 the central sales tax bill, 1956(as introduced in lok sabra)  the central sales tax bill, 1956 (as introduced in lok sabra)a bill to jormujate principles jor determining when a sale or purchah of goods takes place in the course oj inter-state trade or commerce or outride a state or in the courje of import into or export from india, to provide for the levy, collection and dimibution of tare on sales of goods in the course of inter-st4te trade or commerce and to declare certain goods to be of special impdrtance in inter-state trade or commerce and specihl the re~1rictions and conditiont to which state laws impoling taxes on the sale or purchase of such goods of special importance shall be iub;ect b& it enacted by parliament in the seventh year of the republic of india as follows:-chapter i  preuminary5 1 (1) this act may be called the central sales tax act, 1956 (2) it extends to the whole of india except the state of jammulnd short 1itie kashmir tktcdt add oonun"", (3) it shall come into force on such date as the central govem- mdlt ment may, by n9tiftcation in the official gazette, appoint, and different dates may be appointed for different provisions of this act 2 in this act, unless the context otherwise requires,-10 (a) "appropriate state" means-dclditiods (i) in relation to a dealer who has one or more places of business situate in the same state, that state; (ii) in relation to a dealer who has one or more places of business situate in different states, every such state with ~~ct to the place or places of business situate within its territory; expla1udion-clplace of business" means-(i) in the ease of a sale of good in the course ot inter-sta~e trade or commerce falling within clause (a) of section 3, the place from which the goods have been 5 moved by reason of such sale; (ii) in the case of any such sale falling \,7ithin clause (b) of section 3, the place where the sale is effected (b) "dealer" means any person who carries on the business of selling goods, and includes a government \\hich carries on 10 such business; (c) "declared goods" means goods declared l:nder section 14 to be of special importance in inter-state trade or commerce; (d) "goods" includes all materials, articles, ccmmod;ties and all other kinds of movable property, but does not include action- 15 able claims, stocks, shares and securities; (e) "prescribed" means prescribed by ruler trlide under thig act; (f) "registered deaj::>r" means a dealer who is rf>gistered under section 7; 20 (g) "sale", with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but 25 does not include a mortgage or hypothecation or or a charge or pie'dge on goods; (h) "sale price" means the amount payable to r dealer as consideration for the sale of any geod~, less mny sum allowed as cash discount according to the practice normmlly prevailing in the trade, but inclusive of any sum charged {or nnything done 30 by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost clf freight or delivery or the cost of installation in cases where such cost is separately charged: (i) "sales tax law" means any law for the time ljeing in force 35 in any state or part thereof which provides (or the ie'vy (if taxes on the sale or purchase of goods generally or on any specifted goods expressly mentioned in that behalf, and "general sales tax law" means the law for the time being in force in 5ny state or part thereof which provides for the levy of tax on the f:1i1e or 40 purchase of goods generally; (;) "turnover" used in relation to any dealer liable to tax under this act means the aggregate of the sale price! received and receivable by him in respect of sales of any goods ld the course of inter-state trade or commerce made during any prescribed period and determined in the prescribed manner; 4~ (k) "year", in relation to a dealer, means the year applicable in relation to him under the general,lales tax law of the appropriate state, and where there is no such year applicable, the financial year  chapter ii 1"0rmttlation of principles for determining when' sale or purchase 0  goods takes place in the course of inter-state trade or commerce or outside a state or in the course of import or export , 3 a sale or purchase of goods shall be deemed to' take place in whed is a the course of inter-state trade or commerce if the sale or purchase- ~~fpur-(a) occasions the movement of goods from on", state to~' rd ~o another; or the c!:e ::c 10 (b) is effected by a transfer of documents of title to the goods ::-!,tate during their movement from one state to another commerce explanation l-where goods are delivered to a carrier 01 other bauee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee explanation 2-where the movement of goods col!lmences and terminates in the same state it shall not be deemed to be a movement of goods from one state to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other state t (1) subject to the provisions contained in sectior; 3, vol hen a sale whed is a or purchase of goods is determined in accordance with ,ub-~ection (2) eale or purto take place inside a state, such sale or purchase shall be deemed to = ~dto have taken place outside all other states take· place outside i ~5 (2) a sale or purchase of goods shall be deemed to take place state inside a state if the goods are within the state-30 (4) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation e:tplanation-where there is a single