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LEVY AND COLLECTION OF CGST AND SGST

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1. MEANING OF LEVY AND COLLECTION

Levy means the legal imposition of tax by the government.
Collection means the actual recovery of that tax from the taxpayer.

Under GST, tax is levied on the supply of goods and services, not on manufacture or sale alone.

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2. LEGAL PROVISION (BARE PROVISION)

Section 9(1) of the Central Goods and Services Tax Act, 2017

Bare Provision (Simplified)

There shall be levied a tax called Central Goods and Services Tax on all intra-state supplies of goods or services or both, except alcoholic liquor for human consumption.

The tax is charged on the value determined under Section 15 and at rates notified by the government.

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Section 9(1) of the State Goods and Services Tax Act, 2017

Bare Provision (Simplified)

State GST is also levied on intra-state supply of goods or services in the same manner as CGST.

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3. IMPORTANT POINTS FROM BARE PROVISION

Tax is levied on supply
Applies only to intra-state transactions
Both CGST and SGST are charged together
Tax is based on value of supply
Rates are decided by government

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4. WHAT IS INTRA-STATE SUPPLY

When the location of supplier and place of supply are in the same state, it is called intra-state supply.

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Example

A shop in Uttar Pradesh sells goods to a customer in Uttar Pradesh.
This is intra-state supply.
So both CGST and SGST will apply.

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5. DETAILED PRACTICAL EXAMPLES

Example 1: Normal Sale

A trader sells goods worth 10,000 rupees within the same state.
GST rate is 18 percent.

CGST will be 9 percent equal to 900 rupees
SGST will be 9 percent equal to 900 rupees

Total GST = 1800 rupees

The trader collects 1800 rupees from customer and deposits it with government.

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Example 2: Input Tax Credit

A manufacturer buys raw material for 5,000 rupees and pays GST of 900 rupees.

He sells finished goods for 10,000 rupees and charges GST of 1800 rupees.

He will deduct 900 rupees already paid and deposit only 900 rupees.

This shows that tax is collected only on value added.

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Example 3: Restaurant Service

A restaurant provides food worth 2,000 rupees.

GST is charged as CGST and SGST because service is provided within the same state.

Customer pays total bill including GST.

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Example 4: Reverse Charge Mechanism

Section 9(3) CGST Act

Bare Provision (Simplified)

Government may specify certain goods or services where tax is paid by recipient instead of supplier.

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Example

A company takes legal services from a lawyer.
The company (recipient) pays GST, not the lawyer.

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Section 9(4) CGST Act

Bare Provision (Simplified)

Tax is payable by registered person when purchasing from an unregistered supplier in specified cases.

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Example

If a registered business buys goods from an unregistered person (in notified situations), the business pays GST.

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6. COLLECTION OF TAX

Collection means how tax is actually paid to government.

Process is:

Supplier charges GST in invoice
Customer pays the amount
Supplier files return
Supplier deposits tax to government

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Example

A shopkeeper sells goods and includes GST in bill.
Customer pays total amount.
Shopkeeper later deposits GST with government.

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7. IMPORTANT CASE LAWS (DETAILED EXPLANATION)

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1. Mohit Minerals Pvt. Ltd. v. Union of India

Facts

Government imposed GST on ocean freight under reverse charge for import transactions.

Issue

Whether GST can be charged again when tax is already included in import value.

Judgment

Supreme Court held that such levy is unconstitutional.

Easy Explanation

If tax is already paid once, charging it again is double taxation and not allowed.

Importance

Clarifies limits of levy under Section 9 and protects taxpayers from double taxation.

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2. Union of India v. VKC Footsteps India Pvt. Ltd.

Facts

Issue related to refund of input tax credit on input services.

Issue

Whether restriction on refund is valid.

Judgment

Supreme Court upheld the rule restricting refund.

Easy Explanation

Government can limit how much tax credit can be refunded.

Importance

Shows how collection and refund of tax is regulated.

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3. Assistant Commissioner v. Sutherland Global Services Pvt. Ltd.

Facts

Issue related to classification of services and tax liability.

Judgment

Court clarified proper interpretation of GST provisions.

Easy Explanation

Correct classification is important to determine correct tax.

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8. KEY FEATURES OF LEVY AND COLLECTION

Tax is on supply
Destination-based tax
Dual system of CGST and SGST
Input tax credit available
Reverse charge in special cases

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9. CONCLUSION

Levy and collection of CGST and SGST are governed mainly by Section 9 of the CGST and SGST Acts. Tax is imposed on intra-state supply and shared between Central and State Governments.

The system ensures fairness, avoids double taxation, and promotes transparency. Case laws further help in understanding limits and application of GST provisions.

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EXAM TIP

Always write

Section 9 for levy
Section 9(3) and 9(4) for reverse charge
Explain with at least one example
Add one or two case laws