REGISTRATION OF DEALERS

(SECTION 7)

INTRODUCTION

SECTION 2(b) OF CENTRAL SALES TAX,1956 defines DEALER as:

“ Dealer means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash or for deferred payment, or for commission, remuneration or other valuable consideration.”

Every dealer is liable to pay tax has to register himself with sales tax authorities. The procedure for registration includes the law relating to submission of application, issue of certificates, demand of securities, cancellation of certificate etc.

COMPULSORY

REGISTRATION

VOLUNTARY REGISTRATIO

N

TYPES OF REGISTRATION

COMPULSORY REGISTRATIONThere is no initial exemption and registration is required even if sales are of very small amount. Every dealer is liable to pay tax when he effects an inter-state sale. And to pay tax shall apply for registration. Registration has to be done with states sales tax authorities.

VOLUNTARY REGISTRATIONA dealer registered with states sales tax authorities may voluntarily apply for registration under CST though even if he is not liable to pay central sales tax. This provision is mainly useful when the dealer makes purchases in inter-state but all his sales are within the state. But this way, he can make purchases in inter-state at concessional rate of tax against ‘form C’.

APPLICATION FOR

REGISTRATION DEEMED TO

BE LIABLE

CONDITION FOR ISSUE

OF CERTIFICAT

E

GRANT OF CERTIFICATE

OF REGISTRATIO

N

DEMAND OF SECURITY

OR ADDITIONAL

SECURITYMAXIMUM AMOUNT OF SECURITY

SURETY BOND

AMENDMENT IN

CERTIFICATE

CANCELLATION OF

CERTIFICATE

APPLICATION FOR

CANCELLATION

PROVISIONS OF SECTION 7

•APPLICATION FOR REGISTRATION – 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 specify.

•DEEMED TO BE LIABLE – A dealer shall be deemed to be liable to pay tax under the sale tax law of the appropriate state not withstanding that under such law a sale or purchase made by him is exempt from tax.

•CONDITION FOR ISSUE OF CERTIFICATE – Where it appears necessary to the authority to whom an application is made, to do for the proper realization of the tax, he may impose as a condition for the issue of certificate of registration a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the written order such security as may be so specified.

•GRANT OF A CERTIFICATE OF REGISTRATION – If the authority to whom an application is made is satisfied that the application is in conformity with the provisions of this act, he shall register the application and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods.

•DEMAND OF SECURITY OR ADDITIONAL SECURITY –Where it appears necessary to the authority granting a certificate of registration to do for the proper realization of tax payable, he may, any time while such certificate is in force, require the dealer, to whom the certificate has been granted, to furnish in the prescribed manner such security, or such additional security, as may be specified in the order.

•MAXIMUM AMOUNT OF SECURITY –The amount of security and the amount of additional security shall not exceed :1. In case of non-registered dealer – A sum equal to tax payable

under the act on turnover of dealer.2. In case of registered dealer - A sum equal to tax payable

under the act on turnover of dealer as estimated by the authority under the act.

• SURETY BOND – Where the security furnished by a dealer in in the form a

surety bond and the surety becomes insolvent or dies, the dealer shall, within thirty days of the occurrence of any of such aforesaid events, inform the authority granting the certification of registration and shall within 90 days of such occurrence furnish a fresh surety bonds.

•AMENDMENT IN CERTIFICATE - A certificate of registration may either on the application of the dealer to whom it has been granted or where no such application has been made, be amended by the authority granting it if he is satisfied that by reason of the registered dealer.

•CANCELLATION OF THE CERTIFICATE – A certificate of registration granted may be cancelled by the authority granting it where he is satisfied, after due notice to the dealer to whom it has been granted, that he has ceased to carry on business or has ceased to exist to comply with an order under section 3.

CANCELLATION OF

REGISTRATION

BY AUTHORITY(after giving opportunity of

being heard to dealer)When the dealer:1.Has ceased to exist2.Has stopped business3.Has failed to comply with order (s) under section 74.Has failed to pay tax or penalty5.Any other sufficient reason

BY DEALER(must apply 6 months before

the en of the year)

When the dealer:1.Has stopped business2.Is not liable to pay tax3.Any other sufficient reason

•APPLICATION FOR CANCELLATION –

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 where he does so, the cancellation shall take effect from the end of the year.

