Charge of Tax including Reverse Charge: formula sheet

Key formulas

Charge under section 9(1)

CGST = notified rate × value under section 15 (on intra-State supply)

Rate is notified by the Government on Council recommendation and cannot exceed 20%.

Rate ceilings

CGST ≤ 20%; IGST ≤ 40%

CGST ceiling is in section 9(1) CGST Act; IGST ceiling is in section 5(1) IGST Act. These are ceilings, not actual rates.

Excluded from levy

Alcoholic liquor for human consumption (and un-denatured extra neutral alcohol or rectified spirit used to make it)

Outside GST. The words about alcohol for manufacture were inserted w.e.f. 1-11-2024.

Petroleum products

Levy only from the date notified (section 9(2))

Covers petroleum crude, high speed diesel, petrol, natural gas, aviation turbine fuel.

Who pays

Supplier by default; recipient under 9(3) and 9(4); e-commerce operator under 9(5)

The person liable is treated as the supplier for all provisions of the Act.

Reverse charge on unregistered supplier

Section 9(4): notified class of registered persons pays on notified goods or services from an unregistered supplier

Both the class and the supplies must be notified.

Alcohol for human consumption

Outside GST levy (Section 9(1) CGST; Section 5(1) IGST)

Includes un-denatured extra neutral alcohol or rectified spirit used to make alcoholic liquor for human consumption (inserted w.e.f. 1-11-2024).

Five petroleum products

GST levied only from a date notified on the Council's recommendation (Section 9(2) CGST; Section 5(2) IGST)

Products: petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel.

Composition eligibility limit

Aggregate turnover in preceding financial year ≤ ₹50 lakh (Section 10(1))

The Government may notify a higher limit, not exceeding ₹1.5 crore.

Maximum composition rates under the Act

Manufacturer 1%; Schedule II para 6(b) supplies 2.5%; other suppliers 0.5% of turnover in State/Union territory

These are ceilings. The actual rate is prescribed by rules. Section 10(2A) allows up to 3% for some service providers who cannot opt under (1).

Composition person's position

No tax collected from recipient; no input tax credit (Section 10(4))

Applies to persons under Section 10(1) or 10(2A).

Lapse of option

Option lapses from the day aggregate turnover in a financial year exceeds the limit (Section 10(3))

Lapse operates with effect from that day.

Same PAN condition

All registered persons with the same PAN must opt, or none can

Proviso to Section 10(2) and 10(2A).

Section 9(3) rule

Notified goods or services → recipient pays tax (all provisions apply to the recipient as the person liable)

Applies whether the supplier is registered or not, but only for the notified categories.

Section 9(4) rule

Notified class of registered persons + specified goods or services + unregistered supplier → recipient pays tax on reverse charge

All three conditions must be met. Supply by a registered supplier is not covered.

RCM tax liability

Tax payable by recipient = Value of supply (section 15) × notified rate of tax

Rate is notified by the Government. Under section 9(1) it cannot exceed 20% for CGST. Intra-State: split into CGST and SGST/UTGST. Inter-State: IGST.

Input tax credit on RCM

ITC = tax actually paid under RCM, if section 16 conditions are satisfied

Must be used or intended for business use. The tax is paid first, then credit is taken in the return. Credit is not allowed if the supply is otherwise blocked.

Forward charge vs reverse charge

Forward: supplier collects and pays tax. Reverse: recipient pays tax directly to the Government.

Under RCM the supplier's invoice carries no GST on that supply.

Section 9(5) liability

Notified service + supplied through e-commerce operator + intra-State supply ⇒ operator pays CGST as if it were the supplier

The Government notifies categories of services on the Council's recommendation. Without notification, section 9(5) does not apply.

Operator without presence in taxable territory

Representative in taxable territory pays; if none, operator must appoint a person who pays

These are the first and second provisos to section 9(5).

Compulsory registration

Section 24(iv): persons required to pay tax under section 9(5) must register; section 24(iii): persons paying tax under reverse charge must register

Section 24 applies notwithstanding section 22(1), so the normal threshold does not help.

Reverse charge on unregistered supplier

Section 9(4): notified class of registered persons pays tax on notified supplies received from an unregistered supplier

Applies only to the class and categories notified.

