LEVY AND COLLECTION OF CGST AND SGST
The levy and collection of Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) form the core of GST law in India. For exams, special focus should be on Sections 7, 8, 9 of the CGST Act, 2017 and the parallel provisions of SGST Acts.
1. Constitutional Basis of CGST and SGST
GST was introduced by the 101st Constitutional Amendment Act, 2016.
Relevant Articles:
- Article 246A – Gives power to both Parliament and State Legislatures to levy GST.
- Article 269A – Deals with IGST on inter-State supplies.
๐ Intra-State supply → CGST + SGST
๐ Inter-State supply → IGST
2. Meaning of Levy and Collection
- Levy: Legal authority to impose tax.
- Collection: Actual recovery of tax from taxable person.
Under GST:
- Levy is created by law (CGST Act / SGST Act)
- Collection is done through self-assessment and returns.
3. Charging Section – Section 9, CGST Act, 2017
Section 9(1): Levy of CGST
CGST shall be levied:
- On all intra-State supplies
- Of goods or services or both
- Except alcoholic liquor for human consumption
- At rates notified by the Government
- On the value determined under Section 15
- Collected from the taxable person
Same structure exists under Section 9 of respective SGST Acts.
Important Points for Exam
- CGST and SGST are levied simultaneously
- Both are destination-based taxes
- Tax is levied on supply, not manufacture or sale
4. Concept of Supply – Section 7 (Very Important)
Section 7(1): What is Supply?
Supply includes:
- Sale, transfer, barter, exchange, license, rental, lease or disposal
- Made or agreed to be made
- For consideration
- In the course or furtherance of business
Section 7(1)(b)
Import of services for consideration is supply even if not for business.
Section 7(1)(c)
Activities listed in Schedule I are treated as supply even without consideration (e.g., branch transfer).
Section 7(2): What is NOT Supply?
- Activities in Schedule III (e.g., services by employee to employer)
- Activities undertaken by government as public authority
Case Law on Concept of Supply
Mohit Minerals Pvt. Ltd. v. Union of India
Held:
GST is a destination-based consumption tax, and levy must strictly follow the concept of supply.
5. Intra-State Supply – Section 8, IGST Act
CGST and SGST are levied only when supply is intra-State.
A supply is intra-State when:
- Location of supplier and
- Place of supply
are in the same State or Union Territory.
6. Reverse Charge Mechanism (RCM) – Section 9(3) & 9(4)
Section 9(3)
Government may notify goods/services where:
- Tax shall be paid by recipient, not supplier.
Examples:
- Legal services by advocate
- Services by GTA
Section 9(4)
Tax payable by recipient for supplies from unregistered persons (mostly suspended except notified cases).
Case Law
UOI v. Mohit Minerals Pvt. Ltd.
Held:
RCM provisions must be interpreted strictly and cannot be expanded arbitrarily.
7. Collection of CGST and SGST
(a) Self-Assessment – Section 59
Every registered person:
- Calculates tax liability
- Files returns
- Pays tax
(b) Returns Filing
- GSTR-1 – Outward supplies
- GSTR-3B – Summary return
(c) Payment of Tax – Section 49
Tax is paid through:
- Electronic Cash Ledger
- Electronic Credit Ledger (ITC)
8. Time of Supply (Important for Levy)
Tax liability arises at:
- Earliest of invoice date or payment date
This ensures certainty in levy and collection.
9. Value of Supply – Section 15
CGST and SGST are levied on:
- Transaction value
- Price actually paid or payable
- Includes taxes (except GST), incidental expenses
10. Input Tax Credit (ITC) and Collection
- CGST credit can be used for CGST and IGST
- SGST credit can be used for SGST and IGST
- Cross-utilisation between CGST and SGST is not allowed
This ensures proper collection and division of revenue.
11. Case Laws on Levy and Collection
All India Federation of Tax Practitioners v. Union of India
Held:
GST is a value-added tax and avoids cascading effect.
Bharat Sanchar Nigam Ltd. v. Union of India
Held:
Taxation must be based on the nature of transaction.
➡️ GST resolves this by taxing supply, not classification.
12. Comparison: CGST vs SGST
| Basis | CGST | SGST |
|---|---|---|
| Levied by | Central Govt | State Govt |
| Applicable on | Intra-State supply | Intra-State supply |
| Collected by | Centre | State |
| Credit utilisation | CGST → CGST/IGST | SGST → SGST/IGST |
Conclusions
The levy and collection of CGST and SGST are governed mainly by Sections 7, 8 and 9 of the CGST Act, 2017 and corresponding SGST Acts. GST marks a shift from tax on manufacture or sale to tax on supply. CGST and SGST are levied concurrently on intra-State supplies, collected through self-assessment, and supported by an efficient ITC mechanism. Judicial interpretations have reinforced GST as a destination-based consumption tax, ensuring transparency and uniformity.
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