CGST: supply, levy and collection, reverse charge, registration and tax invoice

1. CGST and SGST

CGST is the central tax levied by Parliament under Article 246A on intra-State supplies, under the Central Goods and Services Tax Act, 2017. SGST is the corresponding tax levied by each State on the same supply under its own Act; the State Acts mirror the CGST Act section by section. Both are administered on a common base and through the same portal, and both came into force on 1 July 2017 (the registration provisions earlier, on 22 June 2017).

2. The taxable event: supply, section 7

Section 7(1) provides that “supply” includes:

• (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
• (aa) activities or transactions between a person (other than an individual) and its members or constituents for consideration, the two being deemed separate persons (inserted in 2021 to overcome the doctrine of mutuality for clubs and associations);
• (b) import of services for a consideration, whether or not in the course of business;
• (c) the activities in Schedule I made without consideration: permanent transfer of business assets on which credit was taken, supplies between related or distinct persons (branches in different States), supplies by a principal to an agent and vice versa, and import of services from a related person abroad.

Schedule II classifies doubtful transactions as goods or services (for example, transfer of title in goods is a supply of goods; lease or renting of land or building is a supply of services; works contracts and restaurant service are services). Schedule III lists activities that are neither goods nor services: services by an employee to the employer in the course of employment, services of courts and tribunals, functions of MPs and MLAs, funeral services, sale of land and (subject to the exception) of a completed building, and actionable claims other than specified actionable claims (lottery, betting, gambling, online money gaming). Money and securities are excluded from both “goods” (section 2(52)) and “services” (section 2(102)).

3. Levy and collection: section 9

• Section 9(1): CGST is levied on all intra-State supplies of goods or services or both, except alcoholic liquor for human consumption (and un-denatured extra neutral alcohol used to make it), on the value determined under section 15, at rates not exceeding 20% notified on the recommendation of the Council, and is paid by the taxable person.
• Section 9(2): petroleum crude, diesel, petrol, natural gas and ATF are taxed only from a date notified on the Council’s recommendation.
• Section 9(3): reverse charge. For notified categories of supply, the recipient pays the tax as if he were the person liable (for example legal services by an advocate to a business entity, goods transport agency services, sponsorship, services by a director to a company).
• Section 9(4): a notified class of registered persons pays tax on reverse charge on specified supplies received from unregistered suppliers.
• Section 9(5): for notified services supplied through an electronic commerce operator (passenger transport, accommodation, restaurant services), the operator pays the tax as if he were the supplier.

Value (section 15) is the transaction value, the price actually paid where the parties are not related and price is the sole consideration, including taxes other than GST, incidental expenses and subsidies linked to price, less discounts given on the invoice. Time of supply is in sections 12 and 13; it fixes when the liability arises.

Composition levy (section 10): small taxpayers with aggregate turnover within the notified limit may pay tax at a low flat rate on turnover instead of the normal rate, without input tax credit and without collecting tax from customers; they issue a bill of supply.

Exemption (section 11): the Government may, on the Council’s recommendation, exempt goods or services generally by notification, absolutely or conditionally, or by special order in exceptional cases.

Input tax credit (section 16): a registered person may take credit of tax paid on inputs used in the course of business if he has the tax invoice, has received the goods or services, the supplier has paid the tax and the details appear in the prescribed statements, and he has filed his return. Section 17 blocks credit on specified items (motor vehicles in most cases, food and beverages, club membership, works contract for immovable property, personal consumption).

4. Registration: sections 22 to 30

Who must register: section 22. Every supplier must register in the State or Union territory from which he makes a taxable supply if his aggregate turnover in a financial year exceeds twenty lakh rupees; ten lakh rupees in special category States, which may be raised to twenty lakh. A State may raise the limit to forty lakh rupees for suppliers exclusively of goods (as most States, including Karnataka, have done). A successor to a business transferred as a going concern, and a transferee under an amalgamation or demerger, must also register.