BENEFITS OF REGISTRATION TO THE PURCHASING DEALER

Registration under CST Act, 1956 is beneficial to a dealer as he can buy the goods against “C” Form. The dealer, would be entitled to pay tax on sales price of goods sold at concessional rate of tax.

For example, Bhisam has a factory in Shimla and sells all goods produced within Himachal Pradesh. He however buys from Punjab some raw materials required for the manufacture of goods in his factory. In this case, although Bhisam is not obliged to get himself registered, nevertheless it would be advantageous for him to do so, since the raw material that he purchased from Punjab would be charged to tax only at 2 %.

BENEFITS OF REGISTRATION TO SELLING DEALERIt is compulsory for selling dealer who makes inter – state sale

to get himself registered. There is only indirect benefit to selling dealer.

The indirect benefits are as under:He can recover C.S.T payable by him from the purchasing dealer,

He can make the subsequent sale of goods purchased by him which will be exempt from CST, subject to following : a)The sale is effected by transfer of documents of goods while goods are in movement from one state to another. b)The transferee is a registered dealer.

He can send the goods on consignment basis to branches/ offices outside the state on form ‘F’, without payment of tax.

REMEDY FOR ERRORS IN RESIGTRATION

CERTIFICATE

CERTIFICATE TO BE KEPT AT THE PRINCIPAL

PLACE OF BUSINESS

REGISTRATION CERTIFICATE NOT TRANSFERABLE

CERTIFICATE OF REGISTRATION(IMPORTANT PROVISIONS)

•REMEDY FOR ERRORS IN REGISTRATION CERTIFICATEWhere it is found subsequently that the certificate of registration was not in accordance with the actual orders passed by the registering authority then such an error which is apparent from record can be rectified within a period of two years. The authorities who refuse to rectify the mistake can be compelled by appropriate writ to correct such mistake or error retrospectively.

•CERTIFICATE TO BE KEPT AT THE PRINCIPAL PLACE OF BUSINESSRule 6 provides that the certificate of registration shall be kept at the principal place of business and the copy of such certificate is to be kept at the additional places of business situated in the state.

•REGISTRATION CERTIFICATE NOT TRANSFERABLE

When a certificate of registration is issued, under sec. 7(1) or 7(2) to a dealer, then it is issued to a dealer who has applied for such certificate in form ‘A’. The registration certificate is non – transferable. In case of transfer of business, the transferee steps in to the shoes of the transferor and all the liability and rights of the are available to the transferee even then the transferee has to apply for fresh certificate of registration.

PRESCRIBED LIMIT OF

TURNOVER

SEPARATE REGISTRATION IN

EACH STATE

TIME LIMIT TO APPLY FOR

REGISTRATIONFEE

APPLICATION TO BE MADE TO

NOTIFIED AUTHORITY

SCOPE AND NATURE OF ENQUIRY

POWER TO REJECT APPLICATION FOR

REGISTRATION

SOU-MOTU AMENDMENT OF THE CERTIFICATE

CANCELLATION OF CERTIFICATE OF REGISTRATION

OPPORTUNITY TO SHOW-CAUSE

CANCELLATION OF REGISTRATION PROSPECTIVELY

(OTHER IMPORTANT PROVISIONS)

•PRESCRIBED LIMIT OF TURNOVERState sales tax laws prescribe turn over limit for liability to tax for obtaining the registration certificate. Under the local sales tax acts, the dealers are classified as importers manufacturers and resellers. CST act 1956 prescribes no minimum taxable quantum. In case of importers and manufacturers the turn over limit prescribed is much lower than the prescribed limit for resellers.

•SEPARATE REGISTRATION IN EACH STATEA dealer who has several branches in the state has to apply and get himself registered by making a single application with the appropriate registering authority for its principle business place only. If the dealer has branches in other states, the dealer has to get itself registered in a state by making an application in form A to the registering authority under whose jurisdiction such place of business is situated.

•TIME LIMIT TO APPLY FOR REGISTRATION.The time limit for making an application for registration has been provided in rules 4(1) and 4(2) of the CST rules, 1957. Rule 4(1) provides that an application for registration under section 7(1) by any person liable to pay tax under this act shall be made not later than 30 days from the date of on which he become liable to pay tax. Rule 4(2) provides that an application for registration under sub section (2) of section 7 may be made at any time after the commencement of CST act 1956.•FEERule 4(3) of central sales tax (registration and turnover) rules, 1957, provides that a fee of Rs. 25 shall be repayable in respect of every application for registration under section 7(1) or 7(2). Such fee is payable in the form of court fee stamps affixed to the application for registration.

