Section 32 of the Central Goods and Services Tax Act, 2017 deals with the prohibition of unauthorised collection of tax. The provision is intended to ensure that GST is collected from a recipient only by a person who is legally authorised to collect it and only in accordance with the provisions of the CGST Act and the rules made under it.
The section contains two straightforward restrictions. First, a person who is not registered under GST cannot collect any amount as tax under the CGST Act on a supply of goods or services. Second, even a registered person cannot collect GST except in accordance with the Act and the applicable rules.
This provision is important because GST collected from customers represents an amount meant to be dealt with under the GST law. A business cannot simply add an amount described as GST to its selling price unless it has the legal authority to collect that tax and the collection is made in accordance with the applicable provisions.
What is Section 32 of the CGST Act?
Section 32 is titled “Prohibition of unauthorised collection of tax.”
It contains two sub-sections:
Section 32(1): A person who is not a registered person cannot collect, in respect of any supply of goods or services or both, any amount by way of tax under the CGST Act.
Section 32(2): A registered person cannot collect tax except in accordance with the provisions of the CGST Act or the rules made under it.
Therefore, Section 32 establishes a basic principle:
GST cannot be collected from a customer without proper legal authority and compliance with the GST law.
Purpose of Section 32
The main purpose of Section 32 is to prevent unauthorised persons from representing an amount as GST and collecting it from customers.
GST is not simply an additional amount that any seller can add to a bill. The authority to collect GST is connected with the person’s status under the GST law and the nature of the particular supply.
For example, if an individual who is not registered under GST sells goods and adds “GST” separately to the customer’s bill, the person cannot treat that amount as GST merely because it has been shown on the invoice or receipt.
Similarly, a registered person cannot collect GST merely because the person has a GST registration number. The tax must be collected in accordance with the applicable provisions of the CGST Act and rules.
Text of Section 32
Section 32 provides:
Section 32(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 the CGST Act.
Section 32(2)
A registered person shall not collect tax except in accordance with the provisions of the CGST Act or the rules made thereunder.
The two provisions work together. Section 32(1) deals with persons who are not registered, while Section 32(2) places restrictions even on registered persons.
Section 32(1) – Unregistered Persons Cannot Collect GST
Section 32(1) specifically prohibits a person who is not a registered person from collecting any amount by way of tax under the CGST Act on a supply.
This means that an unregistered seller cannot represent an amount charged to a customer as CGST or otherwise collect an amount as GST under the Act.
Example
Suppose a person operates a small business and is not registered under GST.
The person sells a product for ₹10,000 and prepares a bill showing:
- Product value: ₹10,000
- CGST: ₹900
- SGST: ₹900
- Total: ₹11,800
If the person is not registered and is not otherwise legally authorised to collect GST, simply showing CGST and SGST on the bill does not create a right to collect those amounts.
Section 32(1) prohibits such unauthorised collection.
Why GST Registration Matters
GST registration is an important part of the GST system because a registered person can be subject to specific rights and obligations under the Act.
However, registration does not mean that every transaction can automatically be charged with GST in every circumstance.
The supplier must still determine:
- whether the transaction constitutes a supply;
- whether the supply is taxable;
- whether the supplier is liable to pay tax;
- whether the supply is intra-State or inter-State;
- what rate applies;
- whether any exemption applies;
- whether reverse charge applies; and
- whether any special GST provision affects collection.
Therefore, GST registration and the authority to collect tax must be understood together with the other provisions of the GST law.
Section 32(2) – Registered Persons Also Have Restrictions
Section 32(2) is equally important.
It states that a registered person shall not collect tax except in accordance with the CGST Act or the rules made under it.
This means that GST registration alone does not give a taxpayer unrestricted authority to charge GST on every transaction.
A registered supplier must charge and collect tax according to the applicable GST provisions.
Example
Suppose a registered business supplies a product that is exempt from GST under the applicable exemption notification.
The supplier cannot simply add GST to the customer’s invoice because the supplier has a GST registration number.