Who need not: section 23. A person dealing only in non-taxable or wholly exempt supplies; an agriculturist for supply of produce from cultivation; and categories notified on the Council’s recommendation.

Compulsory registration regardless of turnover: section 24. Persons making inter-State taxable supplies; casual taxable persons; persons liable under reverse charge; persons liable under section 9(5); non-resident taxable persons; persons required to deduct tax under section 51; agents supplying on behalf of others; input service distributors; suppliers through e-commerce operators who collect tax at source; e-commerce operators; suppliers of online information and database access services and online money gaming from outside India to persons in India; and others notified.

Procedure: section 25.

• Apply within thirty days of becoming liable, in every State where liable, electronically on the common portal; a casual or non-resident taxable person must apply at least five days before starting business.
• A PAN is essential (a TAN for tax deductors); Aadhaar authentication is required under section 25(6A).
• One registration per State, with separate registration for each place of business if desired; a unit in a Special Economic Zone needs a separate registration.
• Each registration is treated as a distinct person (section 25(4) and (5)).
• Voluntary registration is permitted (section 25(3)); the person then has all the obligations of a registered person.
• The proper officer verifies the application and grants a certificate with a 15-character GSTIN, or rejects it after a hearing. Where a liable person fails to register, the officer may register him (section 25(8)).

Amendment, cancellation, revocation: section 28 (amendment), section 29 (cancellation or suspension, on the person’s application on closure of business or by the officer for contravention or non-filing of returns), section 30 (revocation of cancellation).

Advantages of registration. The registered person is legally recognised as a supplier; he can collect tax from customers and pass on credit; he can claim input tax credit on his own purchases; he can make inter-State supplies and sell through e-commerce platforms; he can participate in tenders and supply chains of large buyers who need credit; and he can claim refunds on exports.

5. Tax invoice: section 31

• For goods: before or at the time of removal (where goods move) or delivery, showing description, quantity, value, tax and other prescribed particulars (section 31(1)).
• For services: before or after provision, within the prescribed period (section 31(2)).
• A bill of supply instead of a tax invoice for exempt supplies and for composition dealers (section 31(3)(c)); receipt vouchers for advances; refund vouchers where the supply does not take place; invoices by the recipient for reverse-charge purchases from unregistered persons.
• No invoice is needed for supplies below two hundred rupees, subject to conditions.
• E-invoicing through the invoice registration portal applies to taxpayers above the notified turnover. Credit and debit notes adjust the tax later (section 34).

6. Problem

A, a trader in Mysuru, supplies only goods. His turnover in 2025–26 was ₹32 lakh, all within Karnataka. In 2026–27 he receives one order from a buyer in Goa. Must he register?

Issue. Whether a goods supplier below the threshold must register, and the effect of an inter-State supply.

Law. Section 22 and the Karnataka notification: registration is required only above ₹40 lakh for exclusive suppliers of goods. But section 24(i) makes registration compulsory for every person making an inter-State taxable supply, irrespective of turnover.

Application. On turnover alone A need not register. The supply to Goa is an inter-State supply under section 7 of the IGST Act (location of supplier and place of supply in different States). Section 24(i) therefore applies. (The Council has relaxed this for certain small suppliers of services and for small sellers through e-commerce operators by notification, but there is no general relaxation for inter-State supply of goods.)

Conclusion. A must apply for registration within thirty days of becoming liable, before making the inter-State supply, and charge IGST on it.

How this is examined

January 2026 (100-mark) Q. 6: provisions relating to registration under the GST Act. January 2026 (80-mark) Q. 3(a): define CGST and SGST and explain levy and collection of GST relating to supply; alternative Q. 3(a): advantages of registration and the procedure. February 2025 Q. 3(a): registration under the CGST Act. February 2025 Q. 4(b): reverse charge mechanism.

For the registration essay, write sections 22, 23, 24 and 25 in that order and end with advantages. For reverse charge, write section 9(3), (4) and (5), with two examples of each.