VAT is levied by the State Government on sale of goods within the State (i.e. intra-state/ local sale) while CST is applicable on an inter-state physical movement of goods pursuant to a sale. It is a multi-point destination based system of taxation with tax being levied on value addition at each stage of transaction in the production/ distribution chain. It allows credit of input VAT paid on purchase of goods against the VAT/ CST liability on sale, subject to prescribed conditions. The rate of VAT rate may vary depending upon the kind of goods covered under the schedule.

The CST Act and Rules prescribe very few procedures like forms for registration and concessional rate of purchase. Every dealer who effects inter-state sale is required to register with State sales tax authorities who are empowered to grant registration under CST Act. In case of other procedures like returns, appeal, refund, interest, penalties, recovery etc., provisions as per State laws apply.

Form C, E-I/E-II, F, G, H, I and J have been prescribed to avail concessional rate of CST either @ 2% (subject to fulfilment of prescribed conditions) or Nil (stock transfer). Form C and E-I/E-II and F are required to be collected and submitted on quarterly basis. In case of forms H, I and J, no time limit has been prescribed. F form is to be obtained on monthly basis.

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