Sales Tax in India is an indirect tax. It is applicable on purchase and sale of goods within the country. The amount charges are paid over and above the product’s base value. Certain percentage of the goods value is chargeable for sales tax. Both central and state governments may decide the sales tax rate, and recover the tax from the purchaser. Thus, sales tax may vary from a state to state. The government may charge the same from purchasers at any stage of purchase or exchange of certain goods.
In this post, we will discuss sales tax regulations by the central government and state government, its types, exemptions, calculations, Central Board of Direct Tax, violations, and FAQs.
Here are the features:
Here are the standard sales tax types:
Certain categories do not have to come under the State Sales Tax. This is to get rid of the possibility of double taxation. And sometimes the reason for exemption is on the basis of humanitarian grounds. Following are the exemption information:
The rate of sales tax for a particular product is calculated based on the formula: Total Sales Tax = Cost of item x Sales tax rate/100. But when calculating the sales tax, the manufacturer/seller/dealer has to know what the calculation is as a percentage. And the person needs to keep updated with any change in the sales tax rate of the state/city of operation.
Here is an illustration of the sales tax calculation:
The administrative authority - Central Board of Direct Taxes (CBDT) is the one levying and collecting sales tax in the country. It comes under the Department of Revenue. Thus, it is also integral to the Ministry of Finance in India. This authoritative body functions on the laws directed under the Central Board Revenue Act, 1963. The chairman heads the governing body.
The CBDT has members who bear the responsibilities for different departments such as Revenue, Income Tax, Legislation and Computerisation, Investigation, Audit, and Personnel and Vigilance. This body is responsible for the following duties:
Here are the Sales Tax FAQs:
The Central Sales Tax, 1956 governs the sales tax. It contains rules for tax laws for the sale and purchases of goods. It also consists of sales tax that the central government charges. The CST for a specific product is paid on the purchase in the particular state, as per the tax law of the state.
You must know the different forms to fill at various instances of movement and transfer of goods within our outside dealer’s state. Here are the forms:
To prevent instances of violations, sellers and manufacturers must be aware of similar instances that may occur, which are as follows:
The amount which a seller or manufacturer earns from the sale of goods constitutes the sale price. It also contains components such as incentives, charges for packaging and insurance, and the sales tax paid by the dealer. But it does not contain charges applicable during installation, delivery, exchange/return of goods, and cash discounts.
This relates to the title documents of goods’ transfers which are moved from a state to another for sale.
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