ITC eligibility (section 16)

Used or intended for business + tax invoice or prescribed document + goods or services received + tax actually paid to Government + return under section 39 furnished + not restricted under section 38

Reverse charge ITC depends on the recipient having paid the tax; also subject to the section 16(4) time limit.

ITC time limit

Cannot be taken after 30 November following the financial year of the invoice or debit note, or the annual return date, whichever is earlier

Section 16(4).

Core rule of Section 82

Amount payable by taxable person to Government under the Act = first charge on his property

Applies to dues under the CGST Act such as tax, interest and penalty.

Override and its limit

Priority applies notwithstanding other laws, but subject to the Insolvency and Bankruptcy Code, 2016

Always mention the Code as the key exception when insolvency is in the facts.

Nature of the right

First charge = priority claim; recovery still follows the Act's procedure

The charge secures the dues. It does not by itself sell the property.

Quick revision

• Section 9(1) levies GST on intra-state supply of goods, services or both, on value under Section 15, at notified rates.
• Alcoholic liquor for human consumption is outside GST.
• Petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel attract GST from a date notified by the Government on the recommendation of the GST Council.
• Under normal charge, the supplier pays; under reverse charge, the recipient pays.
• Section 9(3) applies to notified categories of goods or services, and the recipient is treated as the person liable.
• Section 9(4), as currently in force, applies to notified categories of supply of goods or services received by a notified class of registered persons from unregistered suppliers. Its wording changed over time, so use the version now in force.
• The composition levy is under Section 10, and the taxpayer pays at a flat rate on turnover and issues a bill of supply, not a tax invoice.
• A composition taxpayer cannot collect tax from the recipient but must pay tax on reverse charge supplies.
• Under Section 9(5), for notified services, the e-commerce operator is liable to pay tax as if it were the supplier. This is not reverse charge by a recipient.
• Reverse charge applies only where the supply is notified, so always check the notification before shifting liability.
• Section 82 makes tax, interest and penalty dues a first charge on the property of the person liable, save as the Insolvency and Bankruptcy Code provides.
• Write the payer's name in every answer, because the liable person decides the later ITC treatment.

Common mistakes

• Quoting 40% as the CGST ceiling Fix: Remember CGST up to 20% (section 9(1)); IGST up to 40% (section 5(1) IGST Act).
• Saying GST is charged on all goods including petrol and liquor Fix: Liquor for human consumption is outside the levy; petroleum products are taxed only from a notified date.
• Saying alcohol is completely outside GST in every form. Fix: Say alcoholic liquor for human consumption, plus un-denatured extra neutral alcohol or rectified spirit used to make it. Other alcohol uses are not covered by this carve-out.
• Writing that petroleum products are exempt from GST permanently. Fix: Write that tax is levied from a date to be notified on the Council's recommendation.
• Treating every purchase from an unregistered supplier as RCM. Fix: Section 9(4) works only for specified supplies, received by a notified class of registered persons. Check the notification given in the question.
• Paying RCM tax by using input tax credit. Fix: Write that RCM tax must be paid through the electronic cash ledger. Credit arises only after the tax is paid.
• Treating section 9(5) as ordinary reverse charge where the recipient pays. Fix: Remember 9(3) and 9(4) make the recipient liable. Section 9(5) makes the operator liable as if it were the supplier.
• Assuming every service supplied through an app falls under section 9(5). Fix: Only notified categories are covered. Apply the rule only when the question states or implies notification.
• Saying the government's claim always beats every other claim. Fix: Add that it is subject to the Insolvency and Bankruptcy Code, 2016.
• Treating Section 82 as a recovery procedure. Fix: Say it only gives priority and security. Actual recovery follows the Act's procedure.

Exam tips

• Learn the two ceilings together: 20% for CGST and 40% for IGST. MCQs often swap them.
• Cite the sub-section: 9(1) levy, 9(2) petroleum, 9(3) and 9(4) reverse charge, 9(5) e-commerce operator.
• In numerical answers, show CGST and SGST separately before totalling.
• Use the phrase 'on the value determined under section 15' in theory answers; it earns the step mark.
• For a reverse charge question, name who pays and why, not just the amount.
• MCQs often test the exact list of five petroleum products. Memorise it as: crude, diesel, petrol, natural gas, ATF.
• For composition, always state the turnover limit and its basis (preceding financial year) first.
• In theory answers, quote the section number: Section 9(1), 9(2) and 10 CGST; Section 5 IGST.