CS Executive · Tax Laws and Practice

Levy and Collection of GST for CS Executive

Levy and collection of GST is the rule on what is taxed, who pays and how much. Section 9 CGST levies tax on intra-State supplies, and Section 5 IGST on inter-State supplies. Tax is paid by the supplier, or by the recipient or an e-commerce operator in notified cases. Section 10 lets small taxpayers pay composition tax.

What this chapter covers

This chapter is the base of the GST part of Paper 7. It answers four questions. What is taxed? Section 9 CGST taxes intra-State supplies of goods or services or both, and Section 5 IGST taxes inter-State supplies. Who pays? Usually the supplier, but sometimes the recipient (reverse charge) or an electronic commerce operator. How much? At rates notified on the Council's recommendation, within a statutory ceiling. And can a small taxpayer choose a simpler scheme? Yes, under Section 10.

The two Acts mirror each other. Section 9 CGST and Section 5 IGST have almost the same sub-sections on reverse charge, e-commerce operators and petroleum products. Learn them together. The main differences are the ceiling on the rate (twenty per cent for CGST, forty per cent for IGST) and the IGST proviso on imported goods.

This chapter links to the rest of Paper 7 Part II. Supply, value of supply, input tax credit, registration and returns all assume you know who is liable to pay and when composition applies. A composition dealer cannot collect tax or take credit, so Section 10 ties directly to input tax credit. Reading this chapter well makes the later chapters easier.

Paper 7 is a written paper, and Part II on GST and Customs is a smaller part of it. Section 9 and Section 10 are core provisions, so they give you clean, high-scoring theory answers and short problems. Questions often ask you to decide who pays tax, whether reverse charge applies, or whether a person can opt for composition. These are answered by stating the provision, applying the facts and giving a conclusion. If you know the conditions exactly, you can score full marks quickly. The sub-sections are short, so the effort is small compared with the return.

Levy and Collection of GST: topics in the order to study them

1Levy and Collection of GST under Section 9Start here. It sets the charging provision for intra-State supplies, the value on which tax is levied and who pays, and the later topics build on it.
2Rates of GST and Taxation of Alcohol and PetroleumNext, learn the rate ceilings and the two special cases: alcohol for human consumption is outside GST, and petroleum products come in only from a notified date.
3Reverse Charge Mechanism under Section 9(3) and 9(4)This shifts liability from the supplier to the recipient, so you need the basic levy and the rules on who pays first.
4Electronic Commerce Operator Liability under Section 9(5)It is another exception to the supplier-pays rule, and easier to grasp once reverse charge is clear.
5Composition Levy under Section 10Finish with this scheme, which replaces the normal levy under Section 9(1) for eligible small taxpayers and has the most conditions to memorise.

How to prepare Levy and Collection of GST

This chapter is mostly about reading the sections closely and remembering conditions exactly. Use the Act's wording as your base, then practise applying it to facts.

Read Section 9 CGST and Section 5 IGST side by side. Note what is the same and the few differences: the rate ceiling (twenty and forty per cent) and the IGST proviso on imports.
Make a one-page list of what is outside the levy or delayed: alcohol for human consumption, and petroleum crude, high speed diesel, petrol, natural gas and aviation turbine fuel until a notified date.
Learn the three payers beyond the supplier: recipient under Section 9(3), notified registered recipients buying from unregistered suppliers under Section 9(4), and e-commerce operators under Section 9(5). Write one line for each on who pays and who decides.
Learn Section 10 as a checklist: the turnover limit, the rate ceilings by category, the eligibility conditions, when the option lapses, and the bar on collecting tax and taking credit.
Practise short problems: given facts, decide who pays tax or whether a person can opt for composition. Write the answer as provision, application, conclusion.
Revise by writing the Section 10 conditions and the Section 9 sub-sections from memory, then check against the Act text.

