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Inter state sale during the movement of goods

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CENTRAL SALES TAX – CST

Inter Stale sale can be by transfer of documents of title during movement of goods from one State to another u/s 3(b) of CST Act.
The movement of goods commences as soon as goods are handed over to transporter. The ‘movement’ is deemed to be continuing till delivery of goods is taken at other end.
Document of title to goods means a document which evidences that the person holding the document has the title of the goods i.e he is the owner of the goods which are represented by the said document.
  
In normal trade practices when the goods are handed over to the carrier by the seller for transportation to reach the buyer, the carrier issues a receipt to the seller. The seller then sends this receipt to the buyer and the buyer gets delivery of goods on submission of such receipt to the carrier when goods reach at the buyer’s destination. This receipt issued by carrier is document of title to goods.
  
Thus a document of title to goods may be a lorry receipt(in case of road transport), a Railway receipt(incase of transport by rail), Bill of Lading(in case of transport by sea or an airway bill(in case of transport by air).
E-I/E-II transactions are required to establish sale during movement. If done, all subsequent sales are exempt from sales tax/Vat.

Form E1
This form is issued by the dealer who makes the first inter-state sale during movement of goods from one State to another. This enables the purchaser to claim exemption from CST on the second inter-state sale during the movement of goods by transfer of documents of title.

Form E2
This form is issued by the second or the subsequent seller when the goods move from one state to another in a series of inter-state sales by transfer of documents of title. This form enables the purchaser to claim exemption form CST on subsequent sale of goods.
Case 1. Form E1,
A- Buyer (Hyderabad), B – seller (Bangalore). It is the first sale of any particular goods. Then B will issue form E1 to A.
Case 2. Form E2,
A- Buyer of original goods now seller, C- new buyer (Chennai). Here A is selling same goods again in interstate trade it is subsequent sale. Then A will issue form E2 to C.