Section 5 is the IGST charging section. Every IGST liability traces to one of its five sub-sections: what is taxed, on what value, at what rate, and who pays.
Key points
- Section 5(1) of the IGST Act, 2017 levies IGST on every inter-State supply of goods or services at notified rates not exceeding 40%, on the value under section 15 of the CGST Act.
- IGST on imported goods is collected by customs under section 3(7) of the Customs Tariff Act, 1975 (proviso to section 5(1)); imported services are charged under section 5(1) itself.
- IGST on petroleum crude, diesel, petrol, natural gas and aviation turbine fuel is deferred until the Government notifies a date (section 5(2)); none has been notified.
- Under sections 5(3) and 5(4) the recipient pays on reverse charge for notified supplies; under section 5(5) the e-commerce operator pays for notified services.
- In Union of India v Mohit Minerals (2022) the Supreme Court held that IGST cannot be levied again under reverse charge on ocean freight in a CIF import already taxed at customs.
HistoryBefore GST— CST on inter-State sales, CVD/SAD on imports, service tax — what section 5 replaced.
Inter-State sales bore Central Sales Tax at 2% against C-form or the full local VAT rate without it. The buying State gave no credit for it, so CST was a permanent cost on inter-State trade. Imports bore basic customs duty plus CVD and SAD. Services bore Union service tax under the Finance Act, 1994, with no inter-State apportionment.
Section 5(1) replaced CST and inter-State service tax; its proviso replaced CVD and SAD. The constitutional base is Articles 246A(2) and 269A, inserted by the Constitution (101st Amendment) Act, 2016.
Counterparts: CST Act s. 6 · Customs Tariff Act s. 3(7), 3(9) · Customs Act s. 12 · Finance Act 1994 ss. 66, 66B · CGST Act s. 9.
HistoryAmendment timeline— From commencement in 2017 to the 2025 rate changes.
- 01.07.2017 — section in force (Notif 3/2017-IT).
- 13.10.2017 — original sub-s. (4) exempted in full (Notif 32/2017-IT(R)), later extended.
- 01.02.2019 — sub-s. (4) substituted by the IGST (Amendment) Act, 2018.
- 29.03.2019 — Notif 07/2019-IT(R): promoters under the substituted sub-s. (4).
- 01.01.2022 — restaurant services added to the e-commerce operator list (Notif 17/2021-IT(R) dated 18.11.2021).
- 19.05.2022 — Mohit Minerals: no separate reverse-charge levy on ocean freight in CIF imports.
- 01.10.2023 — IGST (Amendment) Act, 2023 in force (Notif 02/2023-Integrated Tax dated 29.09.2023): proviso to sub-s. (1) now excepts imported goods notified by the Government.
- 01.11.2024 — extra neutral alcohol / rectified spirit for liquor excluded from sub-s. (1) (Finance (No. 2) Act, 2024).
- 22.09.2025 — rate structure recast on the 56th GST Council's recommendation: 5% and 18%, with 40% for specified goods.
The provisions
5(1)The charge on inter-State supplies
Statutory text
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption 3[and un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption], on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:
3. Inserted by section 151 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
- Notif 8/2017-IT(R) — services rates
- Goods rate notification (recast September 2025)
Cases on this provision
Skill Lotto Solutions Pvt Ltd v Union of India
2020 SCC OnLine SC 990 · 2020 INSC 676 · 03.12.2020 · Supreme Court, 3 Judges (Ashok Bhushan, R. Subhash Reddy, M.R. Shah JJ.)
- Facts
- An authorised agent for the sale of Punjab State lotteries challenged GST on lottery. It argued that a lottery is an actionable claim, that including actionable claims in "goods" under section 2(52) of the CGST Act was unconstitutional, and that prize money should be excluded from taxable value.
- Held
- Writ petition dismissed. The definition of "goods" including actionable claims is consistent with the constitutional meaning of goods; taxing lottery, betting and gambling violates no fundamental right; prize money is not deducted in computing value.
