PERSONAL TAX RATES
For individuals, HUF, Association of Persons (AOP) and Body of individuals (BOI):
| Income Tax Rates/Slab for Assesment Year 2011-12 (F Y 2010-11) | Rate (%) |
| Up to 1,60,000 | NIL |
| 1,60,001 – 5,00,000 | 10 |
| 5,00,001 – 8,00,000 | 20 |
| 8,00,001 upwards | 30 |
| Income Tax Rates/Slab for Assesment Year 2010-11 (F Y 2009-10) | Rate (%) |
| Up to 1,60,000 | NIL |
| 1,60,001 – 3,00,000 | 10 |
| 3,00,001 – 5,00,000 | 20 |
| 5,00,001 upwards | 30* |
| *A surcharge of 10 per cent of the total tax liability is applicable where the total incomeexceeds Rs 1,000,000 | |
- Education cess is applicable @ 3 per cent on income tax, inclusive of surcharge if there is any.
- A marginal relief may be provided to ensure that the additional IT payable, including surcharge, on excess of income over Rs 1,000,000 is limited to an amount by which the income is more than this mentioned amount.
- Agricultural income is exempt from income-tax
Income Tax - Definition of Income Tax
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- Taxes in
- Direct Tax, like income tax, wealth tax, etc. are those whose burden falls directly on the taxpayer.
- The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party.
Income Tax is all income other than agricultural income levied and collected by the central government and shared with the states.
According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year.
The total income of an individual is determined on the basis of his residential status in
Residence Rules
An individual is treated as resident in a year if present in
I. for 182 days during the year or
II. for 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are nonresidents. (The rules are slightly more liberal for Indian citizens residing abroad or leaving
A resident who was not present in India for 730 days during the preceding seven years or who was nonresident in nine out of ten preceding yeas I treated as not ordinarily resident. In effect, a newcomer to
For tax purposes, an individual may be resident, nonresident or not ordinarily resident.
Non-Residents and Non-Resident Indians
Residents are on worldwide income. Nonresidents are taxed only on income that is received in
Capital gains on transfer of assets acquired in foreign exchange is not taxable in certain cases.
Non-resident Indians are not required to file a tax return if their income consists of only interest and dividends, provided taxes due on such income are deducted at source.
It is possible for non-resident Indians to avail of these special provisions even after becoming residents by following certain procedures laid down by the Income Tax act.
Taxability of individuals is summarised in the table below
| Status | Indian Income | Foreign Income |
| Resident and ordinarily resident | Taxable | Taxable |
| Resident but not ordinary resident | Taxable | Not Taxable |
| Non-Resident | Taxable | Not Taxable |
Income Tax - Taxable Heads of Income
Remuneration for work done in
Remuneration includes:
- Tax upon salaries and wages
- Tax upon pension
- Tax upon bonus, fees & commissions
- Tax upon Gratuity
- Tax upon Annuity
- Tax upon profits in lieu of or in addition to salary
- Tax upon advance salary and perquisites
Others:
Besides remuneration for work, individuals may be taxed on the following income:
Tax upon Income from house property
The annual value of property, consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him, the profits of which are chargeable to income tax, shall be chargeable to income tax under the head "Income from House Property".
Tax upon Income from business or professions
For charging the income under the head "Profits and Gains of business," the following conditions should be satisfied:
- There should be a business or profession
- The business or profession should be carried on by the assessee.
- The business or profession should have been carried on by the assessee at any time during the previous year.
Tax upon Income from capital gains
Capital asset means property of any kind held by an assessee whether or not connected with his business or profession.
Tax upon Income from other sources
Income of every kind, which is not chargeable to income tax under the heads
- salary
- income from house property,
- profits and gains of business and profession,
- capital gains can be taxed under the head "income from other sources".
However such income should also not fall under income not forming part of total income under the IT Act.
Tax upon Clubbing of Income
The total income of an individual also includes certain income of other persons. These are:-
a. income of spouse from,
o remuneration derived from the concern in which the individual is substantially interested unless the remuneration is by virtue of the application of technical or professional skill possessed by him or her;
o assets transferred by the individual to the spouse or to any other person for the benefit of the spouse unless the transfer is for adequate consideration or in consideration of an agreement to live apart.
b. income of son's wife from assets transferred by the individual to her or to any other person for her benefit unless the transfer is for adequate consideration.
c. income of his minor child - other than the minor child suffering from disability specified in section 80-U, referred to in para 5.3.9 except when such income arises to the child on account of any manual work done by him or on account of any activity which involves application of any skill, talent or specialised knowledge and experience.
