Levy and Collection of Tax Section 9 of CGST Act, 2017:
Let's divide this section into 3 parts:
1) First part (Normal charge or forward charge)
2) Second part (Reverse charge)
3) Third part (E-commerce operator)
First part (Normal charge or forward charge):
9(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the Central Goods and Services Tax on all INTRA-STATE SUPPLIES of Goods or Services or Both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty 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.
9(2) The Central 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. GST is a consumption based tax i.e. the tax should be received by the state in which the goods or services are consumed and not by the state in which such goods are manufactured.
For example: Mr. A (in Haryana), supply any Goods to Mr. B (in Haryana), the tax should be received by the Haryana Govt. because Goods are going to be consumed in Haryana and in that case Mr. A will charge CGST + SGST from Mr. B.
1. Understanding of the words 'Subject to the provisions of sub-section (2) ' According to Section 9(1) there shall be levied a tax called CGST on ALL inter-state supply that means ALL the goods and ALL the services are subject to tax but If you see the Section 9 Subsection (1) starts with the wordings 'Subject to the provisions of sub-section (2)' and after reading Section 9 Subsection (2) you will get a list of goods i.e. Petroleum Crude, High Speed Diesel, Motor Spirit, Natural Gas & Aviation Turbine Fuel which are also subject to CGST but on a later date and this date will be notified by the Govt. on the recommendations of the council. Now you can conclude that there shall be levied a tax called CGST on ALL inter-state supply with immediate effect as the Central Goods & Service Tax come in to force but in case of supply of Petroleum Crude, High Speed Diesel, Motor Spirit, Natural Gas & Aviation Turbine Fuel, CGST shall be levied from the date as Govt. will notify in this regard.
2. Understanding of words 'at such rates, not exceeding twenty per cent.' - We all of know GST rates has been announced on various Goods & Services. The maximum rate announced of GST is 28% (i.e. 14% CGST+14% SGST) but it can be increased up to 40% (i.e. 20% CGST + 20% SGST). As the Section 9(1) clearly says that 'at such rates, not exceeding twenty percent' that means CGST Rate can be increased max. up to 20%.
3. Understanding of words 'collected in such manner as may be prescribed' - The CGST shall be collected by the CG in the manner as prescribed and the manner is prescribed in GST - PAYMENT OF TAXES RULES, 2017.
4. Understanding of words 'shall be paid by the TAXABLE PERSON' - For payment of CGST, the word is used TAXABLE PERSON, not the supplier. It means the tax shall by paid by the taxable person not by the supplier. We will gradually see in the GST there will be many instances where tax is levied on a person other than supplier like in reverse charge the tax shall be paid by the recipient not by the supplier that means taxable person is RECEPIENT in case of reverse charge not the supplier. There can be many examples that's why the words are used TAXABLE PERSON not the supplier.
5. 'goods' means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
6. 'services' means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
Second part (Reverse charge):
9(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. Reverse Charge on Goods under sec.9(3)
Service Provider Service Receiver GST to be paid by:
1. Goods Transport Agency Casual Taxable person, body corporate, partnership firm, any society, factory, any person registered under CGST, SGST, UTGST Act. Service recipient.
2. Recovery Agent Banking Company, NBFC or any financial institution. Service recipient.
3. A director of a company or a body corporate A company or a body corporate Service recipient.
4. An individual advocate or firm of advocates , An arbitral tribunal Any business entity. Service recipient.
5. Taxi driver or Rent a cab operator ( if service provided by e-commerce operator) Any person E-commerce Operator
6. An insurance agent Any person carrying on insurance business Service recipient.
7. Any person providing sponsorship services Anybody corporate or partnership firm. Service recipient.
8. A person located in non-taxable territory to a person located in non-taxable territory Importer Service recipient.
9. Author or music composer, photographer, artist, etc Publisher, Music company, Producer Service recipient.
10. Any person who is located in a non-taxable territory Any person located in the taxable territory other than non-assessee online recipient (Business Recipient) Service recipient.
1. Understanding of the words 'Reverse Charge':
The basic fundamental of Indirect taxes is taxes are to be collected from the buyer or service recipient by the manufacturer, trader or service provider as the case may be, and deposit the same with concerned authority. Generally, supplier collects the taxes from the recipient and deposits the same after adjusting his output liability with input tax credits to the concerned authority. Under the reverse charge mechanism liability to pay tax on a particular supply is on the recipient of the supply.
2. Whether GST under Reverse Charge is applicable on all the supplies? Reading of Section 9(3), its self made clear that only NOTIFIED SUPPLIES of Goods or Services or both will attract reverse charge provisions under section 9(3). So far as almost twelve (12) Supplies of Services are listed under Reverse Charge Mechanism and list of Supply of Goods under reverse charge is yet to be notified. Supplies of Goods or Service other than notified services will not be covered under section 9(3).
9(4) The central 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.
Comments: After Reading Section 9(4), It is clear that in case of Registered Person who receives the supply from a Unregistered Person would be liable to pay CGST under Reverse Charge Basis. But the supply should be a TAXABLE SUPPLY; no reverse charge shall be applicable in case of EXEMPT SUPPLY OR NON TAXABLE SUPPLY. If you will read the section 9(4) carefully you will see that is NO any words 'Supply of Goods or Services or both notified by the Govt' it means all the supply of goods or services or both will be covered under section 9(4), in other words we can say all the supply will be under reverse charge u/s 9(4). If a Registered person receives any supply from a unregistered person (whether notified by Govt. u/s 9(3) or not ) will subject to reverse charge u/s 9(4). Provided that the total supply from unregistered person exceeds Rs 5,000 in a day, then reverse charge will be applicable. (Notification No.8/2017-Central Tax)
Example: Mr. X is not registered in GST as his aggregate turnover of taxable supplies is below threshold limit. Mr. Y is a registered dealer purchased goods from Mr. X In such case, Mr. Y could be required to pay tax under reverse charge on value of such goods Thus, Threshold exemption for not-obtaining registration given under Sec. 22(1) is only an administrative relief given to small business entities & it would not render the supplies made by them.
Third part (E-commerce operator):
9(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-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:
Proviso (1): No Physical presence of E-commerce operator (ECO) in the taxable territory. In such case, Representative liable to pay service tax
Proviso (2): If ECO has neither the physical presence nor any representative in the taxable territory. In such case, Person liable to pay tax is the person appointed by ECO for the purpose of paying the tax. It is important to note that this exception is carved out only in respect of supply of service through an ECO. It is not applicable/relevant to supply of goods by ECO