- Here
- The reach of "supplies of goods" in sub-s. (1) is wide, and value under section 15 is not reduced by the prize payout.
Larsen & Toubro Ltd v State of Karnataka
(2014) 1 SCC 708 · 26.09.2013 · Supreme Court, 3 Judges
- Facts
- A developer agreed with prospective flat buyers to build and sell flats with an undivided share of land. Karnataka taxed the construction element as a works contract; the developer said it was simply a sale of immovable property.
- Held
- Affirming K. Raheja Development, an agreement with the buyer entered into before construction is complete is a works contract, and the goods element is taxable as a deemed sale. An agreement made after the flat is built is not.
- Here
- Mixed construction contracts are composite supplies; their rate under sub-s. (1) now follows the principal-supply test in section 8 of the CGST Act.
Union of India v Bharti Airtel Ltd
(2022) 4 SCC 328 · 28.10.2021 · Supreme Court, 3 Judges (A.M. Khanwilkar, Dinesh Maheshwari, C.T. Ravikumar JJ.)
- Facts
- For July–September 2017, when GSTR-2A was not available, Bharti Airtel paid about Rs. 923 crore of tax in cash instead of using credit. It sought to rectify the GSTR-3B returns of those months; the Delhi High Court allowed it and read down para 4 of Circular 26/26/2017-GST.
- Held
- Reversed. GST is self-assessed from the taxpayer's own records; GSTR-2A is only a facilitator. An error can be corrected only in the return for the period in which it is noticed, as section 39(9) provides — not by reopening the original months.
- Here
- The duty to pay under sub-s. (1) is self-assessed: a wrong inter-State / intra-State call is corrected prospectively, not by rewriting past returns.
ExampleDelhi consultant advises a Mumbai client— Rs. 10 lakh at 18% → IGST Rs. 1.8 lakh.
- Inter-State under section 7 — supplier in Delhi; place of supply Mumbai under section 12(2).
- Value under section 15 CGST — Rs. 10 lakh.
- Rate under Notif 8/2017-IT(R) — 18%.
- IGST = Rs. 1.8 lakh, charged under section 5(1) on the supplier.
The client takes credit of Rs. 1.8 lakh and uses it in the order set by section 49 of the CGST Act.
Pre-GSTImagic Creative Pvt Ltd v Commissioner of Commercial Taxes, (2008) 2 SCC 614— Service tax and VAT are mutually exclusive.
An advertising agency created concepts and designs and supplied printed material, paying service tax on its work. Karnataka sought VAT on the whole consideration. Held: service tax and VAT are mutually exclusive; the service element could not also be subjected to VAT. The principle survives in GST's single-rate treatment of a composite supply.
5(1) provisoImported goods — taxed through customs
Statutory text
Provided that the integrated tax on goods 2[other than the goods as may be notified by the Government on the recommendations of the Council] imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.
2. Inserted by s. 3 of the Integrated Goods and Services Tax (Amendment) Act, 2023 (No. 31 of 2023) - Brought into force w.e.f. yet to be notified.
What it means
- Machinery is customs law. IGST on imported goods is levied under section 3(7) of the Customs Tariff Act, 1975 and collected by the customs officer with the Bill of Entry — not through GST returns.
- Value. Assessable value plus basic customs duty and other duties (section 3(8) of the Customs Tariff Act), so IGST is charged on a base that already includes BCD.
- Timing. The point when customs duty is levied under section 12 of the Customs Act, 1962.
- Credit. IGST paid at import is input tax credit for the importer like any other IGST.
- Imported services are not covered by the proviso. They are inter-State supplies under section 7(4) and are charged under sub-s. (1); the recipient usually pays on reverse charge (sub-s. (3), Notif 10/2017-IT(R)).
