Interstate sales attract 4% CST. The seller can get this rate only if he collects from buyers and submits the prescribed C-Form to the sales tax authority every financial year. If not, the rate can go up to 16%. Manufacturers/sellers have to submit C-Forms for every quarter beginning October 1, 2005. This has nullified an existing simple and easy procedure of one C-form to cover the entire sales value to a buyer in a financial year.
Sellers also had the flexibility of filing forms any time before completion of assessment. This new order, which has very adverse implications for the manufacturing industry, has been issued when there is acute shortage of C-Forms, say chambers of commerce and industry in Tamil Nadu.
Every state will have to arrange increased quantum of blank forms, which appears impractical. The new order will increase the tax burden, leading to harassment and litigation and ultimately affect the cash flow of the industry, according to the taxation committee of the Madras Chamber of Commerce and Industry (MCCI).
The MCCI committee members PR Subramaniyan, manager, corporate indirect taxes, Larsen & Toubro, K Guruswamy, senior deputy general manager (indirect taxes), TAFE, and K Vaitheeswaran, advocate and tax consultant, said that the central government would have to restore the earlier single declaration form to cover all the transactions in a financial year. And that dealers should be permitted to print self-declaration forms.
The government should abolish the C-Form and substitute it with a self declaration certificate from the registered buyer.
The MCCI said Tamil Nadu, a major manufacturing hub, has a substantial amount of inter-state transactions and the new amendment would adversely affect the industries here. South India Chamber of Commerce and Industry also has assailed the new amendment. All the chambers demand its immediate withdrawal.
Union finance minister P Chidambaramn has been promising progressive reforms with less regulations and paper work for the manufacturing sector. This new rule is a retrograde step throwing the industry at the mercy of the tax officers, the chambers say.
The implementation of Vat would lead to the phasing out of CST. But that seems to be a long drawn dream with much political implication. The Tamil Nadu government has rationalised the entry tax and simplified the procedure for the entry of raw materials for export production.