Sales Tax Return

Sales Tax Return: Overview

Business or trade has become an essential part of the world history. The desire to explore trade has led many people to travel from one country to another doing voyages to find more partners to trade, which thereby changed the entire demographic world.

The world which we are a part of thrives on trade and the government across globe have tried to find ways to use this trade for its utmost utilization. Hence, because of  trade, sale and purchases of goods or services also takes place.  It means that Sales Tax is also paid to the governing body on the basis of the sale of services and goods. Sales tax is type of indirect tax which is levied on purchase or exchange of certain goods which are taxable. It is charged on the percentage of valuation of goods. The rates or slabs are governed by the preceding government after enforcing the individual policies which are generally simple and easy to calculate and collect. Inlay man’s term, the sales tax is the amount which is additionally levied while purchasing goods and services.

Different type of Sales Tax

The determination of the Sales tax depends on the governing principal of the present government but still a universal application of sales tax is there in most countries. The different variants of sales taxes are given below:
  • Manufactures’ Sales Tax- As the name suggests, this tax is levied on the manufacturing of certain tangible goods and has to be paid by the producers and manufactures.
  • Retail Sales Tax- This type of tax is paid on the sale of retail items and has to be paid directly by final customer as well as by industrial users.
  • Use Tax- This kind of tax is levied on those consumers for goods which are purchased with sales tax (it is generally applicable for those vendors who do not fall under the tax jurisdiction).
  • Wholesale Sales Tax- This kind of tax is charged on only those individual who deal in wholesale purchasing, sale and distribution of goods when packaged and labelled good is ready for delivery or shipment to final users and consumers.
  • Valued Added Tax- This is a tax which is applicable as per the decision of certain governments on sale thus avoiding the basic requirement of the system of resale certificate. This tax helps in avoiding tax cascading as only the value added difference between the amount paid by the initial buyer and the amount of money paid by each and every buyer subsequently for the same concerned product.
Importance of Sales Tax in India: India is one of the countries which has emerged as a sound democratic country  that has attained great economic progress. The growth of the country can be attributed by the tax that is collected by the government. In India there is a system of Central Union, the State Government and the Central Government in which each government choosing and following their own taxation policy in order to meet their demands.

CST (Central Sales Tax) Act 1956

This act helps in governing the taxation laws in the country which further extended to the whole country that has the rules and regulations related to  sales tax. This act also helps in collecting the sales tax on various goods and services from the Central Government. This Central Sales Tax is applicable according to the state where the product is being sold.

Objectives of CST: The central Sales Tax is made to ensure that the process is more streamlined and so that overall development can take place. Thus the objectives are as laid below:

  • This tax provides provisioning for the levying of taxes, its collection and distribution by the collected tax from the sale and purchase of goods by the interstate trade happening on daily basis.
  • This tax also frames and determines the principal of the selling and purchasing of the goods.
  • This tax also classifies the different type’s goods for special trade and commerce.  
  • The central sales tax is also a competent authority to settle the interstate dispute.

Selling Price: It is the price which an individual or entity pays in lieu to procure the good or services to the dealer or the trader. This price include the packing cost, if any insurance cost incurred ,the discount price to give incentive to the buyer in order to attract them and the sales tax that is paid to the dealer or trader. This price however does not include installation costs, cash discount or any delivery cost or cost incurred on exchange or return of goods to the buyer.

Sales in Inter State: The inter-state sale means when any good moves from one state to another and where the ownership of goods also changes. Hence, the title document is also moved.

Example 1 – If an individual living in Hyderabad, sells his goods to a person in Delhi. In this situation, the goods are physically being transferred from one state to other.
Example 2 – If Suresh from Tamil Nadu goes and deliver the goods to Dinesh in Punjab and further sells to Kumar in Uttar Pradesh and also transferring the title documents when the goods where being transferred from Tamil Nadu to Uttar Pradesh. Thus this example shows the movement of good from one state to other and also the shifting of title of goods.

