CGST Act · Chapter III
Levy and Collection of Tax
s. 7Scope of supply
Section 7 defines the taxable event of GST. Tax is charged on a "supply", not on a sale or a manufacture, so what counts as a supply — and what does not — decides whether GST arises at all. The section works with three Schedules: I (supplies even without consideration), II (whether a supply is of goods or services) and III (activities that are not supplies).
- Under section 7(1)(a) of the CGST Act, 2017, "supply" includes all forms of supply of goods or services — sale, transfer, barter, exchange, licence, rental, lease or disposal — made for a consideration in the course or furtherance of business.
- Section 7(1)(aa), inserted by the Finance Act, 2021 with retrospective effect from 01.07.2017, treats supplies by a club or association to its members as supplies; in Indian Medical Association v Union of India (2025) the Kerala High Court declared it, and section 2(17)(e), unconstitutional. The Union's appeal is pending in the Supreme Court.
- Imports of services for consideration are supplies even if not in the course of business (section 7(1)(b)); the activities in Schedule I are supplies even without consideration (section 7(1)(c)).
- The activities in Schedule III — including employee services, sale of land and completed buildings, most actionable claims, high-sea sales and merchanting trade — are neither supplies of goods nor of services (section 7(2)(a)).
- Functions of governments and local authorities entrusted to Panchayats and Municipalities under Articles 243G and 243W are notified as not a supply (Notification 14/2017-Central Tax (Rate)).
s. 8Composite and mixed supplies
Businesses rarely supply one thing at a time. Section 8 decides how a bundle is taxed: a naturally bundled "composite supply" takes the rate of its principal supply; an artificial "mixed supply" takes the highest rate among its parts.
- Under section 8(a) of the CGST Act, 2017, a composite supply is treated as a supply of its principal supply.
- Under section 8(b), a mixed supply is treated as a supply of the item attracting the highest rate of tax.
- The test for a composite supply is natural bundling in the ordinary course of business (section 2(30)); a mixed supply is a combination for a single price that is not naturally bundled (section 2(74)).
- In Union of India v Mohit Minerals (2022) the Supreme Court held that the elements of a composite supply cannot be split and taxed separately.
s. 9Levy and collection
Section 9 is the CGST charging section — the intra-State twin of section 5 of the IGST Act. Every CGST liability traces to one of its five sub-sections; each State GST Act has a matching charge for State tax.
- Section 9(1) of the CGST Act, 2017 levies central tax on all intra-State supplies of goods or services at notified rates not exceeding 20%, on the value under section 15; State tax is levied alongside at the same rate under the State GST Acts.
- Alcoholic liquor for human consumption, and from 01.11.2024 un-denatured extra neutral alcohol or rectified spirit used to make it, are outside the charge.
- Central tax on petroleum crude, diesel, petrol, natural gas and aviation turbine fuel is deferred until notified (section 9(2)).
- Reverse charge applies to notified supplies (section 9(3); Notifications 4/2017 for goods and 13/2017 for services) and to notified purchases by a notified class from unregistered suppliers (section 9(4); real-estate promoters, Notification 07/2019).
- For notified services supplied through a platform — passenger transport by motor vehicle (and by omnibus from 20.10.2023, unless the supplier is a company), accommodation, housekeeping, restaurant services other than at specified premises (from 01.01.2022) and local delivery (from 22.09.2025) — the e-commerce operator pays the tax (section 9(5); Notification 17/2017-Central Tax (Rate) as amended).
s. 10Composition levy
Section 10 lets small businesses pay a flat percentage of turnover instead of tax on each supply, without the credit chain. It has two schemes: the original one for manufacturers, traders and restaurants (sub-section (1)), and a smaller one, from 2019, for suppliers of services (sub-section (2A)).
- Under section 10(1) of the CGST Act, 2017 a registered person whose aggregate turnover in the preceding year did not exceed the notified limit — Rs. 1.5 crore (Rs. 75 lakh in specified special category States) — may pay tax at a prescribed rate instead of the normal tax.
- The statute caps the CGST composition rate at 1% for manufacturers, 2.5% for restaurants and 0.5% for other suppliers; State tax is levied at the same rate.
- A composition taxpayer under section 10(1) may also supply services up to 10% of the previous year's turnover or Rs. 5 lakh, whichever is higher.
- Under section 10(2A), from 01.01.2020, suppliers of services (and others not eligible under section 10(1)) with turnover up to Rs. 50 lakh may opt for a composition rate.
- A composition taxpayer may not collect tax from customers or take input tax credit (section 10(4)), and may not make inter-State supplies; since 01.10.2023 it may supply goods through an e-commerce operator.
s. 11Power to grant exemption
Section 11 is the CGST exemption power, the counterpart of section 6 of the IGST Act. Exemptions are made in the Government's notifications on the Council's recommendation, and they are read strictly against the taxpayer claiming them.
- Section 11(1) of the CGST Act, 2017 lets the Government, on the GST Council's recommendation, exempt goods or services generally by notification, absolutely or conditionally, wholly or partly.
- The main CGST exemption notifications are 2/2017-Central Tax (Rate) for goods and 12/2017-Central Tax (Rate) for services, both dated 28.06.2017.
- A clarifying Explanation may be inserted within one year and operates as if always part of the notification (section 11(3)).
- On an absolutely exempt supply, the supplier must not collect tax above the effective rate (Explanation).
- Under Commissioner of Customs v Dilip Kumar & Co (2018), an exemption notification is construed strictly, and ambiguity is resolved in favour of the Revenue.
s. 11APower not to recover
Section 11A deals with a familiar problem: an entire trade has been paying no tax, or less tax, on a supply because of a common understanding, and the understanding turns out to be wrong. Rather than demand years of tax from everyone, the Government may — on the Council's recommendation — regularise the past by directing that the tax need not be paid.
- Section 11A of the CGST Act, 2017, inserted by the Finance (No. 2) Act, 2024 and in force from 01.11.2024, empowers the Government, on the GST Council's recommendation, to direct that central tax not levied or short-levied because of a generally prevalent practice need not be paid.
- Two conditions: a practice was or is generally prevalent regarding the levy (or non-levy) of central tax on a supply, and the supplies were or are in fact liable to tax, or to more tax, than the practice assumed.
- The direction is made by notification in the Official Gazette and overrides the rest of the Act.