| # Indian Sales Tax and VAT - overview This functionality is specific for India. Central Sales Tax (CST) A central tax on goods movement between two states that results from purchase, sale, or transfer. The supplier pays Central Sales Tax to the state government of the place from where the goods are issued. The state government collects the CST on behalf of the central government. Central Sales Tax has uniform rates across states. CST is not claimable and must always be booked as costs. Local Sales Tax (LST) A state tax on the sale or purchase of goods within a state. The tax is payable to the state government of the state in which the transaction occured. Local Sales Tax (LST) or Value Added Tax (VAT) is levied on the sale or purchase of the goods within the state. No LST or VAT is levied on local transfer of goods. The supplier pays LST or VAT to the state government of the state in which transaction occured. Value Added Tax (VAT) A local tax on the sale or purchase of goods within a state. VAT is very similar to, and is gradually replacing, LST. The tax paid on the purchase of goods (input tax) is claimable tax which can be settled with the local sales tax on sales transactions (output tax). SSA ERP uses the states of the ship-from and the ship-to addresses to determine the tax code of a transaction. If the states of ship-from and the ship-to address differ, it concerns an inter-state transaction and CST applies. If the states of the ship-from and the ship-to address are the same, LST or VAT applies. For the goods that you supply, you must submit a tax declaration and pay the sales tax to the tax authorities. For goods that you buy, you pay the sales tax to your supplier when you pay the purchase invoice. If the sales tax is claimable, you pay only the difference between the sales tax paid to your suppliers and the sales tax on the goods that you issue. Calculation of the tax amount For all types of sales tax, the tax amount is calculated over the sum of goods value and other applicable tax amounts such as excise tax, import tax, or service tax. If you deliver services, sales tax only applies to the materials of the service order. For service contracts, you can consider an estimated percentage of the service invoices as materials on which you must pay sales tax. CST can also apply to transfer of goods between your own warehouses. In that case, an invoice must accompany the goods because an invoice is required to calculate the tax amounts. Related topics To set up sales tax |