Sales tax is a percentage of a product value, which is charged at the point of exchange or purchase. There are different types of sales tax such as- retail, manufacturers, wholesale, use and value-added tax, which you will get to learn in this article.
The indirect tax imposed on purchasing or selling of services or goods within the territory of India is referred to as a sales tax. It is the additional amount paid over and will be above the basic value of the services or goods being purchased by a consumer.
The sales tax is commonly imposed by the Government of India on the seller, it helps the seller to collect tax from the consumer. It is charged at the point of purchase. State Sales tax laws will be different depending on the state.
The tax applied to individuals dealing with the wholesale distribution of goods or services is referred to as the wholesale sales tax.
It is the tax charged on the creator/manufacturers of some distinct goods or services.
The tax applied on Sale of goods which is directly paid by the final customer is called as retail sales tax.
This is applicable when a consumer bought goods or services without paying sales tax. Vendors who are not part of the tax jurisdictions, Use Tax is applicable to them
This is the additional tax that is applied by some central government on all kinds of purchases is referred to as Value-added Tax.
All policies regarding sales tax are governed by the Central Sales Act,1956. Central Sales Act lays down rules to tax laws, which are binding on the purchase or sales of goods or services. It also includes sales taxes, which are charged by the central government. The central sales tax must be paid for a particular product in the state itself where it is being purchased.
On humanitarian grounds, some categories exempt from State Sales Tax and are offered to overcome any kind of double taxation on goods or services. They are as follows:
All goods or services which have been exempted by the state government. If a seller produces valid state resale certificates, then those products or services are exempt from sales tax.
If a seller sells for the purposes of charities or educational institutions like school, colleges, etc.
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Sales tax applicable on a particular good or service can be easily calculated by a simple formula:
Total sales Tax = Cost of the item X Sales tax rate
A few points to remember before calculating sales tax:
There is a Central Board of Direct Taxes, which is composed of members who are assigned crucial responsibility across different categorized departments like income tax, Investigations, Revenues, Legislation and Computerisation, Personnel and Vigilance and Audit and Judicial.
The Central Board of Direct Taxes is accountable for the following:
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