub-section or sub-section (2A), such additional security, as may be specified in the order, for all or any of the aforesaid purposes.]

5[(3B) No dealer shall be required to furnish any security and sub-section (2A) or any security or additional security under sub-section (3A), unless he has been given an opportunity of being heard.

(3BB) The amount of security which a dealer may be required to furnish under sub-section (2A) or sub-section (3A) or the aggregate of the amount of such security and the amount of additional security which he may be required to furnish under sub-section (3A), by the authority referred to therein shall not exceed--

(a) in the case of a dealer other than a dealer who has made an application, or who has been registered in pursuance of an application, under sub-section (2), a sumequal to the tax payable under this Act, in accordance with the estimate of such authority, on the turnover of such dealer for the year in which such security or,as the case may be, additional security is required to be furnished; and

(b) in the case of a dealer who has made an application, or who has been registered in pursuance of an application, under sub-section (2), a sum equal to the tax leviable under this Act, in accordance with the estimate of such authority on the sales to such dealer in the course of inter-state trade or commerce in the year in which such security or, as the case may be additional security is required to be furnished, had such dealer been not registered under this Act,]

4[(3C) Where the security furnished by a dealer under sub-section (2A) or sub-section (3A) is in the form of a surety bond and the surety becomes insolvent or dies, the dealer shall, within thirty days of the occurrence of any of the aforesaid events, inform the authority granting the certificate of registration and shall within ninety days of such occurrence furnish a fresh surety bond or furnish in the prescribed manner other security for the amount of the bond.

(3D) The authority granting the certificate of registration may by order and for good and sufficient cause forfeit the whole or any part of the security furnished by a dealer,--

(a) for realising any amount of tax or penalty payable by the dealer;

(b) if the dealer is found to have misused any of the forms referred to in sub-section (2A) to have failed to keep them in proper custody:

Provided that no order shall be passed under this sub-section without giving the dealer an opportunity of being heard.

(3E) Where by reason of an order under sub-section (3D), the security furnished by any dealer is rendered insufficient, he shall make up the deficiency is such manner and within such time as may be prescribed.

(3F) The authority issuing the forms referred to in sub-section (2A) may refuse to issue such forms to a dealer who has failed to comply with an order under that sub-section or sub-section (3A), or with the provisions or sub-section (3C) or sub-section (3E), until the dealer has complied with such order or such provisions, as the case may be.

(3G) The authority granting a certificate of registration may, on application by the dealer to whom it has been granted, order the refund of any amount or part thereof deposited by the dealer by way of security under this section, if it is not required for the purpose of this Act.

(3H) Any person aggrieved by an order passed under sub-section (2A), sub-section (3A), sub-section (3D) or sub-section (3G) may, within thirty days of the service of the order on him, but after furnishing the security, prefer, in such form and manner as may be prescribed, an appeal against such order to such authority (hereinafter this section referred to as the "appellate authority") as may be prescribed:

Provided that the appellate authority may, for sufficient cause, permit such person to present the appeal--

(a) after the expiry of the said period of thirty days; or

(b) without furnishing the whole or any part of such security.

(3I) The procedure to be followed in hearing any appeal under sub-section (3H), and the fees payable in respect of such appeals shall be such as may be prescribed.

(3J) The order passed by the appellate authority in any appeal under sub-section (3H) shall be final.]

6[(4) A certificate of registration granted under this section may-

(a) either on the application of the dealer to whom it has been granted or, where no such application has been made, after due notice to the dealer, be amended by the authority granting it if he is satisfied that by reason of the registered dealer having changed the name, place or nature of his business or the classes of goods in which he carries on business or for any other reason the certificate of registration granted to him requires to be amended; or

(b) be cancelled by the authority granting it, where he is satisfied, after due notice to the dealer to whom it has been granted, that he has ceased to carry on business7[or has ceased to exist or has failed without sufficient cause, to comply with an order under sub-section (3C) or sub-section (3E) or has failed to pay any tax or penalty payable under this Act], or in the case of a dealer registered under sub-section (2) has ceased to be liable to pay tax under the sales tax of the appropriate State or for any other sufficient reason.]

