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Sales Tax Interview Questions & Answers - Learning Mode

Sales Tax Interview Questions & Answers - Learning Mode

Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by Union Government, while sales tax on intra-State sale (sale within State) (now termed as VAT) is charged by State Government. Sales can be broadly classified in three categories. (a) Inter-State Sale (b) Sale during import/export (c) Intra-State (i.e. within the State) sale. State Government can impose sales tax only on sale within the State. CST is payable on inter-State sales is @ 2%, if C form is obtained. Even if CST is charged by Union Government, the revenue goes to State Government. State from which movement of goods commences gets revenue. CST Act is administered by State Government.

Try Sales Tax Interview Questions & Answers - Exam Mode


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Sales Tax Interview Questions & Answers - Learning Mode
Try Sales Tax Interview Questions & Answers - Exam Mode
Question: What are the types of Sales Tax?

Answer: There are two kinds of Sales Tax i.e. Central Sales Tax, imposed by the Centre and Sales Tax, imposed by each state. Source:
Question: What is Registration under CST Act in case of Central Sales Tax (CST)?

Answer: Every dealer who carries out the inter-state sales is liable to pay Central Sales Tax. As per the CST Act, every dealer who carries out inter-state sales has to be registered with the Sales Tax Authority. Intermediaries like agents and transporters are not required to be registered, since they do not affect sales. Registered dealers can purchase goods at concessional rates by issuing the C Form. Source:
Question: What are the objectives of CST Act?

Answer: 1. Formulate principles for determining when a sale or purchase of goods takes place :-

- in the course of interstate trade or commerce, or
- outside a State, or
- in the course of import into or export from India.

2. Provide for the:-

- levy of
- collection and
- distribution
Of taxes on sales of goods in the course of interstate trade or commerce.

3. Declare certain goods to be of special importance of inter state trade or commerce.

4. Specify Source:
Question: What happens if the conditions for CST Act are satisfied?

Answer: 1. The CST Act becomes applicable and CST is levied at the Rate specified.
2. it is levied on Turnover, which in turn is computed on the basis of the sale price.
3. it is payable by the dealer who makes the sale in the course of interstate trade or commerce.
4. It is payable in respect of sale of goods effected by him during the year.
5. It is so payable to appropriate state in which the dealer has a place of business. Source:
Question: What is Form C used for, in case of Central Sales Tax (CST)?

Answer: As per CST Act, sales tax on inter-state sales is 4% or sales tax rate for sale within the state, whichever is lower, is applicable, when the sale is made to a registered dealer and the goods are covered in the registration certificate of the purchasing dealer. Otherwise, the tax is higher, i.e

10% or tax leviable on sale of goods inside the state, whichever is higher. This concessional rate is applicable only if the purchasing dealer submits a declaration in prescribed C Form.

One Source:
Question: What is Forms E1 and E2 used for, in case of Central Sales Tax (CST)?

Answer: According to Section 6(2) of the CST Act, only the first inter-state sale is taxable and the subsequent sale during movement of goods by transfer of documents is exempt from tax, if the purchasing dealer is a registered dealer.

Usually, the transfer of a document refers to the document of title to goods which is endorsed and transferred in favor of the purchaser and is duly signed by the endorser. The document can be further transferred by subsequent endorsements.

The subsequent s Source:
Question: What is Form H used for, in case of Central Sales Tax (CST)?

Answer: A sale during the course of export is exempt from CST and also the penultimate sale is deemed to be in course of exempt from CST under the CST Act. The dealer exporting the goods must have documents in proof of export such as an airway bill, bill of lading, shipping bill, customs documents, bank certificate etc. However, if the penultimate seller is not having any proof evidencing that the sale is exempt, the actual exporter is required to issue a certificate in H Form to the penultimate seller. Source:
Question: What is Inter-State Sale in case of Central Sales Tax (CST)?

Answer: Inter-state Sale is deemed to take place if there is:-
(i) Movement of goods from one state to another or

(ii) Transfer of documents of title to the goods during their movement from one State to another. The above two modes are mutually exclusive. Source:
Question: What is the rate of Central Sales Tax (CST)?

Answer: In an inter-state sale to a registered dealer against form C the rate of CST is 4% or local sales tax rate whichever is lower.

