A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax. There is usually a list of exemptions. The tax can be included in the price or added at the point of sale.

Ideally, a sales tax is fair, has a high compliance rate, is difficult to avoid, is charged exactly once on any one item, and is simple to calculate and simple to collect. A conventional or retail sales tax attempts to achieve this by charging the tax only on the final end user, unlike a gross receipts tax levied on the intermediate business that purchases materials for production or ordinary operating expenses prior to delivering a service or product to the marketplace. This prevents so-called tax “cascading” or “pyramiding,” in which an item is taxed more than once as it makes its way from production to final retail sale.

Sales tax can be levied either by the Central or State Government or Central Sales tax department. Also, 4 per cent tax is generally levied on all inter-State sales. State sales taxes that apply on sales made within a State have rates that range from 4 to 15 per cent. Sales tax is also charged on works contracts in most States and the value of contracts subject to tax and the tax rate vary from State to State. However, exports and services are exempt from sales tax. Sales tax is levied on the seller who recovers it from the customer at the time of sale.

The Two Types of Sales Taxes:

Sales taxes come in two varieties.

The first is a consumption tax or retail sales tax which is a straight percentage tax placed on the sale of a good. These are the traditional type of sales tax.

The second type of sales tax is a value added tax. On a value added tax (VAT), the net tax amount is the difference between the input costs and the sales price.

Sales taxes are considered by some to be regressive; that is, low income people tend to spend a greater percentage of their income in taxable sales (using a cross section time-frame) than higher income people. However, this calculation is derived when the tax paid is divided not by the tax base (the amount spent) but by income, which is argued to create an arbitrary relationship. The tax rate itself is flat with higher income people paying more tax as they consume more. While the tax on spending as a percentage of gross income may be regressive, the effective tax rates can be progressive on consumption due to exemptions or rebates. If a sales tax is to be related to income, then the unspent income can be treated as deferred (spending savings at a later point in time), at which time it is taxed. Sales taxes often exclude items or provide rebates in an effort to create progressive effects. In many locations, “necessary” items such as non-prepared food, clothing, or prescription drugs are exempt from sales tax to alleviate the burden on the poor. Others consider sales tax preferable since it taxes only consumption, which creates an incentive for savings and investment.

How to calculate Sales tax?

1)       Find out the sales tax in your area. The Federal Tax Administration has the sales tax for every city and state on file. Visit their website for your sales tax.

2)       To compute sales tax, it is helpful to have a calculator. If you do not have a calculator, most cell phones come equipped with them.

3)       Remember, sales tax is computed as a percentage.

4)       Take the retail price of the item, or items, you are about to purchase and multiply it by one and the sales tax percentage. For instance, if an item cost 49.99 and your local sales tax was 6.25%, you would multiply 49.99 by 1.0625. Adding the one to the beginning of the percentage adds the sales tax onto the price automatically.

5)       Be sure you know the sales tax in your city, not just the state’s sales tax. The city you live in no doubt has a higher tax rate than the state.

6)       For multiple items, simply add up the prices and multiply the subtotal by the one and the sales tax.

Sales State Tax Laws: Major Principles

The important principles applicable in case of state sales tax laws may be enumerated as below:

  • A good is regarded as sold/bought when the transfer involves money.
  • When the dealers are being assessed they need to provide all the documents and proofs of their tax payment so that the commercial or sales tax officer is satisfied.
  • In majority of the transactions, sales tax applies on the basis of a single point.
  • All the states have different procedures for appeals made by the assessees.
  • In some states the assessees are categorized into manufacturers, selling agents, and dealers, and they are required to obtain necessary certificates. Different rates apply to these entities.
  • All the dealers are supposed to make application registrations and procure it as well. The registration number needs to be provided for all cash or bill memos.