(5) A registered dealer may apply in the prescribed manner not later than six months before the end of a year to the authority which granted his certificate of registration for the cancellation of such registration, and the authority shall, unless the dealer is liable to pay tax under this Act, cancel the registration accordingly, and where he does so, the cancellation shall take effect from the end of the year.

1. Substituted by Act 31 of 1958, section 4 for sub-section (2) w.e.f. 1-10-1958.

2. Inserted by Act 61 of 1972, section 4 w.e.f. 1-4-1973.

3. Inserted by Act 61 of 1972, section 4 w.e.f. 1-4-1973.

4. Inserted by Act 61 of 1972, section 4 w.e.f. 1-4-1973.

5. Sub-section (3B) Inserted by Act 61 of 1972, section 4 w.e.f. 1-4-1973 and Substituted by Act 103 of 1976, section 5 w.e.f. 7-9-1976.

6. Substituted by Act 31 of 1958 section 4, for sub-section (4) w.e.f. 1-10-1958.

7. Substituted by Act 61 of 1972, section 4, for "or has ceased to exist" w.e.f. 1-4-1973

8. Substituted for the words, brackets, letter and figures "clause (a) of sub-section (4) or section 8" by The Taxation Laws (Amendment) Act, 2007, dated 26th March, 2007, w.e.f. 01.04.2007, section 3.


Section 8. Rates of tax on sales in the course of inter-State trade or commerce

17[(1) Every dealer, who in the course of inter-State trade or commence, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be three per cent, of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower:

Provided that the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section.

(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or service not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State.

Explanation.--For the purposes of this sub-section, a dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.]

8 [***]

(3) The goods referred to in sub-section (1),--

9 [***]

(b) 10 [***] are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or 11 [in the telecommunications network or] in mining or in the generation or distribution of electricity or any other form of power;

(c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale;

(d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in 12 [***] clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c).

18[(4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority:

Provided that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.]

14 [(5) Notwithstanding anything contained in this section, the State Government may 11 [on the fulfillment of the requirements laid down in sub-section (4) by the dealer] if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette and subject to such conditions as may be specified therein direct,--

(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce 11 [to a registered dealer 19[***]], from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) 19[***] as may be mentioned in the notification;

(b) that in respect of all sales of goods or sales of such classes of goods as may by specified in the notification, which are made, in the course of inter-State trade or commerce 11 [to a registered dealer 19[***]], by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or tosuch class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) 19[***] as may be mentioned in the notification.]

15 (6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in a unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authorised to establish such unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf.]

(7) The goods referred to in sub-section (6) shall be the goods of such class or classes of goods as specified in the certificate of registration of the registered dealer referred to in that sub-section.

(8) The provisions of sub-sections (6) and (7) shall not apply to any sale of goods made in the course of inter-State trade or commerce unless the dealer selling such goods furnishes to the 16 [prescribed authority referred to in sub-section (4) a declaration in the prescribed manner on the prescribed form obtained from the authority specified by the Central Government under sub-section (6)] duly filled in and signed by the registered dealer to whom such goods are sold.

Explanation.--For the purposes of sub-section (6), the expression "special economic zone" has the meaning assigned to it in clause (iii) to Explanation 2 to the proviso to section 3 of the Central Excise Act, 1944 (1 of 1944).]

1. Substituted by Act 31 of 1958, sec. 5, for sub-section (1) to (4) w.e.f. 1-10-1958.

2. Substituted by the Finance Act, 2003. Prior to substitution it read as under :

"shall be liable to pay tax under this Act, which shall be 20 [four per cent.] of his turnover 11 [or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, which ever is lower]"

3. Substituted by Act 25 of 1975, sec. 38, for "at the rate" w.e.f. 1-7-1975.

4. The words "and" omitted by the Finance Act, 2002 w.e.f. 13-05-2002.

5. Substituted by Act 8 of 1963, sec. 2 for "seven per cent." w.e.f. 1-4-1963.

6. Substituted by Finance Act, 2002 for the words "whichever is higher" w.e.f. 13-05-2002.

7. Substituted by Finance Act, 2002 for the words "and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact may not be so liable under that law." w.e.f. 13-05-2002.