•APPLICATION TO BE MADE TO NOTIFIED AUTHORITYThe central government has notified under section 7(1) the following registering authority to whom dealers classified below shall apply for registration.S.No

Descriptionof Dealer

Description of registeringauthority

1. Dealer having a single place of business in a State.

The authority competent to under the general sales tax law of the State if he were liable to be so registered.

2. Dealer having more than one places of business in a State.

The authority competent to register him in respect of the principal place of business (by whatever name called) under the general sales tax law of the State if he were liable to be so registered.

3. Dealer having no fixed places of business in a State.

The Chief Authority appointed under the general sales tax law of the State to administer such law, whether called a Commissioner, Collector or by any other name,, or such other officer appointed under that law who may be specified in this behalf by the Chief Authority aforesaid.

•SCOPE AND NATURE OF ENQUIRYWhen an application in form A is made for obtaining the certificate of registration, whether under section 7(1) or 7(2) to the specified authority then such authority is expected to examine the form and also make necessary enquiries as contemplated under rule 5.

•SUO-MOTU AMENDMENT OF THE CERTIFICATERegistering authority has power to amend the registration certificate suo-motu, on the basis of information received from other source. However, the authority will have to give notice to the dealer, giving him all such information as has come to the knowledge of the assessing authority and on hearing him the authority may take necessary decision.

•POWER TO REJECT APPLICATION FOR REGISTERATION•Rule 5(2) provides that if notified authority is not satisfied that the particulars furnished in application Form A are correct and complete, it shall reject the application. •Even where the registration fee as required by Rule 4(3) or security amount demanded by issue of proper order is not furnished or is not paid then the application for registration can be refused.•Before the application for registration is rejected the notified authority shall afford the necessary reasonable opportunity to set right the defects in the application or to comply with requirements as regards fee or security. He must be heard over the issue and then the notified authority may decide to issue or reject the request of the applicant for grant of certificate. •The order of refusal to issue registration certificate is an appealable order. If the order of rejection is not on proper grounds, or where the order of rejection does not disclose the reasons which led the notified authority to reject such application of registration, then such order is liable to be set aside by the higher authority in appeal.

•CANCELLATION OF CERTIFICATE OF REGISTRATION Clause (b) of sub-section 4 of section 7 gives power, authority and jurisdiction to the assessing authority to cancel the certificate of registration under the following circumstances:•Where the dealer has ceased to carry on the business.•Where the dealer has ceased to exist.•Where the business is transferred.•Where the business is closed or discontinued.•Where the dealer has failed without sufficient cause to comply with an order under section 3-a or with provision of sub-section 3-g or sub-section 3-c•Where the dealer has failed to pay any tax or penalty payable under the act.•Where the dealer registered under sub-section (2) has ceased to be liable to pay tax under the sales tax act of the appropriate state.•For any other sufficient reason.•At the request of the dealer [(section 7(5)].•Where the dealer to whom registration certificate is issued is found to be fictitious person.

•OPPORTUNITY TO SHOW-CAUSE

Rule 9 provides that a notified authority shall before amending or cancelling as the case may be, the certificate of registration of a dealer, give him an opportunity of being heard over the matter .In view of the principle of natural justice, it is obligatory on the part of the Assessing Officer to issue show cause notice to the dealer and afford a reasonable opportunity of being heard over the issue. If no such show cause notice is issued before any order of cancellation is passed then such order will be liable to be quashed.In a show cause notice, the officer stated only that, ’dealer has closed the business’ , and it did not indicate that the officer wanted to cancel the certificate of registration for this reason, the said notice was held not in accordance with the principle of natural justice.

•CANCELLATION OF REGISTRATION TO OPERATE PROSPECTIVELY AND NOT RETROSPECTIVELY

No law provides that certificate of registration can be cancelled retrospectively. When no specific provision is made, then it is settled position of law that such amendment or notification or order would be effective from the date of issue and not from earlier day. In the central sales tax act and rules there is no provision indicating from what date the effectiveness of the order of cancellation shall operate. So the order of cancellation of certificate has to operate from the date on which such order is made.