- Notified goods are outside the proviso. The words in brackets, in force from 01.10.2023, let the Government (on the Council's recommendation) notify imported goods that are not taxed through customs; such goods are charged under sub-s. (1) itself.
The CBIC note 2 above says the 2023 amendment is “yet to be notified”. It is in force: Notification 02/2023-Integrated Tax dated 29.09.2023 brought the whole IGST (Amendment) Act, 2023 into force from 01.10.2023.
Case on this provision
Union of India v Mohit Minerals Pvt Ltd
(2022) 10 SCC 700 · 19.05.2022 · Supreme Court, 3 Judges (D.Y. Chandrachud, Surya Kant, Vikram Nath JJ.)
- Facts
- Importers of non-coking coal from Indonesia, South Africa and the USA bought on CIF terms and paid IGST at customs on the full CIF value, freight included. Notifications 8/2017-IT(R) and 10/2017-IT(R) also made them, as deemed recipients, pay IGST under reverse charge on the ocean freight paid by the foreign seller to the shipping line. The Gujarat High Court held the levy invalid; the Union appealed.
- Held
- Appeal dismissed. The notifications were validly issued under sections 5(3) and 5(4), but levying IGST separately on the freight element offends section 8 of the CGST Act: in a CIF import the transport is part of a composite supply already taxed with the goods, and cannot be split off and taxed again in the importer's hands. Separately, GST Council recommendations are not binding on Parliament or the State legislatures; they carry persuasive value.
- Here
- Once imported goods suffer IGST through the proviso, a component of that same transaction cannot be taxed again under sub-s. (3). It also marks the limit of any reverse-charge notification.
ExampleMachinery import, CIF USD 105,500— BCD 7.5% + SWS, IGST 18% on Rs. 94.72 lakh → Rs. 17.05 lakh at clearance.
- CIF converted at the notified exchange rate: Rs. 87.50 lakh (illustrative).
- BCD 7.5% = Rs. 6.56 lakh; Social Welfare Surcharge 10% of BCD = Rs. 0.66 lakh.
- IGST base Rs. 94.72 lakh × 18% = Rs. 17.05 lakh, paid with the Bill of Entry.
- No separate IGST on the freight — Mohit Minerals.
5(2)Petroleum — charge deferred
Statutory text
(2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
What it means
These five products are inside GST in principle but not yet taxed under it: no date has been notified. Until one is, the pre-GST levies — central excise, State VAT and CST on inter-State sales — continue. An attempt to charge IGST on them before a notification fails on the words of this sub-section.
5(3)Reverse charge on notified supplies
Statutory text
(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
What it means
- The recipient steps into the supplier's shoes for the notified category — registration, payment, returns, interest and penalty all follow.
- Goods: Notif 4/2017-IT(R) — raw cashew and cotton from agriculturists, tendu leaves, tobacco leaves, silk yarn, lottery, and used vehicles, seized goods and scrap sold by Government.
- Services: Notif 10/2017-IT(R) — goods transport agencies, advocates, sponsorship, arbitral tribunals, most Government services, directors, insurance and recovery agents, authors; and services imported from outside India.
- Credit: tax paid on reverse charge is paid in cash and is then available as input tax credit in the same return.
- Limit: a notification can only move liability for a supply the section already charges. It cannot split a composite supply to tax a part twice — see Mohit Minerals.
- Notif 4/2017-IT(R) — goods
- Notif 10/2017-IT(R) — services
- Circular 76/50/2018-GST — Government sales of used vehicles, scrap and seized goods
ExampleChennai transporter, Bangalore manufacturer— GTA freight Rs. 50,000, GTA not under forward charge → recipient pays 5% (Rs. 2,500) and takes it as credit.
The recipient pays under Notif 10/2017-IT(R), reports in GSTR-3B Table 3.1(d) and claims credit in Table 4 of the same return. Since 22.09.2025 a GTA can instead charge under forward charge at 5% without credit or 18% with full credit (the 18% option replaced the earlier 12%).
