Section 9 of The Central Goods and Services Tax Act, 2017
Original Text
9. Levy and collection.
(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 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 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.
(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.
(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.
(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.
(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:
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 he 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.
Visual Summary
9(1) Forward Charge
The standard levy. The supplier collects tax from the recipient and pays it to the government. Max rate: 20% (CGST).
9(3) & 9(4) Reverse Charge
Liability shifts to the recipient. Applies to notified goods/services (9(3)) or purchases from unregistered dealers by notified persons (9(4)).
9(5) ECO Liability
Electronic Commerce Operators (e.g., Swiggy, Uber) are liable to pay tax for specific services (transport, restaurant, housekeeping).
Summary
Section 9 is known as the “Charging Section” of the CGST Act. Without this section, the government would have no legal authority to collect Central GST. It establishes that CGST is levied on all intra-State supplies (supplies within the same state) of goods and services.
It outlines three distinct methods of tax collection:
- Forward Charge: The default method where the supplier pays the tax.
- Reverse Charge Mechanism (RCM): Special cases where the buyer/recipient must pay the tax directly to the government.
- ECO Liability: Cases where an online platform (like a food delivery app) is treated as the supplier for tax purposes.
It also specifically excludes alcoholic liquor for human consumption from the purview of GST, keeping it under State Excise laws.
In-Depth Analysis
1. The Scope of Levy (Section 9(1))
This subsection empowers the collection of tax on the “transaction value” determined under Section 15. A crucial point is the rate cap: the CGST rate cannot exceed 20%. Since GST is a dual levy (CGST + SGST), this effectively means the maximum combined GST rate cannot exceed 40%.
2. Temporary Exclusions (Section 9(2))
Petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel are currently outside GST. They will only be taxed from a date notified by the Government after the GST Council recommends it. Until then, existing Excise Duty and VAT laws apply to them.
3. The Reverse Charge Mechanism (Section 9(3) & 9(4))
Section 9(3) applies to specific goods (e.g., cashew nuts, silk yarn) and services (e.g., GTA, Legal Services, Sponsorship) notified by the government. Here, the recipient is mandatorily liable to pay tax.
Section 9(4) originally mandated RCM on any purchase from an unregistered dealer. This caused massive compliance burdens and was suspended. It was amended in 2019 to apply only to specified classes of registered persons receiving specified goods (e.g., Promoters buying cement/capital goods in Real Estate).
4. Electronic Commerce Operators (Section 9(5))
This is a “deeming fiction.” For services like passenger transport (Uber/Ola), housekeeping (Urban Company), restaurant services (Swiggy/Zomato), and accommodation (Airbnb/Oyo), the platform is treated as the supplier. They must pay tax as if they provided the service, even if the actual service provider is unregistered.
Deep Research & Legal Precedents
Section 9 has been the subject of intense litigation regarding the constitutional validity of levies and the interpretation of “supply.”
A. The “Ocean Freight” RCM Verdict
The Supreme Court held that levying IGST under RCM on the “service” of ocean transportation for CIF imports is unconstitutional as it amounts to double taxation (since freight is already included in the value of goods for Customs Duty). This judgment underscored that delegated legislation (Notifications) cannot override the Act.
B. The “Secondment” Controversy
The SC ruled that seconded employees (expats) are a “supply of manpower” service, not employees. Thus, the Indian company must pay GST under RCM on reimbursements made to the foreign parent company. This has triggered widespread litigation for MNCs.
C. Recent Amendments (2022-2024)
- Metal Scrap (Oct 2024): RCM is now applicable on the supply of metal scrap by an unregistered person to a registered person to curb fake invoicing.
- Renting of Residential Dwelling (July 2022): Previously exempt, this is now taxable under RCM if rented to a registered person. However, it remains exempt if rented by a proprietor for personal use (and not claimed as business expense).
- Restaurant Services via ECO: Liability shifted from restaurants to platforms like Swiggy/Zomato under Section 9(5).
D. Pending Constitutional Bench Matter
Myrayash Hotels Pvt Ltd v. Union of India: The question of whether GST can be levied on the renting of immovable property (or if it falls exclusively under State land taxes) has been referred to a 9-Judge Constitution Bench.
Practical Examples
Scenario 1: Forward Charge (9(1))
Situation: Alpha Electronics (Mumbai) sells a laptop to a consumer in Pune for ₹50,000.
Tax: Since this is an intra-state supply, Alpha Electronics collects 9% CGST and 9% SGST from the consumer and deposits it with the government.
Scenario 2: Reverse Charge (9(3))
Situation: XYZ Ltd. hires a Goods Transport Agency (GTA) to transport raw materials. The GTA does not charge 12% GST on the invoice.
Tax: XYZ Ltd. (the recipient) is liable to pay 5% GST directly to the government under RCM. The GTA does not collect tax.
Scenario 3: ECO Liability (9(5))
Situation: Mr. A orders dinner from a local restaurant via Zomato.
Tax: Even though the restaurant prepares the food, Zomato is liable to pay the GST on this transaction under Section 9(5). Zomato collects the tax from Mr. A and deposits it.
Key Takeaways
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Section 9 is the charging section; without it, no CGST can be collected. -
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Alcohol for human consumption is permanently excluded; Petrol/Diesel are temporarily excluded. -
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RCM shifts the liability to the recipient. This is mandatory for notified supplies (9(3)) and specific real estate purchases (9(4)). -
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ECOs (like Uber/Swiggy) are treated as “deemed suppliers” for specific services under 9(5). -
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Personal guarantees by Directors (without consideration) are not taxable, but Corporate Guarantees are taxable.
Process Flowchart: Determining Tax Liability
Practice Questions
Q1. What is the maximum rate of Central Tax (CGST) that can be levied under Section 9(1)?
- A. 18%
- B. 20%
- C. 28%
- D. 40%
Show Answer
Correct Answer: B. 20%. Note: The combined GST (CGST + SGST) can be 40%, but Section 9(1) of the CGST Act specifically caps the Central Tax at 20%.
Q2. In the case of Mohit Minerals, the Supreme Court declared RCM on which service as unconstitutional?
- A. Legal Services
- B. Ocean Freight in CIF contracts
- C. Renting of Motor Vehicles
- D. Sponsorship Services
Show Answer
Correct Answer: B. Ocean Freight in CIF contracts. The court ruled that tax was already paid on the value of goods (which included freight), so taxing freight separately was double taxation.
Q3. Under Section 9(5), who is liable to pay tax for restaurant services supplied through Zomato?
- A. The Restaurant
- B. The Customer
- C. Zomato (The Electronic Commerce Operator)
- D. Exempt from tax
Show Answer
Correct Answer: C. Zomato. Restaurant services are notified under Section 9(5), making the ECO liable.
Related Provisions
| Section | Description |
|---|---|
| Section 7 | Scope of Supply (Defines what is taxable) |
| Section 8 | Tax liability on composite and mixed supplies |
| Section 10 | Composition Levy (Alternative to Section 9) |
| Section 15 | Value of Taxable Supply (Valuation Rules) |
Conclusion
Section 9 is the backbone of the CGST Act, 2017. It not only empowers the government to levy tax but also provides the flexibility to collect it via different mechanisms (Forward, Reverse, or ECO) to ensure maximum compliance and ease of administration. Understanding Section 9 is fundamental to determining who is liable to pay the tax in any given transaction.