If under the local sales tax law, sale or purchase is exempt from CST the CST is Nil.

In an inter-state sale to government against form D the rate of CST is 4% or local sales tax rate whichever is lower.

Rate of CST in case of inter-state sale of declared goods without form C or D is twice the rate of tax applicable to the local sale or purchase o Source:
Question: What is Central Sales Tax (CST)?

Answer: Central Sales Tax (CST) is a tax on sales of goods levied by the Central Government of India. CST is applicable only in the case of inter-state sales and not on sales made within the state or import/export of sales.

Inter-state sale is when a sale or purchase constitutes movement of goods from one state to another. Accordingly, consignments to agents or transfers of goods to branch or other offices is not a sale as per the CST Act. Source:
Question: What is Form F used for, in case of Central Sales Tax (CST)?

Answer: Under CST Act, F Form is used for Branch transfers and Consignment transfers. Goods when transferred from one place to another under the same principal, is known as Branch Transfer and when it is transferred to agents, it is termed as Consignment Sale. Here the dealer has to furnish a declaration in F Form received from the consignment agent or branch office in another state to prove that the interstate movement of goods is not a sale.

One F Form covers all transactions in one month, irr Source:
Question: What is Form I used for, in case of Central Sales Tax (CST)?

Answer: Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations, duties and tariffs.

Under the CST Act, supplies made by a registered dealer to a unit in the Special Economic Zone (SEZ) will not be subject to CST, provided such unit furnishes a declaration in I Form. Source:
Question: Where is Central Sales Tax (CST) paid and who collects them?

Answer: Central Sales Tax (CST) is payable in the state where the goods are sold and movement commences. The tax collected is retained by the state in which the tax is collected. CST is administered by Sales Tax authorities of each state. Thus, the State Government Sales Tax officer who assesses and collects local (state) sales tax also assesses and collects CST. Source:
Question: What are the conditions for CST Act to become applicable?

Answer: 1. The sale should not take place in the course of import into or export from India.
2. There should be a Dealer and such dealer must be registered under the CST Act.
3. He should made a sale to any buyer ( registered dealer or unregistered dealer)
4. He should carry on any business.
5. He should made a sale of any goods ( declared or undeclared)
6. The sale should be made in the course of interstate trade or commerce ( i.e. the sale should not be a sale inside a state. Source:
Question: What are different types of Central Sales Tax (CST) Transaction Forms?

Answer: Dealers have to issue certain declarations in prescribed forms to buyers/sellers. The type of forms are C, D, E1, E2, F, H and I. Forms C, E1, E2, F and H are printed and supplied by Sales Tax authorities. Dealers have to issue declarations in these forms printed and supplied by the Sales Tax authorities. Form D is to be issued by government organization departments making purchases. These forms are to be prepared in triplicate.

Form C
The sales tax on inter-state sale is 4% or the app Source:
Question: What is Sale Price in case of Central Sales Tax (CST)?

Answer: "Sale Price" means the amount payable to a dealer as consideration fro the sale of any goods.
It does not include,

Cash Discount ( including Trade Discount, Quantity Discount, Additional Discount ). This sum is deducted from sale consideration.

Cost of installation, freight and delivery is excluded ( if such cost is separately charged).

Goods returned by buyer within 6 months.

Goods rejected by buyer.

It includes,

Consideration for sale any goods
< Source:
Question: What is inter-state sale in case of Sales Tax?

Answer: An inter-state sale takes place when a sale or purchase:

Leads to movement of goods from one State to another State.

Is achieved by the transfer of documents of title while the goods are being moved from one State to another State.

Example 1: ?A? in Orissa sells and delivers goods to ?B? in Gujarat.

Example 2: ?X? in Orissa delivers goods to ?Y? in Calcutta. ?Y? sells it to ?C? in Delhi by transferring the document of title during the goods movement from Oriss Source:
Question: What are Declared Goods in case of Central Sales Tax (CST)?

Answer: Declared Goods means goods declared under Section 14 to be of special importance in inter- state trade or commerce. Some of the important items are cereals, iron and steel, jute, oil seeds, pulses, man-made fabrics etc. Source:


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