S.2CGST ActChapter I — Preliminary
Key definitions
The CGST Act contains over 120 defined terms. Critical definitions: "supply" (S.7 — the taxable event); "taxable person" (any person registered or liable to be registered); "input tax credit" (the credit mechanism); "place of supply" (determines CGST+SGST vs IGST); "aggregate turnover" (for registration and composition threshold — Rs 40 lakh for goods, Rs 20 lakh for services); "composite supply" (two or more taxable supplies naturally bundled, taxed at the rate of the principal supply); "mixed supply" (two or more supplies combined for a single price but capable of being supplied independently — taxed at the highest applicable rate). The distinction between composite supply and mixed supply is critical for hospitality, healthcare, and bundled service industries.
Related:S.7S.8S.22S.16
S.7CGST ActChapter III — Levy and Collection
Scope of supply (the taxable event)
Section 7 defines "supply" — the central taxable event of GST. Supply includes: all forms of supply of goods or services (sale, barter, exchange, license, rental, lease, disposal) made for a consideration in the course or furtherance of business; import of services; and Schedule I activities deemed as supply even without consideration (permanent transfer of business assets, supply between distinct persons, supply by principal to agent/agent to principal). Schedule II specifies whether certain transactions are "goods" or "services" — software on media is goods; software on download is services. Activities in Schedule III are neither goods nor services (e.g., services by employee to employer, sale of land, actionable claims other than lottery/gambling).
Practice Note
The "course or furtherance of business" requirement means personal supplies are generally not subject to GST. However, Schedule I catches related-party supplies even without consideration — holding companies "supplying" management services to subsidiaries at zero cost are a common GST audit trigger.
Related:S.2S.8S.9S.15
S.9CGST ActChapter III — Levy and Collection
Levy and collection of CGST
GST is levied at the rates notified by the GST Council (0%, 5%, 12%, 18%, 28% — plus cess on sin goods). GST is levied on: (a) outward supply of goods/services by a taxable person (forward charge); (b) certain notified supplies where the recipient is liable to pay GST instead of supplier (Reverse Charge Mechanism — RCM under S.9(3) and S.9(4)). S.9(3) RCM: specific supplies listed by notification (e.g., services by advocate to business entity, import of services, GTA services to registered entities, sponsorship services, director fees to registered companies, renting of motor vehicles by unregistered suppliers). S.9(4) RCM: supplies by unregistered suppliers to registered recipients above Rs 5,000/day aggregate (currently exempted for most goods/services except real estate).
Practice Note
RCM compliance is a major source of GST notice-cum-demand for corporates — particularly: (a) advocate fees where no RCM has been paid; (b) director sitting fees treated as professional fees rather than employee emoluments; (c) import of services from overseas subsidiaries not subjected to IGST on RCM basis.
Related:S.2S.7S.15S.16
S.16CGST ActChapter V — Input Tax Credit
Eligibility and conditions for taking input tax credit (ITC)
Input Tax Credit (ITC) is available to a registered person on goods/services used in the course or furtherance of business. Four conditions must ALL be met: (a) the registered person possesses a valid tax invoice or debit note; (b) the goods/services have been received; (c) the supplier has actually paid the tax to the government (verified via GSTR-2B auto-populated from supplier's GSTR-1); (d) the registered person has filed the return under S.39 (GSTR-3B). Post Finance Act 2022 amendment (S.16(2)(aa)), ITC is allowed ONLY to the extent appearing in the buyer's GSTR-2B — any excess ITC claim is not permitted. This "matching" requirement effectively makes the buyer responsible for the supplier's compliance.
Practice Note
The GSTR-2B matching condition (S.16(2)(aa)) created a paradigm shift — buyers must now monitor their suppliers' GSTR-1 filing discipline. Large companies have contractualised GST compliance into vendor agreements: suppliers who fail to file GSTR-1 on time face contract penalties or recovery of unmatched ITC amounts from their invoices.
Related:S.17S.18S.34S.37
S.17CGST ActChapter V — Input Tax Credit
Apportionment of credit and blocked credits
Section 17 restricts ITC in two ways. S.17(1)–(3): Where goods or services are used partly for taxable supply and partly for exempt supply, ITC must be apportioned — only the portion attributable to taxable supply is allowed. S.17(5): Specific "blocked credits" — ITC is NOT available on: motor vehicles (except for specific businesses); food, beverages, club memberships; works contract services for construction of immovable property (except plant and machinery); construction of immovable property (capitalized in books); personal consumption expenditures; employee perks (cab, health insurance, group accident insurance, gifts). The blocked credit list catches many common corporate expenses — insurance, cabs, canteen, and employee welfare costs do not generate ITC.
Practice Note
The "motor vehicle" ITC block under S.17(5)(a) has a significant exception: vehicles used for supply of motor vehicle services (car dealers, rental companies), transportation of goods or persons (travel agents), or imparting motor driving training are eligible for ITC. Companies providing employee cabs cannot claim ITC — but outward transportation service providers can.
Related:S.16S.18S.73S.74
S.73CGST ActChapter XV — Demands and Recovery
Determination of tax not paid — non-fraud cases
Where tax has not been paid, short-paid, erroneously refunded, or ITC has been wrongly availed — without any intention to defraud — the proper officer issues a Show Cause Notice under S.73 (the "non-fraud" route). The SCN must be issued within 3 years from the due date of the annual return for the relevant FY (extended to 5 years for S.74 fraud cases). The taxpayer can avoid penalty entirely if they pay the full tax plus interest before or within 30 days of SCN. If the demand is confirmed after adjudication, a penalty equal to 10% of the tax demand (minimum Rs 10,000) is levied. Appeals against S.73 orders go to GST Appellate Authority (S.107), GSTAT (S.112), High Court (Art.226/Art.227), and Supreme Court.
Practice Note
The S.73/S.74 demand procedure is the primary GST litigation pathway for businesses. Key defence points: (a) limitation — was the SCN issued within the prescribed 3/5-year window; (b) is the case genuinely "non-fraud" or is the officer wrongly invoking S.74 to get the higher 5-year window; (c) have the natural justice obligations (SCN specificity, personal hearing) been met.
Related:S.16S.74S.75S.107
S.74CGST ActChapter XV — Demands and Recovery
Determination of tax not paid — fraud/suppression cases
Where the tax default involves fraud, willful misstatement, or suppression of facts, the proper officer issues an SCN under S.74 (the "fraud" route). The extended limitation period (5 years from annual return due date) applies. Penalty under S.74 (if confirmed): 100% of the tax demanded. Reduction: if paid before SCN issuance — 15% penalty; if paid within 30 days of SCN — 25% penalty; after SCN but before order — 50% penalty; on confirmation — 100% penalty. Criminal prosecution for GST fraud (S.132) is also possible for tax evasion above Rs 100 lakh (Rs 5 crore for certain aggravated offences) — with imprisonment of 1–5 years plus fine.
Related:S.73S.75S.122S.132
S.83CGST ActChapter XV — Demands and Recovery
Provisional attachment of property
Where proceedings under S.62, S.63, S.64, S.67, S.73, or S.74 are pending, the Commissioner can provisionally attach any property (including bank accounts) of a taxable person if they believe it is necessary to protect revenue interests. The attachment continues for one year (or till the conclusion of proceedings, whichever is earlier). The taxpayer can apply for release of attached property by furnishing security (S.83(2)). GST provisional attachment of bank accounts has become a major business disruption tool — courts (including the Supreme Court in Radha Krishan Industries v State of HP) have held that S.83 attachment is draconian and must only be used in extreme cases where there is genuine apprehension of dissipation of assets.
Practice Note
The Supreme Court in Radha Krishan Industries (2021) laid down strict guidelines for S.83 attachment: (a) it cannot be used as a tool to coerce payment; (b) the Commissioner must record cogent reasons for "protecting revenue"; (c) freezing of bank accounts must be a last resort; (d) the affected taxpayer can approach the High Court under Art.226 for stay of attachment — High Courts have been receptive to such petitions.
Related:S.73S.74S.122S.127