contract of sale or purchue of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate eon tracts in respect of the goods at each of such places 5 (1) a sale or purchase of goods shall be deemed to take place whcdisa1 in the course of the export of the goods out of the territory of india or purchaae only if the sale or purchase either occasions such export or is effected ~c tk"'p~ 40 by a transfel' of documents of title to the goods after the goods have i~ thee course crossed the customs frontiers of india of import or (2) a sale or purchase of goods shall be deemed to take place export in the course of the import of the goods into the territory of india u only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crassed the customs frontiers of india  chapter iii inter-state sales tax subject to the other provisions contained in this act, every laibiuty to dealer shall, with effect from such date as 1 he central government , ta od biter- may, by notification in the official gazette, &ppoint, not being earlier slate sales than thirty days from the date of such notitication, be liable to pay tax under this act on all sales effected by him in the course of inter-state trade or commerce during any ye:ar on and from the date so notified 10 7 (1) every dealer liable to pay tax under this act shall, within such time as may be prescribed for the purpose, make an application for registration under this act to such authority in the appropriate state as the central government may, by general or special order, specify, and every such application shall contain such particulars i, as may be prescribed (2) any dealer who is liable to pay tax under the sales tax law of the appropriate state may, notwithstanding that he is not liable to pay tax under this act, apply for registration under this act to the authority referred to in sub-section (1), and every such application shall contain such particulars as may be prescribed ~o (3) if the authority to whom en application under sub--section (1) or sub-section (2) is made is satisfted that the application is in conformity with the provisions of this act and the rules made thereunder, he shall register the applicant and grant to him a certifi- 2, cate of re,patration in the prescribed form which shall specify the class or craases of goods for the purposes of sub-section (1) of section 8 (4) a certificate of registration granted under this section may be cancelled by the authority granting it, where it is satisfied that 30 the dealer to whom it has been granted has ceased to carry on business or has ceased to exist or, in the case of a dealer registered under sub-section (2), has ceased to be liable to pay tax under the sales-tax law of the appropriate state or for any other suftlcient reason 3' (5) a registered dealer may apply in the prescribed manner not later than six months before the end of a year to the authority which granted his certificate of registration for the cancellation of such registration, and the authority shall, unless the dealer is liable to pay tax under this act, cancel the registration accordingly, and 0 where he does so, the cancellation shall take effect from the end of 4 the year 8 (1) every dealer who, in the course of inter-state trade or rates of ': commerce sells to a rejlistered dealer goods of the description referred ~:::e of to in sub-section (3) snail be liable to pay tax under this act, which 4' idter-st8ic shall be one per cent of his turnover: tnde of c'oidideftii provided that, if under the sales-tax law of the appropriate state, the sale or purchase of any goods by a dealer is exempt from tax aenerauy and not in specified cases or in specified circumstances or js subject to tax (by whatever name called) at a rate or rates which 50 is or are lower than the rate specified in sub-section (1), the tax payable under this act on the turnover in relation to the sale of such goods in the course of inter-state trade or commerce shall be niz or shall be calculated at the lower r,ate, as the case may be 5 (2) the tax payable by any dealer in any case not falling within sub-section (1) in respect of the sale by him of any goods in the course of inter-state trade or commerce shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate state, and for 10 the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate state, notwithstanding that he, in fact, may not be so liable under that law (3) the goods referred to in sub-section (1)-is (a) in the case of declared goods, are goods qf the class or 20 classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him; and (b) in any other case, are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or for use by him in the manufacture df goods for sale or for use by him in the execution of any contract; and in either case include the containers or other materials used for 2s the packing of goods of the class or classes of goods so specified explanation-for the purposes of this sub-section, "contract" means any agreement for carrying out for cash or deferred payment or other valuable consideration-(i) the construction, fitting out, improvement or repair of 30 any building, road, bridge or other immovable property; or (ii) the installation or repair of any machinery affixed to any building or other immovable property (4) the provisions of sub-section (1) shall not apply to any sale in the course of inter-state trade or commerce unless the dealer 