Levy &
Collection
of GST
Sec 9 (CGST) & Sec 5 (IGST) — the charging sections that define when and how GST applies. Reverse Charge, ECO liability, Composite & Mixed Supply, and a landmark case law on gift vouchers.
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What Does Levy Mean?
The word Levy is used throughout GST law but is not explicitly defined in the Act. In legal and taxation context, Levy encompasses three distinct actions carried out by a Legal Authority:
Charging
Imposing the legal obligation to pay tax on a taxable event.
Imposition
Formally establishing the tax liability through a legal provision.
Collection
The actual recovery of the tax amount from the taxpayer.
🔑 Why Charging Sections are “KEY” in GST
In GST, the Charging Sections are the most critical provisions — they define WHEN tax applies (the taxable event), HOW it is calculated (rate × taxable value), and on WHOM the liability falls. Without a charging section, no tax can be levied — it is the legal foundation of the entire GST structure.
The Charging Sections — Sec 9 & Sec 5
GST has two primary charging sections — one for intra-state supplies and one for inter-state supplies. Together they cover every taxable transaction in India.
Section 9 — CGST Act (Intra-State Supply)
The primary charging section for intra-state supplies of goods and services. Also applies to SGST (State GST) and UTGST (Union Territory GST) by their respective Acts mirroring the CGST provisions. CGST + SGST/UTGST is charged on all supplies that occur within the same state or Union Territory.
Section 5 — IGST Act (Inter-State Supply)
The charging section for inter-state supplies — transactions crossing state boundaries or involving imports. IGST is charged at a combined rate equivalent to CGST + SGST. Sec 5 contains an important Proviso for import of goods. From 1st October 2023, online money gaming is also taxable under IGST at 28%.
📦 Sec 5(1) Proviso — Import of Goods
- On import of goods into India, IGST + Customs Duty both apply.
- IGST is levied on the assessable value plus customs duty — effectively on the landed cost.
- From 1st October 2023: Online money gaming transactions are taxable under IGST — this was a major amendment targeting platforms like online casinos, fantasy sports etc.
Landmark Case Law — Gift Vouchers & e-Vouchers
Premier Sales Promotion Pvt. Ltd.
The key question in this landmark case: Are Gift Vouchers / e-Vouchers taxable as goods under GST? The argument was whether issuing a voucher constitutes a supply of goods (attracting GST at the time of issuance).
Reverse Charge Mechanism (RCM)
Normally, the supplier collects and pays GST. Under Reverse Charge Mechanism (RCM), this obligation is reversed — the recipient is liable to pay GST directly to the government, not the supplier.
📋 Relevant Sections
- Sec 9(3) CGST / Sec 5(3) IGST — Specific notified goods and services where RCM mandatorily applies (e.g., legal services from advocates, GTA services, import of services).
- Sec 9(4) CGST / Sec 5(4) IGST — Supply from an unregistered person to a registered person (in notified cases) — recipient pays under RCM.
| Section | Scenario | Who Pays GST | Example |
|---|---|---|---|
| Sec 9(3)/5(3) | Notified supplies — specific services | Recipient | Legal service from Advocate to Business |
| Sec 9(4)/5(4) | Unregistered supplier to registered buyer | Recipient | Purchase from unregistered vendor (notified) |
| Sec 9(5)/5(5) | ECO liable to collect & pay on certain services | ECO (Platform) | Ola/Uber collecting ride fares — GST paid by Ola |
Electronic Commerce Operator (ECO) — Sec 9(5)
An Electronic Commerce Operator (ECO) is a digital platform that facilitates supply of goods or services. Under Sec 9(5) of CGST / Sec 5(5) of IGST, certain ECOs are made liable to collect and pay GST on specific services — even though the actual service is provided by a third-party vendor on their platform.
Ride Hailing — Ola / Uber
Ola and Uber collect fares on behalf of drivers. GST is paid by Ola/Uber (ECO), not the individual driver — even though the driver provides the actual transport service.
Why This Matters
Individual drivers/service providers may not be registered under GST. The ECO model ensures tax compliance at the platform level — the government collects GST from one accountable entity.
ECO vs Normal RCM
Under normal RCM, the recipient pays. Under ECO liability (Sec 9(5)), the platform/operator itself pays as if it were the supplier — a special deemed supplier rule.
Composite Supply vs Mixed Supply — Sec 8
When a business offers two or more goods/services together, GST law classifies the bundled transaction as either a Composite Supply or a Mixed Supply — and the tax treatment differs significantly between the two.
Composite Supply
Naturally bundled supplies where one item is the principal supply and others are ancillary to it. The bundle cannot be logically separated in normal commercial practice.
The principal supply = Hotel Stay (accommodation).
Breakfast is ancillary — naturally bundled with the stay.
Mixed Supply
2 or more independent supplies combined and sold for a single price — but they are NOT naturally bundled and could be sold separately in normal trade.
Each item is independent and can be bought separately.
They happen to be bundled for a promotional single price.
🧠 How to Distinguish — Quick Test
- Ask: “Can these items be naturally sold separately in normal commercial practice?”
- If NO — it is a Composite Supply → tax at principal supply rate.
- If YES — it is a Mixed Supply → tax at the highest rate among all components.
- Key rule for Mixed Supply: The highest GST rate in the bundle applies to the entire value — so bundling a watch (28%) with chocolates (5%) means the whole combo is taxed at 28%.