Tags: , , ,

21 Comments on Sales Tax

  1. MODASSIR IMAM says:

    TAX INDIA is very helpful to understand about taxes charges and updated our knowledge

  2. TAX INDIA is very helpful

  3. Sneha says:

    Thanx admin realy cool

    • pradeep garg says:

      Dear sir/mem,
      i m mba students,i have no knoledge regarding sales tax,
      so plz tell me the best website for understading sales tax.

      thanks

  4. ravi gole says:

    Dear Sir,

    We generate invoice to customer in month of March( forth quarter), can customers issue C form in month of April( first quarter)

    Thanking you

    Ravi Goel

  5. Salman says:

    Hello admin.

    I am a student and my income is not taxble.

    But, now few days ago i am started my own home made trainning video. That’s income i think more then 13 Lack’s in a year.

    how much tax should i’ll have to give and should i’ll also have to give sell or service tax. kindly help me.

    • Adele says:

      Would YOU buy a used boob job from this man!?Re: Warning From Space, Glenn Erickson made a comment that during some of the alien scenes the aspect of the shot seemed to get get tighter at some points and he wondered why. One of his correspondents explained about the side-subtitling, and that the lopping off meant that those shots looked &##280;more&82221; pan and scanned.There is a Japanese release of the film but it isn’t subtitled.

  6. tanvi barman says:

    Hello
    I am opening my online website for selling ladies products such as garments cosmetics furnishigns gift items fashion accessories all made in india products I need to apply for sales tax but I have no office will be working from home is there any provision by government f India for people like me who wants to work from home Can I apply for sales tax by providing home address Thanks Tanvi I am living in noida uttar pradesh
    thanks
    Tanvi
    9958679933

  7. Narottam Singh says:

    Sir. me jajana chahta hun ki cooked food par kitna tex lagta he

  8. vidya bhushan says:

    Dear sir,
    i want to know whether someone has to pay any tax for industrial items if it has to be parceled from one state to another via rail.The items are for store stock transfer and are not for sale.

  9. Suresh Nayak says:

    Thanks

  10. m says:

    i want knowlege above which material against 12.50% Vat & which material against 5% vat pl. explain with example

  11. raghav says:

    sir,
    i want to know about how much penalty is imposed in case of non payment of sales tax ??

  12. muktar inamdar says:

    sir,give me guidence on evolution andbasic principales of sales tax and VAT laws

  13. mudassar says:

    sir i am in jalgaon and i found that the many plastic mats are booked from jalgaon to many state throw railway station of bhusaval and companys have no proper tin and vat number show to railway and booked consignment and save money they are not pay sale tax and vat because he do deal with raw billing system and they do all of work throw railway book agent mr arun meghani at railway station bhusaval.

  14. arun says:

    sales tax kitne prakar ke hote h. and kin-kin vastuo pr vat kitne percent h 1%, 4%, 12.5% and service tax kitana h hotel pr

  15. hari shankar says:

    Dear friend,

    I am manufacturing agricultural pumps in tamil nadu,
    I have my branch in Karnataka.
    what is the procedure to trasfer my goods to karnataka branch?
    is there any tax to be paid?
    pls give me a suggestion

    • gaurav singh says:

      no tax is charged on transfer of goods from one branch to another because there is no sale.. and sales tax is charged on SALE OF GOODS.

      • Shobana Ramasubramanian says:

        F Form’ / Form ‘F’
        ‘F form’ is required for stock transfer to branches/ consignment agents or vice-versa from one state to another, without attracting charge of CST. As per section 6A(1) of the CST Act, submission of ‘F form’ with complete details of movement of goods is mandatory to prove stock transfer. Otherwise, the transaction will be treated as normal central sale for all purposes of CST Act including for charging CST at applicable rates. In fact ‘F Form’ is an evidence to prove that the goods are sent out to other states on ‘stock transfer basis’ and not on ‘sale basis’. The consignment agent/ branch/ HO receiving such stock transfer consignment is required to issue ‘F Form’ to the selling outlet (HO/ Branch/ Consignment Agent) or transferror dealer.

        It may be noted that if the movement of goods is ‘occasioned on account of sales’, the movement will be treated as interstate sales. There are many disputes with the VAT Authorities on this issue. so the transfrerror unit has to take due care to avoid applicability and attraction of CST on such transfers. These matters are open for investigation by the VATO and are not settled until the assessment order is passed by the VATO in due course.

