Sales Tax Return

Business or trade has become an essential element of world history. Desire to explore trading has led many to do traveling from one country to another, doing voyages for finding more partners to trade. It results in changing of the entire demographic world. Because of the trade, all purchases and sale of good takes place. Sale tax is being paid to governing bodies based on the sale of goods and services.

Sale tax falls under the category of Indirect Tax which is levied on the purchasing and exchanging of goods and services that falls under the taxable slab. It is levied on the percentage basis. The rate of slabs is decided by the preceding government after enforcing the individual policies which are usually easy and simple to collect and calculate.

In layman’s term, the sales tax is the amount that is additionally levied while purchasing goods and services.

Different forms of Sales Tax

Manufacturers’ Sales Tax

This tax is being charged on the manufacturing of tangible goods and manufacturers and producers of goods are liable to pay this tax.

Retail Sales Tax

This type of tax is being paid on the sale of retail items and final customers or industrial users are liable to pay this tax.

Use Tax

This tax is being charged on those consumers who make the purchase of goods with sales tax. It applies to those vendors who do not fall under tax jurisdiction.

Wholesale Sales Tax

This tax is charged on those individuals who are dealing in wholesale purchase of goods or sale and distribution of packaged and labeled goods which are ready for shipment or delivery to final users and consumers.

Value Added Tax

This tax is applicable as per the decision of a certain government on sale. In some countries, it is also known as Goods and Services tax. It is a type of tax which is assessed incrementally. Like income tax, it is also based on an increase in the value of products or services at each stage of distribution or production. VAT collection being done by end retailer at flat tax rate compared to a sales tax.

Central Sales Tax Act 1956

This tax will help in regulating the taxation laws in the country. CST Act, 1956 defines the rules and regulations related to sales tax. It will also help in collecting taxes on various goods and services from the Central Government. The Central Sales tax is applicable as per the state where the product is being sold.

Aim of CST

• The Central Sales Tax is made to ensure to make the process more streamlined so that overall development can take place.
• It also provides the provision of levying taxes. The collection and distribution of tax based on the sale and purchase of goods by interstate trade happens daily.
• The Central Sales tax also does the classification of different types of goods for specific trade and commerce.
• This tax also frames and determine the principle of selling and purchasing of goods.
• The Central Sales tax is a competent authority for settling the interstate dispute.

Concept of Selling Price

It is a price that an individual entity pays to procure goods and services from the trader or dealer. This price includes packaging costs. This price does not include any cash discount, installation cost or any cost that is incurred on the exchange or return of goods to the buyer.

Sales in Inter-State: The inter-state sale means when movement of good takes place from one state to another and where ownership of goods also changes. Hence the titled document is also moved.

Example 1 : If Prakash from Delhi goes and delivers the goods to Suresh in Mumbai and further sells to Kumar in Pune and transferring the title documents when the goods where being transferred from Delhi to Pune. Thus, this example shows the movement of goods from one state to another and the shifting of the title of goods.

What are Transaction forms for CST?

While dealing in the business of interstate, one needs to follow proper guidelines and certain forms are required to be filled and declared to the buyer.

So, in that case, sales tax authority prints different forms which are listed below:

• Form C: The form which helps in allowing the purchase of goods at concessional rates from the seller.
• Form D: The form that is issued by the government department to help in purchasing the goods.
• Form E1: The form which makes the movement of goods possible in interstate.
• Form E2: The forms which is required or issued by the subsequent seller when goods move from one state to another.
• Form F: When the goods are being sent to a different state altogether is done under Form F.
• Form H: The form which is issued by an exporter for the purchase of goods.
• Form I: The forms that are issued by dealers in the special economic zone.

Taxes by State Government

Every state has a right to charge sale tax according to their financial requirements. Sales tax is different with each product in which Value Added Tax takes a major portion for the state government. This acts as a reason for variations that comes in the cost of certain goods that may be cheaper in other states and costlier in some other states.

State further does the categorization of individuals who are associated with sellers as dealers or the sale of goods as manufacturers. One must keep in mind whether it is a seller or manufacturer, each person has required a certificate to work under the ambit of the law.

Exemptions on Sale Tax: Exemptions on Sale Tax:

• State offers exemption in certain cases or on human grounds or it can be done to avoid double taxation.
• A seller which have a genuine resale certificate is also liable to get an exemption from the State Sales Tax as they are reselling the products.
• Products such as books that are sold in school or sold to charity are also given tax exemption.
• All states have a list of local commodities and essential commodities which are to be given exemption from Sales Tax.

How to do Sales Tax calculation

The term and calculation of sales tax seems very complicated and too hard for lot of people to understand.

Total Sales Tax = Cost of Item x Sales Tax Rate/100

EXAMPLE

Ramesh purchases a box of toffees for Rs 200 in that sales component is 10% of the total Sales tax

Total Sales Tax = 200X10/100=20. So, the Sale tax calculated as Rs 20.

Some points need to keep in mind for calculating Sales Tax are as follows:

a) Always add the cost of various items before calculating sales tax

b) Calculation of Sales tax always done in percentage form

Sales Tax violation

As per the perception of persist for calculating Sales Tax is considered being complicated so an individual not able to make realization that he has violated any provisions or law.

Given below are some of the most common violations:

• People may provide misleading or false information at the time of form filling.
• They do not follow security provisions that are mentioned in the Central Sales Tax Act.
• They fail to make registration according to the Central Sales Tax act.
• Misappropriation can be done on goods that are purchased at the discounted rate.
• If any unregistered dealer collects sales tax from consumers, then also it is considered a violation of law.
• If anyone falsely impersonating as a dealer then also it leads to the violation.
• Sometimes dealers give incorrect statements about the procuring or purchasing of goods.

Central Board of Direct Taxes (CBDT)

CBDT is an apex body that takes charge of the administration of taxes of the entire country. It works as a statutory authority and functions under the preview of the Central Board Revenue Act of 1963. It falls under the Ministry of Finance and works under the ambit of the revenue department.

Composition of CBDT

• The chairman
• Members from the Income Tax Department
• Members from the Revenue Department
• Member from Personnel and Vigilance Department
• Members from the Investigation Department
• Members from Audit and Judicial Department

Role of CBDT

Central Board of Direct Taxes takes care of all the issues and matters that are related in levying and collection of Direct taxes from the whole country. It gives all the necessary input in the making of Direct Tax policies. It serves as an in-charge for the collaboration and administration of Direct Tax law and with the Income Tax Department as well. Also involved in the processing of the investigation in case of tax evasion which takes place now and then.

Procedure to fill the Sales Tax Return

• To fill the Sales Tax return, registration number of Value Added Tax or Tax Identification Number in case of manufacturing or trading of goods in India. An Individual or entity who is engaged in doing business of trading of goods and has a turnover of above 5 Lakh is required to file Sales Tax.
• VAT which has been collected in every state are governed by the different State Government, so they are different guidelines applicable according to goods being manufactured or sold within India.
• After VAT registration is done, a unique 11-digit number provided to business which acts as a Tax Identification number for making further transactions and businesses.
• If the business registered under VAT, then it is a must to file Value Added Tax Returns. Payment of tax to be done before filing returns.
• E-Filing permitted across various states of India, it can be easily done on many online sites.
• Another way of filing return is through a registered Chartered Accountant by giving complete information about a business that has taken place throughout the year.

Thus, to have a smooth functioning of business one should follow all the process of sales tax given above to lead a peaceful life too.