Under the Central Sales Tax (CST) law in India, is CST applicable on freight charges collected from the buyer, and if so, under what condition?

Introduction / Context:
The Central Sales Tax (CST) was a tax on inter state sales of goods in India in the pre GST regime. Many exam questions test conceptual understanding of what forms part of the taxable sale price for CST purposes. Freight or transportation charges are a common area of confusion. The question asks whether CST is applicable on freight charges collected from the buyer and under what condition. This is essentially a test of whether you know when freight is treated as part of the sale consideration for the goods.

Given Data / Assumptions:

• We are dealing with CST on inter state sale of goods.
• The seller may collect freight or transport charges from the buyer.
• Freight may be either included in the sale price or shown separately.
• The question asks when CST is applicable on such freight charges.

Concept / Approach:
Under the general principle of sales tax law, the taxable turnover is based on the sale price of the goods. If freight or transport charges are an integral part of the sale price under the terms of the contract, and are included in the same invoice, then they form part of the taxable sale price and CST is chargeable on the total amount. However, if the buyer arranges and pays for freight directly to the transporter, or freight is clearly a separate contract not forming part of the sale price of the goods, it is usually not included in the taxable turnover for CST. Therefore, the key point is whether freight is included in the sale price and forms part of the same sale invoice. In that situation, CST would apply on the combined amount.

Step-by-Step Solution:
Step 1: Recall that CST is levied on the sale price of goods in an inter state sale.Step 2: Understand that any amounts which are part of the sale consideration under the contract, including freight borne by the seller and recovered from the buyer, are normally included in the sale price.Step 3: Distinguish this from cases where freight is paid separately by the buyer directly to a transporter, which is not part of the seller's turnover.Step 4: Select the option which states that CST is applicable when freight is included in the sale price and forms part of the same invoice, because this reflects the principle that such freight is part of the taxable sale price.

Verification / Alternative check:
A useful way to verify your reasoning is to imagine two scenarios. In the first, the seller quotes a single price per unit inclusive of delivery to the buyer's location and raises one invoice that shows a single amount for goods and freight together. Here, freight is clearly part of the sale price and CST should apply on the total. In the second scenario, the seller sells goods ex factory, and the buyer chooses and pays a transporter separately. In this case, the transporter's freight bill is independent of the sale of goods, and CST is calculated only on the ex factory sale price. Thinking through these scenarios confirms that CST applies to freight only when it is part of the sale price on the seller's invoice.

Why Other Options Are Wrong:
Option A is wrong because it claims CST is never applicable on freight, which ignores situations where freight is built into the sale price. Option C is incorrect because when the buyer pays freight directly to the transporter, that payment is generally outside the seller's taxable turnover, so CST would not be applied on that freight. Option D is also wrong because CST is not automatically applied to all freight charges in every situation; only freight that is part of the sale price is normally taxed. Option B correctly captures the condition that freight included in the sale price and on the same invoice is subject to CST.

Common Pitfalls:
Students often memorise short statements like freight is not taxable without understanding the underlying principle. This can lead to incorrect answers when the freight is actually part of the contract price of the goods. Another common mistake is to confuse CST with later GST provisions, where the treatment of freight may follow different rules. In exam questions based on the CST framework, always return to the core idea that the tax is levied on the sale price of goods, and that any element which is part of that sale consideration, including delivery arranged by the seller and billed to the buyer, will normally attract CST.

Final Answer:
CST is applicable on freight charges when freight is included in the sale price and forms part of the same invoice for the inter state sale of goods.