The individual in whose income the income of other spouse as mentioned in (a) (i) above is to be included will be the husband or wife whose total income - before including such remuneration income - is greater. Similarly the income of minor child is to be included in the income of the parent having greater income. If the marriage of the parents does not subsist, it will be parent who maintains the child.
Avoidation of double taxation
Since a 'resident' is liable to pay tax in
Filing of Return - compulsory
Earlier the one-by-six scheme that prescribed the return was to be filed compulsorily, if any of the following six items were present and whether the person had taxable income or not:
- Occupation of a House
- Ownership of a motor car
- Expenditure on foreign travel
- Holder of credit card
- Electricity payments in excess of Rs 50,000/annum.
- Member of a club - where the entrance fee is more than Rs 25,000/-.
Types of Assessments
Basically assessment is an estimation for an amount assessed while paying Income Tax. It is a compulsory contribution that is required for the support of a government. It is generally of the following types.
Self assessment
The assessee is required to make a self assessment and pay the tax on the basis of the returns furnished. Any tax paid by the assessee under self assessment is deemed to have been paid towards regular assessment.
Regular assessment
On the basis of thereturn of income chargeable to tax furnished by the assessee an intimation shall be sent to the assessee informing him about the tax or interest payable or refundable to him.
Best judgement assessment
In a best judgement assessment the assessing officer should really base the assessment on his best judgement i.e. he must not act dishonestly or vindictively or capriciously. There are two types of judgement assessment :
1. Compulsory best judgement assessment made by the assessing officer in cases of non-co-operation on the part of the assessee or when the assessee is in default as regards supplying informations.
2. Discretionary best judgement assessment is doen even in cases where the assessing officer is not satisfied about the correctness or the completeness of the accounts of the assessee or where no method of accounting has been regularly and consistently employed by the assessee
Income escaping assessment or re-assessment
If the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year assess or reassess such income and also nay other income chargeable to tax which has escaped assessment and which comes to his notice in course of the proceedings or any other allowance, as the case may be.
Precautionary assessment
Where it is not clear as to who has received the income, the assessing officer can commence proceedings against the persons to determine the question as to who is responsible to pay the tax.
Filing of Return
| As per AY 2008-09 Non-auditable accounts are furnished by those businesses, which have annual turnover of up to Rs 40 lakh per annum and those professionals having incomeup to Rs 10 lakh per annum.
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| For the Assessment Year 2007-08 |
| One-by-Six Scheme was omitted according to the proposal of Finance Bill, which said that no return shall be required to be furnished under the proviso for assessment year 2006-07 and subsequent years. The amendment took effect from 1st June, 2006. |
As per Assessment Year 2006-07
It is statutorily obligatory for every person to furnish a return of his total income or the total income of any other person in respect of which he is assessable under the income tax act, in all cases where his total income or the total income of any other person in which he is liable to be assessed exceeds, in any relevant accounting year the maximum amount which is not chargeable to income tax. the return of income must be furnished by the assessee in the prescribed manner by the board from time to time.
Filing of Return - compulsory
One-by-Six Scheme
If a person is enjoying any of the following item, he/she has to file his/her return.
- Occupation of a House
- Ownership of a motor car
- Expenditure on foreign travel
- Holder of credit card
- Electricity payments in excess of Rs 50,000/annum
- Member of a club - where the entrance fee is more than Rs 25,000/-.
The assessee is obliged to voluntarily file the return of income without waiting for the notice of the assessing officer calling for the filing of the return. The time limit for filing of the return by an assessee if his total income of any other person in respect of which he is assessable exceeds the maximum amount not chargeable to tax shall be as follows:
a. Where the assessee is a company the 30th day of November of the assessment year
b. Where the assessee is a person, other than a company :-
i. where the account of the assessee are required to be audited under the income tax act or any other law, or in cases where the report of the chartered Accountant is required to be furnished under sections 80HHC or 80HHD i.e.. for deduction in respect of profits retained for export business and also in respect of earnings in convertible foreign exchange, or in case of a cooperative society, the 31st day of October of the assessment year
ii. where the total income includes any income from the business or profession, not being a case falling under sub clause (i), the 31st day of August for the assessment year
iii. in any other case, 30th day of June of the assessment year
The requirements of Income-tax Act making it obligatory for the assessee to file a return of his total income apply equally even in cases where the assessee has incurred a loss under the head 'profit and gains form business and profession' or under the head 'capital gains' or maintenance of race horses. Unless the assessee files a return of loss in the manner and within the same time limits as required for a return of income or by the 31st day of July of the assessment relevant to the previous year during which the loss was sustained, the assessee would not be entitled to carry forward the loss for being set off against income in the subsequent year.
