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Sales tax is levied on the sale of a commodity which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax.

Sales tax can be levied either by the Central or State Government, Central Sales tax department. Also, 4 per cent tax is generally levied on all inter-State sales. State sales taxes, that apply on sales made within a State, have rates that range from 4 to 15 per cent. Sales tax is also charged on works contracts in most States and the value of contracts subject to tax and the tax rate vary from State to State. However, exports and services are exempt from sales tax. Sales tax is levied on the seller who recovers it from the customer at the time of sale.

The power to levy Sales tax :
1. No state can levy sales tax on any sale or purchase where such sale or purchase takes place (a) outside the state and (b) in the course of import of goods into or export of goods outside India.
2. Only the parliament can levy tax on inter-state sale or purchase of goods

Main Principles in State Sales Tax Laws :
1. A sale or purchase of goods is said to take place when the transfer of property in the existing goods or future goods takes place for consideration of money.
2. The goods have been divided into different categories and different rates of sales tax are charged for different categories of goods.
3. In most of the cases related to the sales tax, the tax on the sale or purchase of goods is at single point.
4. Under the provisions of some state laws the assesses are divided into several categories such as manufacturer, dealer, selling agent etc. and such as assess is required to obtain a registration certificate to that effect. The sales tax or the purchase tax is levied on that assessee on the basis of his category such as dealer, manufacturer etc. on production of certain forms or certificates (and differential rates of sales tax are levied).
5. Generally , a quarter return of sales or purchases is insisted upon and the assessee is required to furnish the return in the prescribed form.
6. At the time of assessment, the assessee has to furnish all the documentary evidence and satisfy the concerned sales tax / commercial tax officer.
7. The sales tax laws of the states prescribe the procedure to be followed in case an assessee prefers to make an appeal.
8. Every dealer should apply for registration and obtain a registration certificate to that effect. The registration certificate number should be quoted in all the bill / cash memos.

Inter State Trade or Commerce :
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--
a) occasions the movement of goods from one state to another
b) is effected by a transfer of documents of title to the goods during their movement from one state to another

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 :-