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Section 32 — Prohibition of Unauthorised Collection of Tax

Ever seen a shopkeeper add 'GST' to your bill even though he's not registered? That's exactly what Section 32 of the CGST Act is designed to stop. This section is all about who is legally allowed to collect GST — and the answer is simpler than you'd think: only registered persons, and only as per the rules.

Sub-section (1) lays down the first rule: if you are not a registered person, you have absolutely no right to collect any amount as tax from your customers. Period. Think of Mr. Ravi who runs a small hardware shop with ₹30 lakh annual turnover — below the ₹40 lakh threshold, so he's not registered. If Ravi charges a customer ₹1,800 extra labelling it 'GST', he's committing an offence under this section. He can collect the price of goods, not a rupee more in the name of tax.

Sub-section (2) applies to registered persons — and it's equally strict. Just because you have a GSTIN doesn't mean you can charge GST however you like. You must collect tax strictly in accordance with the CGST Act and its rules. So if Ms. Priya Nair is registered under GST and sells an exempt item (say, unprocessed fresh vegetables), she cannot charge GST on it just because she feels like it or made a mistake. The supply is exempt — no GST can be charged, registered or not.

Why does this matter? Because collecting tax you're not entitled to collect is treated as an offence, and the person collecting it can be held liable to deposit that wrongly collected amount to the government under Section 76. The government doesn't let anyone play 'fake tax collector.' This section is the gatekeeper. Exam tip: This is frequently tested as a short 2–4 mark theory question asking you to explain or identify violations. Know both sub-sections with crisp examples.

📊 Worked example

Example 1 — Unregistered person collecting GST

Mr. Suresh runs a consultancy firm with annual receipts of ₹15,00,000 (₹15 lakhs). The GST registration threshold for services is ₹20 lakhs, so he is not required to register and has not registered.

Suresh raises an invoice on a client:

  • Professional fees: ₹50,000
  • Add: GST @ 18%: ₹9,000
  • Total charged: ₹59,000

Is this valid?

Working:

  • Suresh is NOT a registered person.
  • Section 32(1) prohibits any unregistered person from collecting any amount as tax.
  • The ₹9,000 collected as 'GST' is unauthorised collection of tax.
  • Suresh is liable under Section 76 to deposit ₹9,000 to the government and faces penal consequences.

Answer: Suresh has violated Section 32(1). The ₹9,000 must be deposited to the government.

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Example 2 — Registered person charging GST on exempt supply

Rajesh & Co. Pvt. Ltd. is GST-registered (GSTIN valid). They supply fresh unprocessed rice (exempt from GST) worth ₹2,00,000 and raise the following invoice:

  • Value of rice: ₹2,00,000
  • Add: GST @ 5% (incorrectly charged): ₹10,000
  • Total invoice: ₹2,10,000

Is this valid?

Working:

  • Fresh unprocessed rice is an exempt supply — GST rate is NIL.
  • Even though Rajesh & Co. is registered, Section 32(2) says tax can only be collected in accordance with the Act.
  • Charging GST on an exempt supply is NOT in accordance with the Act.
  • The ₹10,000 collected is unauthorised and must be deposited to the government under Section 76.

Answer: Rajesh & Co. has violated Section 32(2). The ₹10,000 collected as GST is to be paid to the government.

⚠️ Common exam mistakes

  • Students think Section 32 only applies to fraudsters. Wrong — an honest mistake (like a registered person charging GST on an exempt supply) is also a violation of Section 32(2). Intent doesn't matter; compliance does.
  • Don't confuse 'not registered' with 'registration not required.' If someone is below the threshold and voluntarily unregistered, they still cannot collect GST. There are no exceptions for 'small businesses' under Section 32(1).
  • Students forget the consequence. Section 32 prohibits collection, but the penalty provision is Section 76 — wrongly collected tax must be deposited to the government. In theory questions, always link Section 32 violations to Section 76.
  • Assuming a registered person can charge GST on anything. A GSTIN is not a blank cheque. GST can only be charged on taxable supplies, at the correct rate, and in the correct manner. Charging GST on nil-rated or exempt supplies violates Section 32(2).
  • Mixing up Section 32 with Section 9 (levy). Section 9 tells us GST is levied on taxable supplies. Section 32 tells us who can collect it and how. They work together — don't use them interchangeably in answers.
📖 Bare Act text — Section 32, CGST Act 2017 (click to expand)
(1) A person who is not a registered person shall not collect in respect of any supply of goods or services or both any amount by way of tax under this Act. (2) No registered person shall collect tax except in accordance with the provisions of this Act or the rules made thereunder.
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