35 selling the' goods furnishes to the prescribed authority in the ptescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold, containing the prescribed particulars on a prescribed form obtained from the prescribed authority 40 9 (1) the tax payable by 8l'ly dealer under this act shall be and levied and collected in the appropriate state by the government of ~od of india in the manner provided in sub-section (2) tal (2) the authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales-tax 4,' law of the a~propriate state shall, on behalf of the government of india and subject to any rules made under this act, assess, collect and enforce payment of any tax payable by a dealer under this act in the same manner as the tax on the sale or purchase of goods under the general sales-tax law of the state is assessed, paid and collected; and 50 for this purpose they may exercise all or any of the powers they have under the general sales-tax law of the state; and the provisions of such law including provisions relating to returns appeals, reviews, revisions, references, penalties and compounding of offences, shall apply accordu1gly (3) the proceeds (reduced by the cost of collection) in any finan- , cial year of any tax levied and collected under this act in any state on behalf of the government of india shall except in so far lis those proceeds represent proceeds attributable to union territories, be assigned to that state and shall be retained by it; and the proceeds attributable to union territories shall form part of the consolidated 10 fund of india 10 it any person-pcnaltiea cognizance of offences pawn to make ru1ea (a) fails to get himself registered as required by section 7; or (b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered i' by his certificate of registration; or , (c) not being a registered dealer, falsely represents when purchasing goods in the course of inter-state trade or commerce that he is a registered dealer; or (d) after purchasu1g any goods for any of the purposes specified u1 clause (b) of sub-section (3) of section 8 fails with- 20 out reasonable excuse, to make use of the goods for any such purpose;  (e) has in his possession any form prescribed for the purpose of sub-section (4) of section 8 which has not been obtained by him or by his principal or by h~s agent in accordance with the 2  provisions of this act or any rules made thereunder; he shall be punishable with simple imprisonment which may extend to six months, or with fine or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for eve'rf day during which the offence continues 30 11 (1) no court shall take cognizance of any offence punishable under this act or the rules made thereunder except with the previous sanction of the government within the local-limits of whose jurisdiction the offence has been committed or of such officer of that government as it may, by general or special order, specify in this behalf; 3s and no court inferior to that of a presidency magistrate or a magistrate of the first class shall try any such offence (2) all offences punishable under this act shall 'be cognitable and bailable 12 no suit prosecution or other legal proceeding shalllie against any officer of government for anything which is in good faith done 40 or intended to be done under this act or the rules made thereunder 13 (1) the central government mayj by notification in the official gazette, make rules providing for-(a) the manner in which applications for registration may be made under this act, the particulars to be contained therein,4s the procedure for the grant of such registration, the circumstances in which registration may be refused and the form in which the certificate of registration may be given; 10 (b) the period of turnover, the manner in which the turnover in relation to the sale of any goods under this act shall be determined, and the deductions which may be made in the process of such determination; (c) the cases and circumstances in which and the conditions subject to which any registration granted under this act may be cancelled; (d) the particulars to be contained in the declaration to be given by any registered dealer purchasing goods and the form of such declaration (2) all rules made by the central government under sub-sectlon (1) shall be laid before both houses of parliament as soon as may be after they are made and shall be subject to such modifications as parliament may make during the session in which they are so laid or is the session immediately following (3) the state government may make rules, not inconsistent with the provisions of this act and the rules made under sub-section (1), to carry out the purposes of this act (4) in particular and without prejudice to the powers ('onferred 20 by sub-section (3), the state government may make rules for all or any of the following purposes, namely:- (a) the publication of lists of registered dealers, of the amendments made in such lists from time to time, and the particulars to be contained in such lists; (b) the form and manner in which accounts relating to sales 25 in the course of inter-state trade or commerce shall be kept by registered dealers; (c) the furnishing of any information relating to the stocks of goods of, purchases, sales and deliveries of goods by, any dealer or any other information relating to his business as may be 30 necessary for the purposes of this act; 35 (d) the