5(4)Reverse charge on purchases from unregistered suppliers
Statutory text
1[(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.]
1. Substituted for "(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. " by s. 3 of the Integrated Goods and Services Tax (Amendment) Act, 2018 (No. 32 of 2018) - Brought into force w.e.f. 01st February, 2019.
What it means
Three conditions must all be met: the buyer belongs to a notified class, the purchase is of a notified category, and the seller is unregistered. Outside that, a purchase from an unregistered supplier attracts no reverse charge.
The operative notification covers promoters of real-estate projects: cement and capital goods bought from unregistered suppliers, and the shortfall where less than 80% of inputs and input services come from registered suppliers (Notif 07/2019-IT(R), 29.03.2019; CGST counterpart 07/2019-CT(R)).
Case on this provision
Chief Commissioner of CGST v Safari Retreats Pvt Ltd
2024 INSC 756 · 03.10.2024 · Supreme Court, 2 Judges (Abhay S. Oka, Sanjay Karol JJ.)
- Facts
- Safari Retreats built a shopping mall in Odisha to let out, and accumulated about Rs. 34 crore of credit on its construction. Revenue denied it under section 17(5)(d) of the CGST Act. The Orissa High Court read the bar down for buildings built for letting.
- Held
- Sections 17(5)(c) and (d) are constitutionally valid. But "plant or machinery" in clause (d) is not the defined term "plant and machinery": a building can be a "plant" if, on a functionality test, it is an essential tool of the business rather than its setting — a question of fact. Remanded to the Orissa High Court to apply the test. A review petition was dismissed in May 2025.
- Since then
- Overridden. Section 119 of the Finance Act, 2025 substituted "plant and machinery" for "plant or machinery" in section 17(5)(d) retrospectively from 01.07.2017, with an Explanation overriding contrary judgments. The functionality-test route to credit is closed; the finding on constitutional validity remains.
- Here
- Reverse charge paid by a promoter under sub-s. (4) on construction inputs is, after the 2025 amendment, generally blocked from credit by section 17(5)(d).
HistoryThe original sub-section (4), 2017–2019— Every registered buyer on reverse charge for any unregistered purchase; exempted within months.
"(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient …"
Unworkable as a cash-flow burden, the charge under it was exempted in full from 13.10.2017 by Notif 32/2017-IT(R) (CGST counterpart 38/2017-CT(R)), with the exemption extended until the present text took effect on 01.02.2019. Demands for the exempted period fail on those notifications.
ExamplePromoter buys cement from unregistered suppliers— Rs. 5 crore of cement: 28% before 22.09.2025 (Rs. 1.40 crore), 18% after (Rs. 90 lakh).
Cement attracts reverse charge regardless of the 80% calculation. The rate is the one in force on the date of supply: cement moved from 28% to 18% on 22.09.2025. Credit is blocked by section 17(5)(d) — see Safari Retreats above.
5(5)E-commerce operator as the supplier
Statutory text
(5) The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
What it means
- Services only. For notified services sold through a platform, the operator — not the person actually providing the service — is the taxable supplier.
- Notified services (Notif 14/2017-IT(R)): passenger transport (radio taxi, motorcab, maxicab, motorcycle), accommodation, housekeeping, and from 01.01.2022 restaurant services including cloud kitchens (Notif 17/2021-IT(R), 18.11.2021).
- Foreign operators: the first proviso makes the operator's representative in India liable; failing one, the second requires it to appoint a person in India to pay.
- The underlying provider does not charge tax on these supplies; the operator invoices and pays.
- Notif 14/2017-IT(R)
- Notif 17/2021-IT(R) — restaurants from 01.01.2022
ExampleRestaurant order through a delivery platform— Rs. 1,000 order; platform charges and pays 5%; restaurant charges nothing.
