Central Sales tax (CST) query

[Asked by Guest]

Dear Sir,

My query is why CST is not cenvatable like ED and Service Tax.

[KASTURI SETHI]

The very purpose of leviability of CST would be defeated if Cenvat Credit is allowed on CST. However, GST when implemented will so many problems.

[Ganeshan Kalyani]

Suppose you are buying a goods within State you will have to pay full VAT applicable to that goods as per Schedule Entry of the respective State VAT Act. Here when you have purchased outside the State you enjoyed concession of VAT and paid only 2% to the State from when you purchased the goods. The concessions of the tax is itself like a CENVAT. This is my logical answer. To be professional, VAT is a State subject and CST is a Central levy though taxed and retained by State. Hence cross credit I.e setting of Central tax with State tax may not be justifiable. That is why CST is not Cenvatable. I welcome views of other experts to through some light in this aspect. Thanks.

AI Summary

Central sales tax non-creditability arises because cross-credit between central and state levies is not permitted under existing tax framework.
The discussion explains that CST is not Cenvatable because allowing Cenvat on CST would defeat the purpose of the CST levy; CST is a central levy though retained by states, while VAT is a state subject, so cross-credit between central and state taxes is legally and administratively unjustifiable. Respondents also observe that concessional treatment on inter-state purchases operates like a de facto credit, and that a unified regime such as GST would change these mechanics.