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CA Intermediate · Taxation

Charge of GST: CA Intermediate Taxation Study Guide

Charge of GST decides which supplies are taxed, who pays and at what stage. You learn the Section 9 levy, reverse charge, composition levy, exemption powers and composite versus mixed supply. Solve by identifying the supply, the person liable, then the rate or relief that applies.

What this chapter covers

This chapter is the starting gate of GST. Section 9 of the CGST Act, 2017 is the charging section. It levies CGST on intra-State supplies of goods or services or both, other than alcoholic liquor for human consumption. SGST or UTGST is levied on the same supply under the State or Union Territory GST Act. CGST and SGST/UTGST are each charged at the rate notified by the Government on the recommendation of the GST Council, not exceeding 20%. Tax is levied on the value of the supply determined under Section 15. It is paid by the taxable person (the supplier), unless reverse charge applies and the law shifts the liability to the recipient. The IGST Act, 2017 applies the same idea to inter-State supplies. IGST is levied under Section 5 of that Act at the notified rate, not exceeding 40%.

Petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel are within the Act, but CGST on them is leviable only from a date notified on the recommendation of the GST Council. Until that date, the tax is not levied on them.

The chapter then covers four related ideas. Reverse charge changes who pays the tax. Under Section 9(3) it applies to notified categories of goods or services. Under Section 9(4), tax on notified categories of supply of goods or services or both by an unregistered supplier to a registered person is paid by the recipient under RCM. For inter-State supplies, the matching powers are in Section 5(3) and 5(4) of the IGST Act. Composition levy lets eligible registered persons pay tax at a prescribed percentage of their turnover in the State or Union Territory, instead of the normal tax on the value of each supply. Section 10(1) is mainly for suppliers of goods and restaurant services. Section 10(2A) gives a separate option to eligible service providers, with its own conditions. Composition is available only if aggregate turnover does not exceed the prescribed limit. The conditions in Section 10(2) apply to the Section 10(1) option. They include bars on persons making supplies not leviable to tax, inter-State outward supplies, 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. This list is not exhaustive, so check every condition. Exemption powers let the Government relieve tax on specified supplies. Composite and mixed supply decide how a bundle of items is taxed. A composite supply (Section 2(30)) is made by a taxable person to a recipient and consists 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 being the principal supply. A mixed supply (Section 2(74)) is two or more individual supplies made by a taxable person to a recipient in conjunction with each other for a single price, and it is not a composite supply.

This chapter links to almost everything else in Section B. Before you can fix the time, place or value of a supply, you must know the supply is taxable and who must pay. Input tax credit, registration and returns all depend on the charge. Weak basics here will cost you marks in later chapters.

Charge of GST gives you short, scoring questions in both parts of the paper. In MCQs, you can get direct questions on who pays under RCM, composition conditions, or whether a bundle is composite or mixed. In the 70-marks written part, a case with several facts often needs you to identify the liable person first. These rules are mostly clear-cut, so careful study gives reliable marks, and the same logic helps you in later chapters.

Charge of GST: topics in the order to study them

  1. 1Levy and Charge of GST under Section 9This is the base rule on who pays and on what, so every other topic builds on it.
  2. 2Composite and Mixed SupplyIt is a short, concept-based topic that sharpens how you read a supply before applying the charge.
  3. 3Reverse Charge Mechanism (RCM)Once you know the normal rule that the supplier pays, you can understand the exceptions where the recipient pays.
  4. 4Composition Levy under Section 10It needs the normal levy clear first, because it is an optional alternative with conditions and limits.
  5. 5Power to Grant Exemption from TaxStudy it last, as exemptions are relief from a charge you already understand, and need the most memory work.

How to prepare Charge of GST

Treat this chapter as a set of decision rules. For each question, ask what the supply is, who is liable, and whether any relief applies.

  1. Read Section 9 in plain words and write the charge in one line: tax on intra-State supply of goods or services or both, except alcoholic liquor for human consumption, paid by the supplier unless reverse charge applies.
  2. Learn the difference between composite and mixed supply with one everyday example each, and note how the tax rate is decided for each.
  3. Make a table for RCM with columns for supply, supplier, recipient and liable person. Revise it until you can fill it from memory.
  4. List the conditions and restrictions for composition levy, such as eligibility, the aggregate turnover limit, the bar on inter-State outward supplies and who cannot opt. Remember that the tax is a prescribed percentage of turnover in the State or UT. Check the current figures in your study material.
  5. Group exemptions into notified goods, notified services and conditions for relief. Practise spotting whether a given supply is exempt or taxable.
  6. Solve past exam questions and ICAI practice questions. Write answers in a fixed order: provision, facts, conclusion.
  7. Attempt MCQs on the chapter in timed sets. With no negative marking, always answer every question and eliminate wrong options first.

Common mistakes in Charge of GST

  • Treating the supplier as liable in every case.

    Fix: Check first whether the supply falls in a notified RCM category, then decide who pays.

  • Mixing up composite and mixed supply.

    Fix: Ask whether the taxable supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business. If yes, it is composite. If they are just supplied together for a single price, it is mixed.

  • Applying the wrong rule for tax treatment of a bundle.

    Fix: Remember that composite (two or more taxable supplies naturally bundled and supplied in conjunction with each other, one being the principal supply) is taxed as the principal supply, and mixed (individual supplies made in conjunction with each other for a single price, not a composite supply) is taxed as the supply of the item attracting the highest rate.

  • Forgetting composition conditions.

    Fix: Keep a checklist of eligibility, the turnover limit, the bar on inter-State outward supplies and other restrictions, and test each fact in a question against it. Also remember that the tax is a prescribed percentage of turnover in the State or UT.

  • Assuming all exemptions are unconditional.

    Fix: Check for conditions in the question. An exemption that is conditional applies only when the conditions are met.

  • Writing answers without a clear provision and conclusion.

    Fix: State the rule, apply it to the facts in short steps, then give a one-line conclusion.

Last-day revision: Charge of GST

  • 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.

Charge of GST practice questions

Charge of GST in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Charge of GST: frequently asked questions

What is the main section in the Charge of GST chapter?

Section 9 of the CGST Act, 2017 is the main charging section. It levies tax on intra-State supplies of goods or services or both, other than alcoholic liquor for human consumption, and petroleum products are taxable only from a notified date. Learn it first, then the other topics.

Which topic in this chapter is hardest to remember?

Most students find RCM and exemptions hardest because they involve lists. Use tables and revise them in short sessions. Practise questions help the lists stick.

How do I tell a composite supply from a mixed supply?

A composite supply is made by a taxable person to a recipient and consists of two or more taxable supplies that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one being the principal supply. A mixed supply is a combination of individual supplies made in conjunction with each other for a single price, without being a composite supply. Check the nature of the bundle first.

Should I attempt every MCQ from this chapter?

Yes. There is no negative marking, so attempt every MCQ. Eliminate options that clearly break the rule, and then choose the best remaining one.