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Answer Posted / abhivirthi tax and industrial
An inter-State sale or inter-State purchase which is effected by transfer of document of title to the goods during their movement from one State to Another is called sale in transit.
In the course of inter-State trade or commerce goods may move from State to State. To save handling charges, the traders may resort to sale by transfer of documents of title during the course of inter-State movement of goods as laid down in Section 3(b). They may save handling charges, but they have to pay tax every time a sale is made which will result in price hike and in order to prevent price hike Section 6(2) has been designed to prevent cascading effect.
An inter-State sale or inter-State purchase which is effected by transfer of document of title to the goods during their movement from one State to Another is called "Sale in Transit".
In simple:
The dealer who effects first interstate sale under Section 3(a) must issue Form E I to the buyer and charge Central Sales Tax at concessional rate and get C Form. (First seller has to issue E I Form to the buyer and obtain C form from the buyer)
In case where the registered dealer purchases goods from one registered inter-state dealer and sells the same while in transit, to another registered inter-state dealer, the sales will be exempted from CST on submission of “Form E-II” to the Department.
The dealers who effects subsequent sales must issue Form E II to the subsequent buyers and also issue Form C to the sellers from whom the goods were purchased under Section 3(b) and the subsequent seller gets CST exemption. (Second and subsequent sellers has to issue E II Form). The subsequent sellers should not handle the goods physically and if the goods were handled physically subsequent transfer will not be made. (Subsequent seller has to issue E II Form to the buyer and obtain C form from the subsequent buyer)
When the goods were taken delivery or physically handled the movement of goods comes to an end and such dealer or person will be treated as final buyer and hence the final buyer must issue C form to the last seller to him as the transit chain breaks and the cost of the goods will be the Cost of the goods + Central Sales Tax (Concessional rate).
Form E-II is used for claiming the exemption from payment of CST.
Reply from:
ABHIVIRTHI Tax and Industrial Consultancy
R.R.JAGADEESAN
VAT Practitioner and Industrial Consultant
H-63, Palaami Enclave
New Natham Road
Madurai-625014
Cell: 9994990599
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