        ‘H Form’ / Form ‘H’
        ‘H Form’ under CST is issued when the inter-state buyer is an exporter and buys the goods for the purpose of exports. If the exporter buyer (who belong to other state) issues ‘H form’, the selling dealer is not required to charge or pay any CST on the transaction. The selling dealer should obtain ‘Form H’ from the exporter buyer in due course along with Bill of Lading for onward submission to the VAT Deptt. or else eventually the selling dealer has to pay CST at full rate as may be applicable. Selling dealer should always obtain security to the extent of amount of applicable CST/ VAT which is not charged due to anticipated issuance of Form H and the same may be released after receipt of duly filled up ‘Form H’ along with copy of the Bill of Lading in due course.

        It may be noted that ‘H form’ is meant to facilitate exports/ penultimate sale of the same goods only, thru a merchant exporter, i.e. ‘H form’ should not be used for buying raw materials for the purpose of use in manufacture of finished goods which are proposed to be exported.

        Tags:Statutory Forms
        46 Comments
        Lokesh
        Pls let me know 2 things:
        1. by accepting ‘C form’ from the inter state customers whether total amount of CSt 4% is going to nill?
        2. why only 2% of CST will be charged against H form?
        Pls provide extremely correct details.

        Reply
        Ashwani Mehta
        @Lokesh
        1. The buyer can purchase goods at concessional rates, against C Form, in the inter-state sale. It may be 1% or 2% depending upon item and the concerned state VAT Laws. Please check with your local consultant.
        2. If the exporter buyer issues H form, the selling dealer is not required to charge or pay any CST on the transaction.
        Hope above clarifies.

        Reply
        Lokesh
        Pls clarify, that rate of CST is not going to be nil against ‘C form’, i.e. it may be 1% / 2% etc.

        Reply
        Ashwani Mehta
        Normally CST against C Form can’t be Nil. However, if those items are exempt from local VAT, then it’s possible.

        Reply
        Jagdish
        I want to know whether H Form is valid only against CST or also valid against VAT??

        Reply
        Ashwani Mehta
        H Form is meant for inter-state supply of materials to exporters. However, if the supply is within the state then CST laws are not applicable and hence H Form under CST is not required to be used.

        Reply
        Shashikant Dimble
        Where local sale (i.e. intra-state sale) is made to exporter who exported goods, do the seller has to charge VAT to exporter ? Under which provision of VAT, Local seller need not charge VAT on sale made to exporter who exported the goods.?

        Reply
        selvakumar
        I am based at chennai and have CST registration, I have to do merchandise export from delhi to poland. Who has to get the form H and to give to whom?

        Reply
        Ashwani Mehta
        As merchant exporter in Chennai, you will provide H Form to seller in Delhi.

        Reply
        Lokesh Vyas
        whether H form is part of Inter state sales? if Material supply within the state, then what? plz let me know. also where i have to show in form 704 in Schedule_1?

        Reply
        Ashwani Mehta
        Of course H Form is used under CST / Inter State Sale made to merchant exporter who eventually will export the such goods out of India. How to handle Sale to Merchant Exporter within the state depends upon the local VAT law in this regard. Unable to understand last part of your question..sorry.

        Reply
        L Vishalakshi
        WE had sent the scrap of raw material for reprocessing as the raw material for reuse for production of the goods to Meerut state and now they are demanding F Form. Scrap material was sent for conversion as raw material on labour charges basis only by issuing E.Sugam. Kindly let us know should we issue F Form for our supplier. Kindly clarify

        Reply
        Ashwani Mehta
        F Form is meant for stock transfer between branch & HO, consignment agent & principal, etc. situations where such material is to be sold later on locally in normal course of business. So demanding F Form for job work materials doesn’t seems to be reasonable.

        Reply
        Satya Singh
        what can we do if our buyers not provide us C form on time.