Late Return
Any person who has not filed the return within the time allowed may be file a belated return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, which ever is earlier. However, in case of returns relating to assessment year 1988-89 or any other assessment year, the period allowable is two years.
Revised Return
An assessee who is required to file a return of income is entitled to revise the return of income originally filed by him to make such amendments, additions or changes as may be found necessary by him. Such a revised return may be filed by the assessee at any time before the assessment is made. There is no limit under the income tax Act in respect of the number of time for which the return of income may be revised by the assessee. However, if a person deliberately files a false return he will be liable to be imprisoned under section 277 and the offence will not be condoned by filing a revised return.
Where the return relates to assessment year 1988-89 or any earlier assessment year, the period of limitation is two years from the end of the relevant assessment year.
Defective Return
If the assessing officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within 15 days from the date of such intimation or within such further period as may be allowed by the assessing officer on the request of the assessee. If the assessee fails to rectify the defect within the aforesaid period, the return shall be deemed invalid and further it shall be deemed that the assessee had failed to furnish the return. However, where the assessee is made the assessment officer may condone the delay and treat the return as a valid return.
Signing of Return
The return of income must be signed and verified. In case of an individual
- by the individual himself
- where he is absent from
- where he is mentally incapacitated from attending to his affairs, by his guardian or any person competent to act on his behalf
- where for any other reason, it is not possible for the individual to sign the return, by any person duly authorised by him in this behalf.
Penalty
Under the existing law, penalty for delay in filing of return of income is calculated as a percentage of the shortfall of tax. Where tax has already been deducted at source, or advance tax has been duly paid, no penalty is leviable. It is proposed to amend the law to provide for the penalty of Rs.1000 even in such cases. This provision is targeted towards the salary earners who always had the impression that their liability was over the moment the tax was deducted by the employer.
Section 139 - Return of Income
(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year in the prescribed form 1416 and verified in the prescribed manner and setting forth such other particulars as may be prescribed :
Provided that a person, not furnishing return under this sub-section and residing in such area as may be specified by the Board in this behalf by a notification in the Official Gazette, and who at any time during the previous year fulfils any one of the following conditions, namely :-
(i) Is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or
(ii) Is the owner or the lessee of motor vehicle other than a two- wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or
(iii) Is a subscriber to a telephone; or
(iv) Has incurred expenditure for himself or any other person on travel to any foreign country,
(v) Is the holder of the credit card, not being an "Add-on" card, issued by any bank or institution; or
(vi) Is a member of a club where entrace fee charged is twenty-five thousand rupees or more : shall furnish a return, of his income during the previous year, on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Provided further that the Central Government may, by notification in the Official Gazette, specify class or classes of persons to whom the provisions of the first proviso shall not apply,
Explanation 1 : In this sub-section, "due date" means -
(a) Where the assessee is a company, the 30th day of November of the assessment year;
(b) Where the assessee is a person, other than a company, -
(i) In a case where the accounts of the assessee are required under this Act or any other law to be audited or where the report of an accountant is required to be furnished under section 80HHC or section 80HHD or where the prescribed certificate is required to be furnished under section 80R or section 80RR or sub-section (1) of section 80RRA, or in the case of a co-operative society or in the case of a working partner of a firm whose accounts are required under this Act or any other law to be audited, the 31st day of October of the assessment year;
(ii) In a case where the total income referred to in this sub-section includes any income from business or profession, not being a case falling under sub-clause (i), the 31st day of August of the assessment year;
(iii) In any other case, the 30th day of June of the assessment year.
Explanation 2 : For the purposes of sub-clause (i) of clause (b) of Explanation 1, the expression "working partner" shall have the meaning assigned to it in Explanation 4 of clause (b) of section 40.
Explanation 3 : For the purposes of this sub-section, the expression "motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988).
Explanation 4 : For the purposes of this sub-section, the expression "travel to any foreign country" does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette.
(3) If any person, who has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72 or sub-section (2) of section 73, or sub-section (1) or sub-section (3) of section 74 , or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, 1429 and all the provisions of this Act shall apply as if it were a return under sub-section (1).
(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :
Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as reference to two years from the end of the relevant assessment year.
(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed 1432 and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
(4B) The chief executive officer (whether such chief executive officer is known as secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed 1433a manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :
Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.
(6) The prescribed form of the returns referred to in sub-sections (1) and (3) of this section, and in clause (i) of sub-section (1) of section 142 shall, in such cases as may be prescribed, require the assessee to furnish the particulars of income exempt from tax, assets of the prescribed nature value and belonging to him, his bank account and credit card held by him, expenditure exceeding the prescribed limits incurred by him under prescribed heads and such other outgoings as may be prescribed.
(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returns referred to in this section, and in clause (i) of sub-section (1) of section 142 shall, in the case of an assessee engaged in any business or profession, also require him to furnish the report of any audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, a copy of such report together with proof of furnishing the report, the particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and, if he is a member of an association or body of individuals, the names of the other members of the association or the body of individuals and the extent of the share of the assessee and the shares of all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.
(8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the Assessing Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at fifteen per cent per annum, reckoned 1443 from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source : Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, 1444 reduce or waive the interest payable by any assessee under this sub-section.
Explanation 1 : For the purposes of this sub-section, "specified date", in relation to a return for an assessment year, means, - (a) In the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later;
(b) In the case of every other assessee, the 30th day of June of the assessment year. Explanation 2 : Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section.
(b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of tax on which interest was payable under this sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and -
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(c) The provisions of this sub-section shall apply in respect of the assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to the other provisions of this Act shall be construed as references to the said provisions as they were applicable to the relevant assessment year.
(9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.
Explanation : For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :- (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in;
(b) The return is accompanied by a statement showing the computation of the tax payable on the basis of the return;
(bb) The return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;
(c) The return is accompanied by proof of - (i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid;
(ii) The amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);
(d) Where regular books of account are maintained by the assessee the return is accompanied by copies of - (i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet;
(ii) In the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals;
(e) Where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section;
(f) Where regular books of account are not maintained by the assessee the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.
Sales Tax
| · Sales tax reduced to 2 per cent from April 1, 2008. |
Sales Tax is a tax, levied on the sale or purchase of goods. There are two kinds of Sales Tax i.e. Central Sales Tax, imposed by the Centre and Sales Tax, imposed by each state.
- When is Sales Tax payable?
- What is interstate sale?
- To whom is Sales Tax payable? By whom is it payable?
- What are the possible offences, which may be committed, that are liable to be penalized? What are the penalties for such offences?
- What is the liability of a Company in liquidation, with respect to payment of Central Sales Tax? What is the liability of the directors of a private company?
- What is the liability of the directors of a private company with respect to payment of Central Sales Tax?
- The power to levy Sales tax
- Main Principles in State Sales Tax Laws
- Transactions not amounting to inter-state sales
- Sales Tax ID number
- Exception in the sales taxes
- Which forms are to be filled?
When is Sales Tax payable?
Central Sales tax is generally payable on the sale of all goods by a dealer in the course of inter-state Trade or commerce or, outside a State or, in the course of import into or, export from
What is interstate sale?
According to S3, a sale or purchase shall be deemed to take place in the course of interstate trade or commerce in the following cases:
- when the sale or purchase occasions the movement of goods from one State to another;
- when the sale is effected by a transfer of documents of title to the goods during their movement from one State to another.
Where the goods are delivered to a carrier or other bailee for transmission, the movement of the goods for the purpose of clause (b) above, is deemed to start at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Also, when the movement of goods starts and terminates in the same State, it shall not be deemed to be a movement of goods from one State to another.
To make a sale as one in the course of interstate trade, there must be an obligation to transport the goods outside the state. The obligation may be of the seller or the buyer. It may arise by reason of statute or contract between the parties or from mutual understanding or agreement between them or, even from the nature of the transaction, which linked the sale to such transaction. There must be a contract between the seller and the buyer. According to the terms of the contract, the goods must be moved from one state to another. If there is no contract, then there is no inter-state sale.
There can be an interstate sale even if the buyer and the seller belong to the same state; even if the goods move from one state to another as a result of a contract of sale; or, the goods are sold while they are in transit by transfer of documents.
To whom is Sales Tax payable? By whom is it payable?
Sales tax is payable to the sales tax authority in the state from which the movement of goods commences. It is to be paid by every dealer on the sale of any goods effected by him in the course of inter-state trade or commerce, notwithstanding that no liability to tax on the sale of goods arises under the tax laws of the appropriate state.
What are the possible offences, which may be committed, that are liable to be penalized? What are the penalties for such offences?
