E-I AND E-II SALES CALLED TRANSIT SALES
UNDER CENTRAL SALES TAX ACT 1956
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
i.e. EI EII Sales.
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 phycally 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.
Example:
For easy understanding
the following may be
kept in memory.
Andhra
Balaji
Tamil Nadu
Ganesan
Murugan
Kerala
Iyyappan
Karnataka
Manjunath
Ganesan from Tamil Nadu raises a bill to
Balaji of Andhra and sends
goods from Tamil Nadu. Ganesan raises an inter-State sale bill and
handed over the goods to
the
Lorry or Railway and gets booked for transportation to
reach the buyer and received Lorry receipt or
Railway Receipt. The receipt
issued by the Carrier or Railway
authority is “Document of title of goods”.
During the movement of goods, Balaji of
Andhra sells goods by endorsing documents of title of goods
in favour of Iyyappan in Kerala.
Iyyappan in Kerala sells goods by endorsing documents of title of goods
in favour of Manjunath in Karnataka.
Then Manjunath of Karnataka sells goods by endorsing documents of title of
goods in favour of Murugan
of Tamil Nadu and Murugan in
Tamil Nadu takes delivery of goods in
Tamil Nadu and the movement of goods comes to an end in Tamil
Nadu.
(If Manjunath in Karnataka takes delivery of goods in Karnataka without endorsing the documents of title of goods the movement of goods
comes to an end in Karnataka itself).
ISSUANCE OF FORM C, FORM E-I AND E-II:
In this case Ganesan in Tamil Nadu
will issue E-I form to Balaji and will get Form C from Balaji.
Balaji will issue E-II Form to
Iyyappan and will get Form C from Iyyappan.
Iyyappan will issue E-II
Form to
Manjunath and will get Form C from Manjunath.
Manjunath of Karnataka sold the
goods to Murugan of Tamil Nadu and Murugan of
Tamil Nadu takes
delivery of goods and physically
handled and sold the same locally. Hence Murugan of Tamil Nadu will become the Inter-State buyer and has to pay CST @ the appropriate rate and has to
issue C Form to Manjunath of Karnataka.
(“C Form” can be
issued for the sale in transit, even between two dealers within the State)