## The Charging Section – Heart of GST Law

### Why the Charging Section Matters

A tax can only be levied if there is a valid charging section. The charging section answers four questions:

1. What is taxed? (Taxable event)

2. At what rate?

3. On what value?

4. By whom?

### Section 9 of CGST Act – Intra-State Supply

> CGST shall be levied on all intra-State supplies of goods or services or both, except on supply of alcoholic liquor for human consumption, on the value determined under Section 15, at such rate as notified (not exceeding 20%), to be collected and paid by the taxable person.

Similarly, SGST/UTGST Acts levy SGST/UTGST on the same intra-State supply.

### Section 5 of IGST Act – Inter-State Supply

> IGST shall be levied on all inter-State supplies of goods or services or both, on the value determined under Section 15 of CGST Act, at such rate as notified (not exceeding 40%), to be collected and paid by the taxable person. Plus IGST on imports (collected at the customs port).

### Key Components of the Charge

Element	Position
Taxable Event	Supply (defined in Section 7)
Value	As per Section 15 (transaction value)
Rate	As notified (currently 0%, 5%, 12%, 18%, 28% + Cess)
Person Liable	Generally supplier; in specified cases, recipient (Reverse Charge)
Excluded Goods	Alcoholic liquor for human consumption (permanently); 5 petroleum products (currently)

### Visual Map

```

SUPPLY (Section 7)

/ \

Intra-State Inter-State

(Sec 9) (Sec 5)

| |

CGST + SGST/UTGST IGST

| |

Value u/s 15 Value u/s 15 of CGST

| |

Rate ≤ 20% each Rate ≤ 40%

```

### When No Supply, No GST

If an activity is not a supply under Section 7, the charging section cannot fire — even if money changes hands. That is why understanding Section 7 (Supply) is fundamental.

Worked example

### Example 1

Example – Applying the Charge

Mr. Ajay (registered in Karnataka) supplies machinery worth ₹5,00,000 to:

(a) Mr. Bharat in Karnataka (intra-State).

Section 9 of CGST fires + corresponding Karnataka SGST.
Tax: CGST 9% + SGST 9% = ₹45,000 + ₹45,000.

(b) Mr. Chetan in Kerala (inter-State).

Section 5 of IGST fires.
Tax: IGST 18% = ₹90,000.

Charging section does NOT apply (alcoholic liquor for human consumption is excluded).
State Excise + VAT apply instead.

⚠️ Common exam mistakes

Forgetting that alcoholic liquor for human consumption is excluded by the charging section itself (constitutional carve-out via Article 366(12A)).
Treating the rate cap of 20% (CGST) / 40% (IGST) as the actual rate — these are maximum statutory caps; actual rates are notified.
Saying GST is levied on 'sale' — the taxable event is supply, which is much wider than sale.
Ignoring Reverse Charge — in specified cases, the recipient pays GST, not the supplier (Section 9(3), 9(4) CGST).

Bare-Act text Section 9 (read with Section 5 of IGST Act, 2017) · CGST Act, 2017 · click to expand

Section 9(1) CGST Act: 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 rate, 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.

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Charging Section – Section 9 CGST & Section 5 IGST

Worked example

⚠️ Common exam mistakes