Charge of GST: formula sheet

Key formulas

Charging rule (CGST)

CGST is levied on intra-State supply of goods and/or services at notified rate, on value under section 15

Section 9(1). Rate is notified on Council's recommendation. The CGST cap is 20% under section 9(1); the State GST Acts and the UTGST Act have a similar 20% cap.

Tax on intra-State supply

Total GST = CGST + SGST (or UTGST)

Normally the rate is split equally between Centre and State, for example 18% = 9% CGST + 9% SGST.

Tax on inter-State supply

Total GST = IGST (single levy)

Levied under section 5 of IGST Act. Cap 40%.

Value on which tax is levied

Tax = Value under section 15 × Rate

Tax is computed on the value determined under section 15. That value is the transaction value, that is, the price actually paid or payable, only where the supplier and recipient are not related and the price is the sole consideration for the supply. If either condition fails, the valuation rules made under the Act apply instead. Where transaction value applies, it includes certain items such as taxes, duties, cesses and fees charged under other laws (not GST) and incidental expenses charged by the supplier, such as commission and packing. It excludes the GST itself.

Reverse charge

Section 9(3): tax on notified categories of goods or services or both; section 9(4): tax on notified categories of supply of goods or services or both received by a notified class of registered persons from an unregistered supplier

Recipient pays tax on reverse charge instead of the supplier. Under section 9(3) the supplier may be registered or unregistered. Section 9(4) applies only to the notified class of registered recipients, the notified categories of supply and an unregistered supplier. Under the IGST Act, similar provisions are in section 5(3) and 5(4).

E-commerce operator liability

Section 9(5) CGST: tax on notified categories of services paid by the operator (section 5(5) IGST for inter-State supplies)

Applies only to categories of services notified by the Government. The operator is liable to pay tax only for the notified services, not for other supplies made through it. Section 9(5) of the CGST Act covers intra-State supplies made through the operator. Section 5(5) of the IGST Act applies the same rule to inter-State supplies made through the operator. Notified services have included transportation of passengers by motor vehicle, accommodation in hotels supplied through the operator by unregistered persons, and restaurant services other than those supplied by restaurants at specified premises, each subject to the conditions and exceptions in the notification. For these notified services the operator is treated as the person liable to pay tax.

Excluded from GST

Alcoholic liquor for human consumption

Petroleum products are taxable only from a notified date.

Meaning of reverse charge

Reverse charge = recipient pays tax instead of supplier (section 2(98))

Applies under CGST section 9(3) and 9(4), and under the matching IGST provisions, including IGST section 5(3) for import of services.

RCM liability

Tax payable by recipient = Value of supply × Applicable GST rate

Value is the transaction value under section 15. For intra-State supply, split into CGST and SGST/UTGST equally. For inter-State supply or import of services, charge IGST.

Section 9(3) rule

Notified goods/services → recipient liable, whether or not the supplier is registered

Always check the conditions in the notified entry. Some entries apply only to specified suppliers and recipients.

Section 9(4) rule

Notified categories of supply received by a registered person from an unregistered supplier → recipient liable

Applies only to the categories of goods and services the Government has notified. It does not cover every purchase from an unregistered supplier.

Payment of RCM tax

RCM tax is paid in cash; ITC is claimed afterwards, subject to sections 16 and 17

RCM tax is not output tax (section 2(82)), so the credit ledger cannot be used to pay it. Credits blocked under section 17(5) stay blocked.

Registration

Person liable to pay tax under RCM must register (section 24(iii)), irrespective of the turnover threshold

The turnover threshold does not apply to such a person. If a question gives an exemption notification, apply it as stated. Do not assume one.

Documents under RCM

Recipient liable under RCM: issues invoice for supplies received (section 31(3)(f)) and payment voucher at the time of payment to the supplier (section 31(3)(g))

A registered supplier does not charge tax and states that tax is payable on reverse charge. An unregistered supplier issues no tax invoice. Check Notification 8/2017-Central Tax (as amended) for the current position on supplies from unregistered suppliers.

Eligibility limit, goods suppliers and restaurants (Section 10(1))

Aggregate turnover in preceding FY ≤ ₹1.5 crore (₹75 lakh in special category states)

Tested on the preceding financial year. Under Section 2(6), aggregate turnover covers taxable supplies, exempt supplies, exports and inter-State supplies of all persons with the same PAN, on an all-India basis. It excludes central tax, State tax, UT tax, IGST and cess, and inward supplies on reverse charge. The ₹75 lakh limit applies only to the notified special category states: Manipur, Mizoram, Nagaland and Tripura.

Eligibility limit, service providers (Section 10(2A))

Aggregate turnover in preceding FY ≤ ₹50 lakh

For a person not eligible under Section 10(1), such as a service provider (including one making mixed supplies of goods and services).

Rate for manufacturers and traders

1% of turnover (0.5% CGST + 0.5% SGST)

Notified rate under Rule 7 of the CGST Rules. It applies to manufacturers other than those of barred goods, and to traders. Composition tax is computed on turnover in the State or UT. Under the rate notification for manufacturers and traders, the value of exempt supplies is excluded from this turnover. Do not assume the same exclusion for other categories unless the question states it.

Rate for restaurants

5% of turnover (2.5% CGST + 2.5% SGST)

Restaurant service providers not serving alcoholic liquor for human consumption.

Rate for service providers (Section 10(2A))

6% of turnover (3% CGST + 3% SGST)

Applies to those who opt under Section 10(2A). Such a person cannot make supplies of goods or services that are not leviable to tax (interest or discount on deposits, loans or advances is ignored for this bar under a notified relaxation), cannot make inter-State outward supplies of goods, cannot supply goods through an e-commerce operator liable to collect TCS, cannot be a casual taxable person or a non-resident taxable person, and cannot be a manufacturer of notified goods (ice cream, pan masala, tobacco).

Services allowance for goods suppliers

Services value ≤ higher of 10% of turnover in the State/UT in the preceding financial year or ₹5 lakh

A goods supplier may make some supplies of services under the notified relaxation and still stay in the scheme. The relaxation covers supplies of services generally, not only inter-State supplies.

Tax payable

Tax = Turnover in the State/UT × composition rate

No ITC is deducted. Tax is not collected from the buyer.

Conditions under Section 10(2)

No supply of goods or services that are not leviable to tax; no inter-State outward supplies of goods; no supply of goods through an e-commerce operator liable to collect TCS; not a casual taxable person or a non-resident taxable person; not a manufacturer of notified goods (ice cream, pan masala, tobacco)

All conditions must hold. A casual taxable person or a non-resident taxable person cannot opt for composition. Under a notified relaxation, interest or discount on deposits, loans or advances is ignored when testing the bar on supplies not leviable to tax. The bar on inter-State outward supplies applies to goods only. Inter-State outward supplies of goods (including exports, which are treated as inter-State supplies) are barred. A separate notified relaxation lets a goods supplier make supplies of services (any, intra-State or inter-State) up to the higher of 10% of turnover in the State/UT in the preceding financial year or ₹5 lakh. All registered persons with the same PAN must opt for the scheme together. A Section 10(2A) person may make inter-State supplies of services but not inter-State supplies of goods.

Compliance

CMP-08 quarterly (by the 18th after the quarter); GSTR-4 annually (by 30 April)

Tax is paid quarterly. The annual return replaces the regular monthly returns.

Source of the power

Section 11 CGST: Central Government + public interest + Council recommendation + notification (or special order under s.11(2))

All conditions must be present. For IGST, the parallel power is in section 6 of the IGST Act, 2017.

Types of exemption

Absolute | Conditional | Full | Partial

Absolute means no conditions. Conditional means the exemption applies only if the specified conditions are met. Partial means only a part of the tax is exempted.

Special order

Section 11(2): special order in each case, in exceptional circumstances stated in the order, on the Council's recommendation, in the public interest

It exempts goods or services on which tax is leviable. It is a special order, not a notification.

Clarifying explanation

Section 11(3): explanation inserted by notification within one year of the notification or order, effective as if inserted in the original

It is used only to clarify the scope or applicability of a section 11(1) notification or a section 11(2) order.

Exempt supply definition

Exempt supply (s.2(47)) includes: nil-rated supply + wholly exempt supply (s.11 CGST / s.6 IGST) + non-taxable supply

This wider definition matters for ITC reversal (section 17). The three kinds of supply still differ in meaning.

Nil-rated vs exempt vs non-taxable

Nil-rated: taxable supply at 0% | Wholly exempt: exempted by notification under s.11 | Non-taxable: outside the GST levy (s.2(78))

Alcohol for human consumption is permanently outside GST. Petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel are outside GST until a date is notified on the Council's recommendation. These are outside the levy, not exempted.

Zero-rated vs nil-rated

Zero-rated (s.16 IGST Act): exports and supplies to SEZ, with ITC and refund | Nil-rated: 0% rate under the rate notification

Zero-rated supply is a separate concept from nil-rated supply. Do not use it as a synonym for nil-rated, exempt or non-taxable supply.

Composite supply tax treatment

Tax on composite supply = tax rate of the principal supply

The whole bundle takes the principal supply's rate, even if an ancillary item has a different rate. Section 8(a).

Mixed supply tax treatment

Tax on mixed supply = tax rate of the supply attracting the highest rate of tax

Applies to the whole bundle. Section 8(b).

Composite supply test

Two or more taxable supplies + naturally bundled + ordinary course of business + one principal supply

Defined in section 2(30). All parts of the test must hold. If the bundle is not natural, test for mixed supply.

Mixed supply test

Two or more individual supplies made in conjunction with each other + single price + not a composite supply

Defined in section 2(74). All parts must hold. A single price alone does not make a bundle mixed; the supply must also not be a composite supply.

Value of the bundle

Taxable value = single transaction value of the bundle; tax = value × rate of principal (or highest-rate) supply

You do not split the price among items when charging tax on the whole bundle.

Quick revision

• Section 9 is the charging section: CGST (and SGST/UTGST under the State or UT Act) is levied on intra-State supplies of goods or services or both, except alcoholic liquor for human consumption. CGST and SGST/UTGST are each charged at the notified rate not exceeding 20%. For inter-State supplies, IGST is levied under Section 5 of the IGST Act at the notified rate not exceeding 40%. The supplier is normally liable to pay.
• CGST on petroleum crude, HSD, motor spirit, natural gas and ATF is leviable only from a date notified on GST Council recommendation. Until then, it is not levied.
• Under RCM, the recipient pays the tax instead of the supplier.
• RCM applies in two cases under the CGST Act: notified categories of goods or services (Section 9(3)), and notified categories of supply of goods or services or both by an unregistered supplier to a registered person (Section 9(4)). For inter-State supplies, the matching provisions are Section 5(3) and 5(4) of the IGST Act.
• Composition levy (Section 10) is optional. Section 10(1) is mainly for suppliers of goods and restaurant services, and Section 10(2A) is a separate option for eligible service providers, with its own conditions. It is available only to eligible registered persons whose aggregate turnover does not exceed the prescribed limit. Tax is paid at a prescribed percentage of turnover in the State or UT.
• The Section 10(2) conditions apply to the Section 10(1) option. They include bars on a person making inter-State outward supplies, supplies not leviable to tax, or supplies through an e-commerce operator who must collect tax at source, and on manufacturers of notified goods such as ice cream, pan masala and tobacco, among others. The list is not exhaustive.
• A composition taxpayer cannot collect tax from customers on supplies.
• Composition taxpayers cannot claim input tax credit.
• Exemption can be granted by notification in public interest.
• Exemption can be absolute or conditional, and can apply fully or partly.
• A composite supply is a supply made by a taxable person to a recipient, consisting of two or more taxable supplies of goods or services or both, or any combination thereof, that are naturally bundled and supplied in conjunction with each other in the ordinary course of business. One of them is the principal supply, and the whole bundle is taxed as the principal supply.
• A mixed supply is two or more individual supplies of goods or services, or any combination of them, made in conjunction with each other by a taxable person to a recipient for a single price, and it is not a composite supply. It is taxed as the supply of the item attracting the highest rate.
• Always identify the nature of the supply before choosing the rate.
• Write provision, facts and conclusion in every written answer.

Common mistakes

• Charging both IGST and CGST/SGST on the same supply. Fix: Decide the nature of supply first. Intra-State means CGST + SGST/UTGST. Inter-State means IGST only.
• Treating alcohol for human consumption as taxable under GST. Fix: Remember the exclusion in the Constitution and Section 9. Alcohol for human consumption stays with State levies.
• Treating every purchase from an unregistered supplier as RCM. Fix: Section 9(4) applies only to notified categories of supply received by a registered person from an unregistered supplier. A promoter receiving development rights, FSI (including additional FSI) or construction services from a landowner is one example. Land itself is not an RCM item. Apply it only when the question gives such facts and the conditions of the notification are met.
• Paying RCM tax from the electronic credit ledger. Fix: RCM tax is not output tax under section 2(82). Pay it in cash, then claim the credit in the ledger.
• Testing the turnover limit on the current year's turnover. Fix: Use the preceding financial year's aggregate turnover for eligibility. The current year's turnover is used only to compute tax, and to see if the limit is crossed during the year.
• Testing the limit on the turnover of one State or one registration only. Fix: Aggregate turnover is computed on an all-India basis for all registrations under the same PAN. Tax is then charged on turnover in the State.
• Saying that section 11 itself lists the exempt goods and services. Fix: Write that section 11 only gives the power. The actual exemptions are in notifications issued under it.
• Treating nil-rated, exempt and non-taxable supplies as the same thing. Fix: Remember: nil-rated is a taxable supply at 0%, wholly exempt is notified under section 11, non-taxable is outside GST. Link to the section 2(47) definition, which includes all three, for ITC reversal.
• Calling every bundle at a single price a mixed supply. Fix: Test natural bundling first. A single price does not make a bundle mixed. Hotel room plus breakfast at one price is composite.
• Taxing each item in a bundle at its own rate. Fix: Apply one rate to the whole value: the principal supply's rate for composite, the highest rate for mixed.

Exam tips

• Most MCQs test the exclusions: alcohol for human consumption and the deferred petroleum products. Memorise both.
• In MCQs, first decide intra-State or inter-State, then pick the tax. This removes two options quickly.
• In written answers, quote section 9(1) for levy and section 9(3), 9(4) or 9(5) for the person liable, then apply the facts.
• Always check whether the price given is inclusive or exclusive of GST before computing.
• Do not state exemption and rate details beyond the question. Marks come for correct application, not extra detail.
• Always name the provision: section 9(3), section 9(4), or IGST import of services. Naming it earns step marks.
• In MCQs, watch for options that say the supplier pays or that use ITC to pay RCM. Those are the usual wrong choices.
• Read the question for the supplier's registration status and the recipient's type. Many RCM entries depend on them.