        Reply
        Sadanand Sawant
        We are a dealer located at Ghatkopar. We are purchasing goods from a manufacturer located at Navi Mumbai. Now this is a local sale so will not attract CST. We will be exporting goods to Saudi. How can we save the VAT applicable? Will H form come into picture in this case? Please advice

        Reply
        Ashwani Mehta
        Export of goods is exempt under CST / VAT, so no form is required at all. H Form is required when sale is made to an interstate dealer who will subsequently and finally export the goods.

        Reply
        Sadanand Sawant
        Thank you for your valuable advice. But still what to do to save VAT? Do i need to provide any declaration to the seller as a proof of export? please advice…..

        Reply
        Ashwani Mehta
        Saving VAT is not in question at all when exempted exports are the subject matter. Please check with your vendor dealer for documentation requirements, if any, as per applicable local VAT laws.

        Reply
        Shiva
        Hi, I have vat registration in Bangalore. I need to buy material from Pune vendor and sell it to Mumbai buyer (means no need to bring the material to Karnataka). But I don’t have VAT registration of Maharastra so how to charge VAT/ CST or make the necessary compliance?

        Reply
        Tushar Patoliya
        Do any seller has right to reject or deny accepting the C-Form for concessional rate of CST whereas both the Seller and buyer are having CST number or are registered dealers?

        Reply
        Ashish Jain
        We are directly exporting material to Nepal without any tax, as the same is exempted. Now the VAT Department is asking for “Form H” to get this exemption. As per our knowledge we have already provided the Bill of Export and other export documents. The problem is from where to get this Form H?

        Reply
        Ashwani Mehta
        H Form under CST is issued when the buyer is an exporter and buys the goods for the purpose of exports. In the case of direct exports, H Form is not required. It’s advisable to take help from some local VAT consultant to make a written representation to VAT Deptt.

        Reply
        Neha agrawal
        What’s the period within which forms such as Form C, H, F, I, E1, E2, etc. under CST Act are required to be issued?

        Reply
        savithri
        Purchsed some garment items from Local Supplier against H Form and exported out side india. Just wnat to know where do i declare the export amount and local purchase amount against Form H in karnataka VAT 100?

        Reply
        Vinay
        For local purchases meant for subsequent exports, the H Form (a CST form) is not applicable. Please refer local VAT laws for applicable form and accordingly you can submit information in said KVAT 100.

        Reply
        pramod sancheti
        We are registered with Rajasthan VAT and selling goods to Maharashtra VAT dealer for export, who will finally export the goods after processing. Whether this transaction is exempt from ‘CST’ by using H form. Please advice.

        Reply
        Rahul
        We are buying raw material against C Form (2% CST) from other states. Final product, which is finally exported, is manufactured using this raw material. So in this case can we as a buyer can get benefits of Form H even if we are not exporting the good in same properties and using as raw material.

        Reply
        Ashok Kumar Thakur
        If you make direct export of that material then you can take the benefit, otherwise not. Yes. as Purchaser you can give Form H to avail CST exemption on exports.

        Reply
        Suresh patil
        Can I purchase against H form, export Material from Gujarat Vendor, for exports to Nepal? We are also based in Gujarat ?

        Reply
        Avinash Sonawane
        If A Charge B 5% CST, so B should give A the ‘C Form’. Is this correct or not? If 5% CST is paid to vendor at the time of purchase, whether c Form is to be given to him or not?

        Reply
        venkat
        We supplied material with cst @2% against form c. Customer not willing to give the c form, however he is ready to pay the difference amount. what could be the implications?

        Reply
        Parneet Kaur
        We are a system integrator co. situated in Delhi with assembly unit at Manesar. We purchase raw IT material at Delhi and send to Manesar. Also we make purchases directly at Manesar to have a finished product for our projects. Selling of these finished goods/ projects is done from our Delhi HQ. Do we have to pay tax on the movements of raw material transferring from Delhi to Manesar via Stock Transfer Note??

        Reply
        Priyanka Gupta
        If a client has provided C form against a purchase, but has not given complete payment, then what can be done by the supplier?

        Reply
        L. MISHRA
        ours is trading company based in delhi and exporting. we purchased some finished goods and exported. Then applied for Form H and received. Exported goods however were rejected by overseas buyer and sent back to Mumbai port. Now the customs clearance is going on. The supplier is pressuring us for Form H. What should we do? Form H is to be cancelled or given to supplier?