The offences that may be committed and, the penalties, prescribed for can be summarised as under. Offences, under section10, are punishable with simple imprisonment (up to 6months) with or without fine.
1. Giving false declaration in Form C, E-I, E-II, F or H, which he knows or has reason to believe it to be false.
2. Not getting registered under the CST Act, when required to be registered or not complying with provisions relating to security.
3. False representation by a registered dealer that the goods, purchased are covered under his certificate of registration for a concessional rate.
4. Falsely representing that he is a registered dealer, though he is not.
5. Misusing or using for different purpose, the goods, obtained under C form at a concessional rate.
6. Having possession of form C, which is not obtained as per provisions of the CST Act.
7. Collecting any amount, representing as sales tax, by an unregistered dealer or by a registered dealer in contravention of the provisions of the CST Act.
What is the liability of a Company in liquidation, with respect to payment of Central Sales Tax? What is the liability of the directors of a private company?
If a liquidator or receiver is appointed in the case of a company, he should inform the Sales Tax authorities within 30 days of his appointment. The Sales Tax Authority shall intimate him the amount of tax due from the company in liquidation within 3 months. The Sales Tax authorities are "preferential creditors' in a case of liquidation.
The Liquidator shall not dispose of assets of the company before setting aside the amount of dues as intimated by sales tax department. The liquidator may, however, part with such assets or properties in compliance with any order of a court or for the purpose of payment of the tax, payable by the company under the CST Act or, for making any payment to secured creditors whose debts are entitled under law to priority of payment over debts due to the government, on the date of liquidation or, for meeting such costs and expenses of the winding up of the company, as are in the opinion of the appropriate authority, reasonable.
What is the liability of the directors of a private company with respect to payment of Central Sales Tax?
If a private limited company is in liquidation and, any tax, assessed on the company, cannot be recovered, it becomes the personal liability of the directors, jointly and severally.
Directors can however avoid this liability; if they prove that the non-payment of tax was not on account of neglect, misfeasance or breach of duty on the part of the directors, in relation to affairs of the company.
The power to levy Sales tax
1. No state can levy sales tax on any sale or purchase where such sale or purchase takes place
o outside the state and
o in the course of import of goods into or export of goods outside
2. Only the parliament can levy tax on inter-state sale or purchase of goods
Main Principles in State Sales Tax Laws
1. A sale or purchase of goods is said to take place when the transfer of property in the existing goods or future goods takes place for consideration of money.
2. The goods have been divided into different categories and different rates of sales tax are charged for different categories of goods.
3. In most of the cases related to the sales tax, the tax on the sale or purchase of goods is at single point.
4. Under the provisions of some state laws the assesses are divided into several categories such as manufacturer, dealer, selling agent etc. and such as assess is required to obtain a registration certificate to that effect. The sales tax or the purchase tax is levied on that assessee on the basis of his category such as dealer, manufacturer etc. on production of certain forms or certificates (and differential rates of sales tax are levied).
5. Generally , a quarter return of sales or purchases is insisted upon and the assessee is required to furnish the return in the prescribed form.
6. At the time of assessment, the assessee has to furnish all the documentary evidence and satisfy the concerned sales tax / commercial tax officer.
7. The sales tax laws of the states prescribe the procedure to be followed in case an assessee prefers to make an appeal.
8. Every dealer should apply for registration and obtain a registration certificate to that effect. The registration certificate number should be quoted in all the bill / cash memos.
Transactions not amounting to inter-state sales
Not all despatches of goods from one state to another result in inter state sales rather the movement must be on account of a covenant or incident of the contract of sales. There are some instances wherein the goods are moved out of the selling state and yet they are not considered inter state sales :-
- Intra-state sales
- Stock transfer from head office to branch & vice versa
- Import and Export sales or purchases
- Delivery of Goods for executing works contract
Sales Tax ID number
A state sales tax ID number is basically a business version of your Social Security number under which you collect and pay tax for any service or product you sell that qualifies for taxation in your state. The state department of taxation provides sales tax ID numbers and it takes about a month to get one.
The rule of thumb for sales tax is that most services are exempt and most products are taxable except for food and drugs. However, states have been gradually adding to the list of services that are taxable for the last few years. Check with your state department of taxation to determine if the product or service you sell is taxable in your state.
Exception in the sales taxes
- Sales to resellers such as wholesalers and retailers that have a valid state resale certificate.
- Sales to tax-exempt institutions such as schools or charities
- Form C;
- Form D;
- Form G;
- Forms E-I & E-II.