8. Omitted by the Finance Act, 2002 w.e.f. 13-05-2002. Prior to omission sub-section 2A read as under :

"(2A) Notwithstanding anything contained in sub-section (1A) of section 6 or sub-section (1) or clause (b) of sub-section (2)] of this section, tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent. (whether called a tax or fee or by any other name), shall be nil, or as the case may be shall be calculated at the lower rate.

Explanation.- For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods."

9. Clause (a) omitted by Act 8 of 1963, sec. 2 w.e.f. 1-4-1963.

10. Certain words omitted by Act 8 of 1963, sec. 2 w.e.f. 1-4-1963.

11. Inserted by the Finance Act, 2002 w.e.f. 13-05-2002.

12. The words "clause (a) or" omitted by Act 8 of 1963, sec. 2, w.e.f. 1-4-1963.

13. Inserted by Act 61 of 1972, sec. 5 w.e.f. 1-4-1973.

14. Substituted by Act 61 of 1972, sec. 5, for sub-section (5) w.e.f. 1-4-1973.

15. Substituted by the Finance (No.2) Act, 2004 for the following section:-

(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of manufacture, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as trading or packing material or packing accessories in an unit located in any special economic zone, if such registered dealer has been authorised to establish such unit by the authority specified by the Central Government in this behalf.

16. Substituted by the Finance (No.2) Act, 2004 for the following:-

"authority referred to in sub-section (6) a declaration in the prescribed manner on the prescribed form obtained from the authority referred to in sub-section (5)".

17. Substituted by the Taxation Laws (Amendment) Act, 2007, dated 26.03.2007, w.e.f. 01.04.2007 for the following text:-

"1[(1) Every dealer, who in the course of inter-State trade or commerce-

(a) sells to Government any goods; or

(b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3), 2 [shall be liable to pay tax under this Act, with effect from such date as may be notified by the Central Government in the Official Gazette for this purpose, which shall be two per cent of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, or, as the case may be, under any enactment of that State imposing value added tax, whichever is lower :

Provided that the rate of tax payable under this sub-section by a dealer shall continue to be four per cent of his turnover, until the rate of two per cent takes effect under this sub-section.].

(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1)--

(a) in the case of declared goods, shall be calculated 3 [at twice the rate] applicable to the sale or purchase of such goods inside the appropriate State; 4 [***]

(b) in the case of goods other than declared goods, shall be calculated at the rate of 5 [ten per cent.] or at the rate applicable to the sale or purchase of such goods inside the appropriate State, 6 [whichever is higher; and]

7 [(c) in the case of goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally shall be nil, and for the purpose of making any such calculation under clause (a) or clause (b), any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.

Explanation.-- For the purposes of this sub-section, a sale or purchase of any goods shall not be deemed to be exempt from tax generally under, the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.]"

18. Substituted by the Taxation Laws (Amendment) Act, 2007, dated 26.03.2007, w.e.f. 01.04.2007. Prior to substitution, it read as under:

"( 4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner--

(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars form obtained from the prescribed authority; or

(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government:]

13[Provided that the declaration referred to in clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.]"

19. In Clauses (a) and (b), the words "or the Government" and the words, brackets and figure "or sub-section (2)", wherever they occur omitted by the Taxation Laws (Amendment) Act, 2007, dated 26.03.2007, w.e.f. 01.04.2007.


Section 8A. Determination of turnover

1 [8A. Determination of turnover

(1) In determining the turnover of a dealer for the purpose of this Act, the following deductions shall be made from the aggregate of the sale prices, namely:--

(a) the amount arrived at by applying the following formula-

rate of tax X aggregate of sale prices

100 + rate of tax

Provided that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.