        Reply
        Mohit
        we received C Forms from the Purchasing parties, but lost the originals. Now having only photocopies of the same. Is there any way to electronically submit the C Forms received or what should I do in such a case to comply with the sales tax dept(MVAT)?

        Reply
        Paramesh
        We have vat n CST registered at Karnataka. However we are buying material from Gujarat and want to sell at Maharashtra. How to charge VAT and CST. How can I trade with no double VAT or CST charges.

        Reply
        Javed
        you can purchase on 2% cst and sell on 2% cst

        Reply
        Ashwin Bharani
        We have trading business of Ceramic Tiles and we are registered in EXCISE, now, We have purchase Tiles from other Mfg. against Form H and want sale to my customer against Form H. Is it possible and what is the process.

        Reply
        Vivek Agarwal
        Our client has imported some goods and the same was kept in a Bonded Warehouse. Now we have transferred such goods from one bonded Warehouse to another bonded warehouse which is located in another state. Is there any requirement to produce F-Form to the department?

        Reply
        Sujatha
        We purchased goods from Tamilnadu (invoice dt. 31/03/16). We considered it as purchase for April 2016 and generated C Form accordingly along with other purchases of April month. Our supplier is not accepting the same and insisting for a fresh c form.

        Reply
        sanghamitra chakraborty
        i am a registered dealer under vat and cst act based in west bengal. i do resale some plant and machinery and tools to my overseas dealer in bangladesh out of my local purchase. in this case the buyer, whom i sale is not export the same. the buyer consume the same for their manufacturing purpose. in this case is issuance of form “H” connected or not ? please clarify.

        Reply
        Shushank Malhotra
        we are moradabad based manufacturing and exporter. so can we buy raw material from other states against form H which is used for manufacturing of final product which is exported out of India.

        Reply
        Atul
        Billing done at 2% cst against form C in Q4 of 2016-17. But customer order was against H form and mistake happened due to oversight from our end. Customer will issue form H. Will it be acceptable to VAT Deptt or what is to be done to solve this issue?

        Reply
        Vikramjeet Singh
        I purchased goods from interstate (odisha) now they are demanding c-form against my purchase, so please help me out as to how i generate c-form.

        Reply
        Bhawani
        i lost my form h and dont have eitheir proof of sale what do i do?

        Reply
        Swaminathan.S
        For a machine purchased/ exported in April 2017, I have to issue Form F now, since not issued at that time. How to issue/ obtain now? I am holding bill of lading and purchase order.

        Reply
        Leave a Reply

        Comment Text*
        Name*
        Email*
        Website
        Save my name, email, and website in this browser for the next time I comment.

        Search the site
        Search
        Recent Posts
        CBIC Instructs GST Officers to Verify Application for Fresh Registration by Existing Taxpayers
        ITC-04 Due Date extended upto 30 June 2019 (July 2017 to March 2019), notifies CBIC
        CBIC Notifies Changes in Format of Shipping Bill for Export of Goods (SB I & SB III)
        E-Way Bill Portal Announces Certain Changes in e-Way Bill (EWB) System (dt. 25 March 2019)
        Practical Training (PT) Assessment Test Deadline Extended by ICAI
        Key Recommendations of 34th GST Council Meeting (dt. 19 March 2019)
        Registering GST & Tax Audit Reports at UDIN Portal mandatory from 1 April 2019: ICAI
        ICAI Postpones May 2019 CA Exams (Foundation/ Intermediate/ Final) due to Elections
        Simplified GST Returns Forms: Normal (RET 1), Sahaj (RET 2), Sugam (RET 3)
        Composition Scheme Threshold Limit Increased to Rs. 1.5 Crore for Suppliers of Goods under GST

  16. priya tupsoundare says:

    Hii..I want to work wid sales tax department bt wat should I do for that

  17. Shobana Ramasubramanian says:

    Tax india site’s info is truly helpful

Leave a Reply