inspection of any books, accounts or documents required to be kept under this act, the entry into any premises at all reasonable' times for the purposes of searching for any such books, accounts or documents kept or suspected to be kept in such premises and the seizure of such books, accounts or documents; (e) the authority from which any form of declaration prescribed under sub-section (4) of section 6 may be obtained, the manner in which the form shall be kept in custody and records relating thereto maintained, the manner in which any such form may be used and any such declaration may be furnished; 45 (f) in the case of an undivided hindu family, a~socjation, club, society, firm or company or in the case of a person who carries on business as a guardian or trustee or otherwise cn behalf of another pe!rson, the furnishing of a de:claration stating the name of the person who shall be deemed to be the manager in relation to the business of the dealer in the state and the form in which such declaration may be given; (g) the time within which, the manner in which end the authorities to which any change in the ownership of any business or in the nature of any business carried on by any dealer shall be furnished (5) in making any rule under this section the state government 5 may d!rect that a breach thereof shall be punishable with fine which may extend to five hundred rupees and when the offence is a continuing offenc~, with a daily fine which may extend to fifty rupees for every day during which the offence continues chapter iv goods of special importance in inter-state trade commerce ~~~ be 14 it is hereby declared that the following goods are of special of ap:cial importance in inter-state trade or commerce: - !mpjrtancc iii inter-slate trade or cxiii1d1ei'ce (i) coal, including coke in all its forms; (ii) cotton, that is to say, all kinds {)f cotton (indigenous or 15 imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste; (iii) hides and skins, whether in a raw or dressed state; (iv) iron and steel, that is to say,-(a) pig iron and iron scrap; (b) iron plates sold in the same form in which they are directly produced by the rolling mill without further processing or fabrication; (c) steel scrap, steel ineots, steel billets, steel bars and 2s rods; (d) (i) steel plates, }s ld ill th ~'n (") te i h ts 0 e aamc orm i ~~ s e s ee, which they are diroctly pro-(tn) sheet bars and tm bars, duced by the rolling mill (iv) rolled steel sections, withrut f~rther processing (v) tool alloy steel; or fabnc&uodi (v) jute, that is to say, the fibre extracted from plantsbelcng- 30 ing to the species corchorus capsula", and corchorus ozitorious and the fibre known as mesta or bimli extracted from plants of the species hibiscus cannapinm and hibiscw abdariffa-var altissima, whether baled or otherwise; (vi) oil seeds, that is to say, seeds yielding non-volatile oils 3' used for human consumption, or in industry, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the ¥ke =~~ 15 notwithstanding anything contained in the salei' tax law tit any 40 tione ill re- state, the tax payable by any dealer under that law in iespect f'f any iud to tax sales or purchases ot declared goods made by him inside the state on :c- or shall not exceed two per cent of the sale price thereof and such tax ~~: 0 shall not be levied at more than one stage in a state goods rrpea1 of 16 the essential goods (declaration and regulation of tax on act 5a of sale or purchase) act, 1952, is hereby repealed 1953  statement of objects and reasonsin the interest of the national economy of india certain amendments were undertaken in the constitution by the constitution (sixth amendment) act, 1956, whereby-(4) taxes on sales or purchases of goods in the course of inter-state trade or commerce were brought expressly within the purview of the legislative jurisdiction of parliament; (b) restrictions could be imposed (m the powers of state legislatures with re$pect to the levy of taxes on the sale or ourehue of goocls within the state where the goods are of special importance in inter-state trade or commerce the amendments at the same time authorised parliament to formulate prineiples for determining when a sale or purchase takes place in the eourse of inter-state trade or commerce or in the course of export or import or outside a state in order that the legislative spheres of- parliament and the state legislatures become clearly demarcated in the case of goods of special importance in inter-state trade or commerce, a law of parliament is to lay dqwn the restrictions and conditions subject to which any state law may regulate the tax on sales or purchases of such goods in the state 2 this bill seeks to provide for the legislation authorised by the constitution as amended above with a view to enabling the state governments to raise additional revenues by levying tax on inter-state transactions which are at pjlesent immune from tax under their respective sales tax laws after taking into account the recom- mendations of the taxation enquiry commission and in consultation with the states, the government of india are of the view that the following principles should govern the scheme of the detailed legislation on the three inter-related subjects:-(i) the central government should authorise the state governments to impose on behalf of the central government a tax on the sale or purchase of goods in the course