Transaction forms for CST: While dealing in business of interstate the proper guideline needs to be followed and certain forms needs to be filed and declared to the buyer. So these sales tax authority print different forms listed below:

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

Taxes by State Government

Every state has the right to levy sales tax as per their financial requirements. So the sales tax rates vary with each products in which Value Added Tax form the major chunk for the state governments. This acts is the reason for the variation in prices of certain goods which are cheaper in some states while costlier in other states. The state further categorizes the individuals associated with different sellers as dealers, sales of good as manufactures and each and every one needing certificate to work under the ambit of law.

Exemptions on Sales Tax: The states can still provide exemptions in certain cases or on human grounds or it can even be done to avoid double taxation.
  • The sellers which have genuine resale certificate are exempted from state sales tax as they are reselling the products.
  • Products such as books sold in school, or those which are sold to charity are also given tax exemption.
  • All states have a list of essential and local commodities which are to be exempted from sales tax.
Sales Tax Calculation: The term and calculation of sales tax seems very complicated and too hard for a lot of people to understand. But it can be understood easily and it is not a herculean task if one does the basic calculation  Formula: Total Sales Tax = Cost of Item x Sales Tax Rate

Example: If Mr. Bhatia purchase the box of toffees for Rs.200 in that the sales component attached is 10% then the total sales tax that needs to be paid by him becomes (200x.10)=20. So he pays a sales tax of rupees 20 on buying that box.

However some points need to be taken into consideration while calculating sales tax.
  • As the sales tax vary from state to state, so buying a product at the rate of that particular city and state needs to be taken into consideration.
  • We need to add the price of various items and then calculate the sales tax.
  • The calculation of sales tax is always done in percentage.
Sales Tax Violation: As the perception persist for the calculation of sales tax being complicated so an individual may not realise that when he has violated the law or any provisions. Given below are some of the most common violations:
  • People tend to provide false and misleading information’s while filling the form.
  • They even do not follow security provisions mentioned in the Central sales Tax.
  • They fail to obtain the registration according to Central Sales Tax act.
  • The goods that are purchased at discounted rates their misappropriation being done in them.
  • The sales tax being collected from consumers by unregister dealers is a violation of the law.
  • Even falsely impersonating as a dealer or projecting oneself as a dealer leads to violation.
  • Sometimes dealers provide incorrect statements about the procuring or purchasing of goods.

CBDT (Central Board OF Direct Taxes)

This CBDT is an apex body which takes charge of the administration of taxes of = the whole country. It acts as a statutory authority and functions under the preview of Central Board Revenue Act of 1963. It comes under the ministry of finance and works under the ambit of revenue department.

Composition of CBDT: This body is compound of the following members given below:

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

Thus the Central Board of Direct Taxes looks after all the issues and matters that are related in levying and collection of the direct taxes from the whole country. It gives all necessary inputs to form the direct taxes policies. It acts as an in charge for the collaboration and even administration of direct tax law and with the Income Tax Department as well. It takes care and even processes the investigation in case of tax evasion that takes place every now and then.
So for filing the sales tax return either Value Added Tax (VAT) registration number or the Tax Payer Identification (TIN) number is required in case of manufacturing or trading business of goods in India. An entity engaged in the business of trading of good and has a turnover or more than Rs. 5 lakh is mandatory to file sales tax under the government. The VAT, which is collected in every state are governed by different State Government so they have a different guideline applicable as per the goods being manufactured or sold within India. After the registration is done for VAT, a unique 11 digit number is provided to the business that acts the TIN for all further transactions and businesses. If the business is registered under VAT, then it should definitely file VAT returns. However the payment of tax has to be done before the returns are filed. E-filing of VAT is permitted across various states of India which can be done by many online sites in three or four easy steps. Else the filing of returns can also be done by a registered Chartered Accountant by giving a  complete information about your business throughout the year. Thus in order to have a smooth functioning of business one should follow all the process of sales tax given above in order to lead a peaceful life too. And also act as a good Indian citizen.

Get Free Credit Report