Explanation.- Where the turnover of a dealer is taxable at different rates, the aforesaid formula shall be applied separately in respect of each part of the turnover liable to a different rates of tax;

(b) the sale price of all goods returned to the dealer by the purchasers of such goods,--

(i) within a period of three months from the date of delivery of the goods, in the case of goods returned before the 14th day of May, 1966;

(ii) within a period of six months from the date of delivery of the goods, in the case of goods returned on or after the 14th day of may, 1966:

Provided that satisfactory evidence of such return of goods and of refund or adjustment in accounts of the sale price thereof is produced before the authority competent to assess or, as the case may be, re-assess the tax payable by the dealer under this Act; and

(c) Such other deductions as the Central Government may, having regard to the prevalent market conditions, facility of trade and interests of consumers, prescribe.

(2) Save as otherwise provided in sub-section (1), in determining the turnover of a dealer for the purpose of this Act, no deduction shall be made from the aggregate of the sale prices.]

1. Inserted by Act 28 of 1969, section 5 (retrospectively).


Section 9. Levy and collection of tax and penalties

1[9. Levy and collection of tax and penalties.--

(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provision of sub-section (2), in the State from which the movement of the goods commenced:

2[Provided that, in the case of a sale of goods during their movement from one State of another, being a sale subsequent to the first sale in respect of the same goods and being also a sale which does not fall within sub-section (2) of section 6, the tax shall be levied and collected--

(a) where such subsequent sale has been effected by a registered dealer, in the State from which the registered dealer obtained or, as the case may be, could have obtained, the form prescribed for the purposes of 10[sub-section (4) of section 8] in connection with the purchase of such goods; and

(b) where such subsequent sale has been effected by an unregistered dealer in the State from which such subsequent sale has been effected.]

(2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess re-assess, collect and enforce payment of tax, including any3[interest or penalty,] payable by a dealer under this Act as if the tax or3[interest or penalty] payable by such a dealer under this Act is a tax or3[interest or penalty] payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm of Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references,4[refunds, rebated, penalties,]5[charging or payment of interest,] compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly:--

Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matter specified in this sub-section.

6[(2A) All the7[provisions relating to offences, interest and penalties] (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for an offence but excluding the provisions relating to matters provided for in section 10 and 10A) of the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, re-assessment, collection and the enforcement of payment of any tax required to be collected under this Act in such State or in relation to any process connected with such assessment, re-assessment, collection or enforcement of payment as if the tax under this Act were a tax under such sales tax law.]

8[( 2B) If the tax payable by any dealer under this Act is not paid in time, the dealer shall be liable to pay interest for delayed payment of such tax and all the provisions for delayed payment of such tax and all the provisions relating to due date for payment of tax, rate of interest for delayed payment of tax and assessment and collection of interest for delayed payment of tax, of the general sales tax law of each State, shall apply in relation to due date for payment of tax, rate of interest for delayed payment of tax, and assessment and collection of interest for delayed payment of tax under this Act in such States as if the tax and the interest payable under this Act were a tax and an interest under such sales tax law.]

(3) The proceeds in any financial year of any tax,9[including any interest or penalty] levied and collected under this Act in any State (other than a Union Territory) on behalf on the Government of India shall be assigned to the State and shall be retained by it; and the proceeds attributable to Union territories shall form part of the Consolidated Fund of India.]

1. Section 9 Substituted by Act 31 of 1958, sec. 6 and again Substituted by Act 28 of 1969, sec. 6 (retrospectively).

2. Substituted by Act 103 of 1976, sec. 6, for the proviso w.e.f. 7-9-1976.

3. Substituted by the Finance Act, 2000, sec. 115, for "penalty".

4. Substituted by Act 61 of 1972, sec. 6, for "refunds, penalties" w.e.f. 1-4-1973.

5. Inserted by Act 103 of 1976, sec. 6 (retrospectively).

6. Inserted by Act 103 of 1976, sec.6 w.e.f. 7-9-1976.

7. Substituted by the Finance Act, 2000, sec. 115, for "provisions relating to offences and penalties".

8. Inserted by the Finance Act, 2000.

9. Substituted by the Finance Act 2000, sec. 115, for "including any penalty."

10. Substituted for the words, letter, brackets and figures "clause (a) of sub-section (4) of section 8" by the Taxation Laws (Amendment) Act, 2007, dated 26.03.2007, w.e.f. 01.04.2007.