of inter-state trade or commerce the central legislation should alsodelegate to the states the central government's power to levy and collect the tax and for this purpose prescribe the same system of registration, assessment, etc, as prevails in the states concerned under their own sales-tax system (ii) an important aspect of the central legislation will be concerned with the definition of the locale of sales for the purpose of defining in detail the relative jurisdiction, firstly of the union and the states, and secondly, of the states inter-be it is, therefore, necessary that the law should define clearly, with specific reference to sales tax, the circumstances in which a sale or purchase becomes taxable by a particular state and no other it should also define for the purpose of the constitutional restrictions on the state's power to impose a tax under item if of the state uri, when a sale or purehue of good may be  id to take place: (a) in the course of export out of india, (b) in the course of import into india, and (c) in the course of inter-state trade or commerce (iii) the central legislation should provide for the declaration of certain commodities which are in the nature of raw materials and of special importance in inter-state trade or commerce and lay down the restrictions and conditiona  to the rate, system of levy and other incidents of tax subject to which the states may impose tax on the sale or purehue thereof 3 nec:esaary provisions have, therefore, been made in the cwlerent chapters of this but incorporating the principles atated above new dbua; the 14th november, 1956 t t krishnalfachari -under clause 9 of the bill, the assessment and collection of the tax on behalf of the central government will be made by the exlsung sales tax machinery of the state governments empowered to aaess and collect taxes leviable under their respective state sales tax actl the said clause also provides that the proceeds in any financial year of the tax levied and collected under this act in any stte, redueed by their colt of collection, except in so far as thole proeeeds represent proceeds attributable to union territories, shall be aaigned to the states within which the tax has been levied and collected and shall be retained by them the proceeds attributable to union territories shall form part of the consolidated fund of india so far as states other than union territories are concerned, no net withdrawal from the consolidated fund of india would be involved by reason of the provisions of the bill the union territories, except delhi, have no appreciable volume of inter-state trade so as to require any additional expenditure by way of staff some expenditure might, however, be required to be incurred on the printing of forms, registers, etc, prescribed under the law and other items of stationery in addition, the sales tax staff in delhi may have to be slightly increased on a rough estimate, the total of such expenditure is not likely to exceed rupees one lakh per annum  -  memorandum rggarding btlegated legislationclause 14 of the bill specifies the mattera respecting which rules may be made under this law the rules relate to matters like the manner in which applications for registration may be made the particulars which may be contained therein, the manner in which the turnover shall be determined for the purposes of this law, the particulars to be contained in the declaration furnished by - registered dealer purchasing goods in order that the goocll purchued liy him are liable to tax at the lower rate, the form and manner in which accounts relating to sales shall be maintained, the inspection of books of accounts, documents etc, and so on the rule-makinc power is being shared by the central and the state governments for the reason that the actual levy, assessment and collection w1ll have to be made by the state governments through their own agencies, as the taxes are ultimately to be retained by them under the principles laid down in the bill sharing of the rule-making powers by two goverrments is not an unusual feature (ct section s6 of the administration of evacuee property act, 1950, as originally enacted) matters which are of a general nature and in respect of which some uniformity is desirable, are left to be regulated by rules made by the central government whereas matters which are pr~ural in nature, are left to be regulated by rules made by state governments it is unnecessary to burden the act with detalla relating to these matters the rule-making power is of a normal character  - a bill to fonnulate principles for determining when a sale or purchase of goods takes place in the course of inter-state trade or commerce or outside a state or in the course of import into or export from india, to provide for the levy, collection and distribution f taxes on sales of goods in the course of inter-state trade or commerce and to declare certain goods to be of special importance in inter-state trade or commerce and specify the restrictions and conditions to which state laws imposing taxes on the sale or purchase of such goods of special importance shall be subject the president ha~, in pursuance of clauses (i)' and (3) of article 117 and clause (1) of article 274 of the constitution it)f india, recollullended to lok sabha the introduction and collsideralien of the bill· m n kaul, secretary ----(shri t t krishnamachari,  minister of finance) 