Common mistakes in Levy and Collection of GST

Mixing up the CGST and IGST rate ceilings, or applying CGST to an inter-State supply.
Fix: Tie each Act to the supply type. Intra-State supply: CGST, ceiling twenty per cent. Inter-State supply: IGST, ceiling forty per cent.
Saying that petroleum products and alcohol are simply exempt or always taxed.
Fix: Alcohol for human consumption is excluded from the levy. Petroleum products are within GST but taxed only from a notified date.
Confusing Section 9(3) with Section 9(4).
Fix: Section 9(3) depends on the category of supply. Section 9(4) depends on the class of registered recipient buying from an unregistered supplier.
Forgetting who pays under Section 9(5) when the e-commerce operator has no physical presence in the taxable territory.
Fix: Remember the two provisos. If the operator has no physical presence in the taxable territory, its representative there is liable to pay tax. If it has no representative either, the operator must appoint a person in the taxable territory, and that person is liable to pay tax.
Giving the wrong turnover test or rate for composition.
Fix: Eligibility is tested on the preceding financial year. Lapse is tested on turnover in the current year. Learn each rate ceiling against its category, and remember that the rates apply to turnover in the State or Union territory.
Writing only the conclusion in a problem, such as 'he can opt for composition'.
Fix: State the section, test each condition against the facts, then conclude. Marks are given for the steps.

Last-day revision: Levy and Collection of GST

Section 9(1) CGST taxes intra-State supplies of goods or services or both; Section 5(1) IGST taxes inter-State supplies.
CGST rate ceiling is twenty per cent; IGST rate ceiling is forty per cent. Rates are notified on the Council's recommendation.
Alcoholic liquor for human consumption is excluded from GST; so are un-denatured extra neutral alcohol or rectified spirit used to make it.
Petroleum crude, high speed diesel, petrol, natural gas and aviation turbine fuel are taxed only from a date notified on the Council's recommendation.
Section 9(3): notified categories of supply are taxed on reverse charge, with the recipient liable to pay.
Section 9(4): notified classes of registered persons pay reverse charge on notified supplies received from unregistered suppliers.
Section 9(5): notified categories of services supplied through an e-commerce operator are taxed in the operator's hands. If the operator has no physical presence in the taxable territory, its representative there is liable. If it has no representative either, it must appoint a person in the taxable territory, who is liable to pay the tax.
Composition: aggregate turnover in the preceding financial year must not exceed fifty lakh rupees, unless the Government notifies a higher limit up to ₹1,50,00,000.
Composition ceilings, all on turnover in the State or Union territory: one per cent for manufacturers; two and a half per cent for persons making supplies under clause (b) of paragraph 6 of Schedule II (supply of food or drink as part of a service); half per cent for other suppliers; and up to three per cent under Section 10(2A) for registered persons not eligible under Section 10(1) and (2), such as service providers.
A composition person cannot make inter-State outward supplies. He also cannot supply services through an e-commerce operator who must collect tax at source under Section 52. Since 1 October 2023 the bar covers services only, so supplying goods through such an operator is no longer barred.
A composition person cannot collect tax from the recipient or claim input tax credit.
The option lapses from the day aggregate turnover in a year exceeds the limit.

Levy and Collection of GST practice questions

Levy and Collection 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.

Levy and Collection of GST: frequently asked questions

What is the difference between Section 9 CGST and Section 5 IGST?

Section 9 CGST levies tax on intra-State supplies, with a rate ceiling of twenty per cent. Section 5 IGST levies tax on inter-State supplies, with a ceiling of forty per cent. IGST also has a proviso on imported goods, which are taxed under the Customs Tariff Act at the point customs duty is levied.

Who pays GST under reverse charge?

The recipient pays. Under Section 9(3) this applies to notified categories of supply. Under Section 9(4) it applies to notified classes of registered persons for notified supplies from unregistered suppliers. All provisions of the Act then apply to the recipient as if he were the supplier.

Can a composition dealer collect GST from customers?

No. Under Section 10(4), a person paying tax under composition cannot collect tax from the recipient on supplies and cannot claim input tax credit. He pays tax at the prescribed rate on his turnover instead.

When does the composition option lapse?

Under Section 10(3), it lapses from the day on which aggregate turnover during a financial year exceeds the applicable limit. Eligibility to opt is tested on the preceding financial year, but lapse is tested on the current year's turnover.

How should I write answers from this chapter in the exam?

Paper 7 is descriptive. State the provision and cite the section, apply it to the facts given, and end with a clear conclusion. For composition problems, check each eligibility condition one by one.