Inter State Trade or Commerce In Sales Tax

A sale or purchase of goods shall be deemed to take place in the course of interstate trade or commerce if the sale or purchase--

1. Occasions the movement of goods from one state to another.
2. Is effected by a transfer of documents of title to the goods during theirmovement from one state to another.

Where the goods are delivered to a carrier or other bailee for transmission, the movement of the goods for the purpose of clause is deemed to start at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Also, when the movement of goods starts and terminates in the same State, it shall not be deemed to be a movement of goods from one State to another.

To make a sale as one in the course of interstate trade, there must be an obligation to transport the goods outside the state. The obligation may be of the seller or the buyer. It may arise by reason of statute or contract between the parties or from mutual understanding or agreement between them or, even from the nature of the transaction, which linked the sale to such transaction. There must be a contract between the seller and the buyer. According to the terms of the contract, the goods must be moved from one state to another. If there is no contract, then there is no inter-state sale.

There can be an interstate sale even if the buyer and the seller belong to the same state; even if the goods move from one state to another as a result of a contract of sale; or, the goods are sold while they are in transit by transfer of documents.

Transactions not amounting to inter-state sales :
Not all despatches of goods from one state to another result in inter state sales rather the movement must be on account of a covenant or incident of the contract of sales.
There are some instances wherein the goods are moved out of the selling state and yet they are not considered inter state sales :-

• Intra-state sales.
• Stock transfer from head office to branch & vice versa.
• Import and Export sales or purchases.
• Sale through commission agent / on account sales.
• Delivery of Goods for executing works contract.