Gujarat restaurant, Maharashtra customer: inter-State. From 01.01.2022 the operator is the deemed supplier and pays Rs. 50; the customer pays Rs. 1,050.
HistoryRestaurants before 01.01.2022— The restaurant itself was liable.
Until the 2021 amendment, restaurant services through a platform were not notified, so the restaurant paid tax itself.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- What is the maximum IGST rate under section 5?
- 40%, on the value under section 15 of the CGST Act (section 5(1) of the IGST Act). Since 22.09.2025 the 40% rate is applied to specified goods.
- Who collects IGST on imported goods?
- The customs officer at clearance, under section 3(7) of the Customs Tariff Act, 1975, as the proviso to section 5(1) requires.
- Is IGST payable on ocean freight in a CIF import?
- No separate reverse-charge levy. In Union of India v Mohit Minerals (2022) the Supreme Court held it breaches section 8 of the CGST Act, as the freight is already in the customs value.
- When does reverse charge apply on purchases from unregistered suppliers?
- Only for a notified class buying notified supplies (section 5(4)) — currently promoters of real-estate projects under Notification 07/2019-Integrated Tax (Rate).
- Who pays IGST on a taxi ride or restaurant order booked through an app?
- The e-commerce operator, as if it were the supplier (section 5(5) and Notification 14/2017-Integrated Tax (Rate); restaurant services from 01.01.2022).
- Is IGST charged on petrol and diesel?
- Not yet. Section 5(2) defers it until a date is notified; the pre-GST levies continue.
Practice tools
ToolForms, returns and due dates— Invoice, GSTR-1 Tables 5A/7A, GSTR-3B Tables 3.1(a)/(d) and 4, Bill of Entry, self-invoice.
- Tax invoice (Rule 46 CGST Rules) — place of supply, IGST amount, HSN/SAC.
- GSTR-1 Table 5A / 7A — inter-State outward supplies by place of supply; monthly by the 11th (IFF by the 13th under QRMP).
- GSTR-3B Table 3.1(d) and Table 4 — reverse charge payable and its credit; 20th, 22nd or 24th depending on State.
- Bill of Entry — IGST on imported goods, at clearance.
- Self-invoice (Rule 36) — purchases from unregistered suppliers under sub-s. (4).
ToolCompliance sequence— Classify, value, rate, check reverse charge, invoice, report, pay.
- Identify the supply and its inter-State character (section 7).
- Value it under section 15 of the CGST Act.
- Find the rate in the rate notifications as amended.
- Check reverse charge under Notifs 4/2017 and 10/2017-IT(R), and the operator rule under Notif 14/2017-IT(R).
- For imported goods, IGST is paid with the Bill of Entry.
- Invoice under Rule 46, report in GSTR-1, pay through GSTR-3B.
ToolBy sector— Importers, promoters, platforms, GTAs, Government suppliers, petroleum.
- Importers — IGST at customs on CIF + BCD; no separate IGST on ocean freight (Mohit Minerals).
- Real-estate promoters — reverse charge under sub-s. (4) on cement, capital goods and the 80% shortfall; credit generally blocked.
- Platforms — deemed supplier for ride-hailing, accommodation, housekeeping and restaurant services.
- GTAs — reverse charge at 5%, or forward charge at 5% (no credit) or 18% (full credit).
- Government suppliers — most Government services are on reverse charge under Notif 10/2017-IT(R).
- Petroleum and alcohol — outside the charge for now (sub-s. (2)) or altogether (alcoholic liquor).
Union of India v VKC Footsteps India Pvt Ltd, (2022) 2 SCC 603— Refund of accumulated credit is a statutory concession — treated under section 54 of the CGST Act.
13.09.2021, D.Y. Chandrachud and M.R. Shah JJ.: Rule 89(5) upheld — inverted-duty refund confined to credit on input goods. Relevant to refunds, not to the charge under section 5.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The sub-section fixes every element of the levy in one sentence. Read it as five questions: