Sale in Course of Interstate Trade and Commerce

In simple language, it means sale of goods from one state to another

As per Section 3 of CST Act,

Interstate sale means

Sale which occasions the movemen t of goods from one State to another (Section 3 (a))

and

Where sale or purchase is effected by a transfer of documents of title to the goods during their movement from one State to another (Section 3 (b))

Lets study both of these in detail

Sale which occasions the movement of goods from one State to another

Example

A of Delhi sells goods to B of Mumbai, As per contract, goods are to be delivered to Mumbai

It is an interstate sale as sales occasions movement of goods outside state

A of Delhi sells goods to B of Mumbai, Goods are sold at A’s shop and B takes it to Mumbai

It is a local sale

It is not interstate as sales does not occasions movement of goods outside state

A of Delhi sells goods to B of Mumbai, As per contract, goods are to be delivered to B’s branch in Delhi

It is local sale and not interstate sale

Hence, Even if the buyer is located outside the State, sale is not an inter-State sale if the goods do not move outside the State

A of Delhi sells goods to C of Delhi, As per contract, goods are to be delivered to Noida branch of C

It is interstate sale as sales occasions movement of goods outside state

Even if the buyer and seller are in the same State, it is an inter-State sale if the sale occasions the movement of goods from one State to another.

Where sale or purchase is effected by a transfer of documents of title to the goods during their movement from one State to another

It means goods are in movement from one state to another

And during their movement,

Goods are sold by transfer of documents in title

What are Documents of title?

 (Section 2(4) of CST Act),

It means any document used in the case of ordinary course of business

as a proof of ownership or control

or authorizing or purporting to authorize,

the possessor of the document to transfer or receive goods thereby represented.

Example of Documents of Title

Bill of lading, railway receipt, warehouse keeper certificate, multi model transport document

Example of Sale by Documents of title

A of Delhi sold goods to B of Mumbai. A duly dispatched goods through truck.

During its movement, B sold goods to C and actual delivery taken by C

Hence, sale by B to C is a sale by documents of title and hence also interstate sale

Exam Questions

Question 11
Briefly examine the validity of the following statements with reference to the Central Sales Tax
Act, 1956:-

(ii) Central sales tax is leviable on the inter-State sale of goods by any unincorporated
association or body of persons to a member.

Question 4
Examine whether following amount to inter-State sales:-
(i)  D of Delhi comes to Hyderabad, purchases certain chemicals from E and transports them
     in his own name to Delhi.
(ii)  X of Mumbai sends goods by air to his branch office at London. Subsequently, he
      transfers the documents of title of such goods to a buyer at Scotland after said goods
      have crossed the customs frontiers of India.
(iii)  A London based entrepreneur enters into a contract of sale of goods with Madhav of
      Gujarat and sends the goods to India.

Question 3
X of Kolkata sells goods to Y of Chennai and hands over the goods to MKS Transport, Kolkata
for transporting the same to Chennai. The lorry receipt is sent to Y by post. While goods are
in transit, Y sells the goods to Z of Vijayawada, Andhra Pradesh by endorsing the lorry receipt
and goods are diverted to Vijayawada. X, Y and Z are registered dealers. Is the second sale
between Y and Z chargeable to tax?