The collection must be supported by the applicable GST law.
This is the practical significance of Section 32(2).
Can a Registered Person Charge GST on Every Sale?
No.
A registered person must determine whether GST is actually applicable to the particular supply.
A registered taxpayer may have taxable supplies as well as supplies that are exempt or otherwise subject to different tax treatment.
Therefore, before collecting GST, the supplier should determine the correct GST treatment of the transaction.
The tax charged should correspond with the applicable provisions, including the correct tax rate and type of tax.
Section 32 and Tax Invoice
Section 32 is closely connected with the provisions relating to tax invoices.
Section 31 deals with tax invoices and related documents, while Section 32 controls the unauthorised collection of tax. Section 33 deals with the amount of tax to be indicated in tax invoices and other documents.
The structure can therefore be understood as follows:
| Section | Subject |
|---|---|
| Section 31 | Tax invoice |
| Section 31A | Facility of digital payment to recipient |
| Section 32 | Prohibition of unauthorised collection of tax |
| Section 33 | Amount of tax to be indicated in tax invoice and other documents |
| Section 34 | Credit and debit notes |
Section 32 therefore plays an important role in ensuring that the tax shown on commercial documents corresponds to a lawful GST collection.
Difference Between Charging GST and Collecting GST
It is useful to distinguish between the commercial price charged by a supplier and the amount collected as GST.
A supplier may determine the price of its goods or services according to commercial terms. However, when an amount is specifically represented or collected as GST, the supplier must comply with the GST law.
For example, a supplier cannot avoid the requirements of Section 32 simply by writing “GST amount” or “tax amount” on a document.
The legal nature of the transaction and the applicable GST provisions determine whether the amount can lawfully be collected as tax.
Can an Unregistered Person Mention GST on an Invoice?
An unregistered person cannot collect an amount by way of GST in respect of a supply contrary to Section 32(1).
The important issue is not merely whether the document contains the word “GST”. The central issue is whether the person is legally entitled to collect the amount as tax under the GST law.
An unregistered person should therefore not represent a separately collected amount as GST when the person is not authorised to collect GST.
What Happens When GST Is Collected Without Authority?
Section 32 establishes the prohibition, but the consequences of unauthorised collection can involve other provisions of the GST law depending on the circumstances.
One particularly important provision is Section 76, which deals with tax collected but not paid to the Government.
Section 76 provides that where a person has collected from another person any amount as representing tax under the CGST Act and has not paid that amount to the Government, the amount must be paid to the Government, irrespective of whether the supplies in respect of which the amount was collected were taxable or not.
This shows why collecting an amount as GST without proper authority can have significant consequences.
Section 76 and Section 32 – How Are They Connected?
Section 32 and Section 76 deal with different aspects of an improper tax collection.
Section 32 says who is not permitted to collect GST and restricts registered persons from collecting tax except according to the Act and rules.
Section 76 deals with an amount that has been collected as representing tax but has not been paid to the Government.
For example, suppose a person collects ₹1,800 from a customer by representing that amount as GST but does not pay the amount to the Government.
Depending on the facts, Section 76 can become relevant to recovery of the amount.
Therefore, businesses should not treat GST collected from customers as ordinary business income.
Section 32 and Section 122
Section 122 of the CGST Act contains various penalty provisions for specified contraventions.
The consequences of a particular unauthorised tax collection must therefore be determined by examining the exact facts and the specific provisions applicable to the transaction.
It is important not to assume that every violation of Section 32 automatically results in one fixed penalty under Section 122. The applicable consequence depends on the nature of the contravention and the provisions invoked by the tax authorities.
Section 32 and Section 132
Section 132 deals with punishment for certain offences.
The provision includes, among other specified offences, situations involving collection of an amount as tax where the amount is not paid to the Government beyond the period prescribed in that section.
Therefore, where an unauthorised or otherwise improper tax collection also falls within a specified offence under Section 132, additional consequences may arise.
The application of Section 132 depends on its statutory conditions and the facts of the case.
Section 32 Does Not Mean Every Unregistered Person Is Required to Charge GST
A common misunderstanding is that a person making a sale should add GST even when the person is not registered.
Section 32 establishes the opposite principle for persons who are not registered: they cannot collect an amount by way of tax under the CGST Act.
Whether a person is required to obtain GST registration is determined separately under the registration provisions, particularly Sections 22 to 30 and the applicable rules and notifications.
Thus, registration liability and tax collection are related but separate legal questions.
👉 Read More → Section 33 – Amount of tax to be indicated in tax invoice and other documents
Section 32 and Composition Taxpayers
Composition taxpayers require special attention because the composition scheme operates differently from the regular GST payment mechanism.
Section 10 of the CGST Act provides that a taxable person to whom the composition scheme applies shall not collect any tax from the recipient on supplies made by him and shall not be entitled to input tax credit, subject to the statutory provisions governing the scheme.
Therefore, a composition taxpayer cannot simply charge GST separately to customers as a regular taxpayer would.
This is a good example of why Section 32(2) requires registered persons to collect tax only in accordance with the Act and rules.
Example of an Unregistered Seller
Consider a person who is not registered under GST and sells furniture for ₹50,000.
The seller cannot create an additional line on the bill stating:
GST @ 18% – ₹9,000
and collect ₹59,000 from the customer as though the ₹9,000 were GST under the CGST Act.
Section 32(1) prohibits an unregistered person from collecting an amount by way of tax under the Act.
Whether the seller is required to obtain registration depends on the applicable registration provisions and circumstances, but the seller cannot treat GST as a separately collectible amount merely because GST exists on similar taxable supplies made by registered businesses.
Example of a Registered Supplier
Now consider a registered supplier selling taxable goods.
The supplier determines that the applicable GST rate is 18%.
The supplier may charge the applicable GST in accordance with the GST law and issue the required tax invoice.
However, suppose the same supplier makes another supply for which GST is not legally chargeable.
The supplier cannot automatically add 18% GST merely because it possesses a valid GST registration.
Section 32(2) requires the registered person to collect tax in accordance with the Act and rules.
Example of Wrong GST Rate
Suppose a registered supplier makes a taxable supply on which a GST rate of 5% applies but charges the customer 18% as GST.
The supplier cannot justify the higher collection simply by pointing to its GST registration.
The collection must comply with the applicable provisions of the GST law.
The correct treatment may also require examination of the classification of the supply, applicable rate notifications and the circumstances of the transaction.
Section 32 and Exempt Supplies
Exempt supplies are another important area.
Where a supply is exempt from GST under the applicable law, the supplier should not separately collect GST merely because the supplier is registered.
The supplier must apply the relevant exemption and tax provisions correctly.
This is consistent with Section 32(2), which restricts registered persons from collecting tax except according to the Act and rules.
Section 32 and Reverse Charge Mechanism
Reverse charge transactions are another area where taxpayers must be careful.
Under the reverse charge mechanism, the liability to pay GST is shifted to the recipient in specified circumstances.
Therefore, a supplier cannot simply collect GST from the recipient in the normal manner when the law requires the recipient to discharge the tax liability under reverse charge.
The exact treatment depends on the relevant reverse-charge provision and the nature of the supply.
This again demonstrates the importance of Section 32(2): a registered person must collect tax only in accordance with the GST law.
Section 32 and Inter-State Supplies
The type of GST also matters.
For an intra-State taxable supply, the applicable central and State or Union territory components may apply, subject to the GST law.
For an inter-State taxable supply, IGST may apply under the IGST Act.
A registered supplier should therefore determine the place of supply and nature of the transaction before collecting GST.
Section 32 does not give a registered person freedom to choose whichever tax component the supplier wishes to collect.
Why Unauthorised GST Collection Is a Serious Issue
GST collected from a customer is not simply an additional amount belonging to the supplier.
The supplier collects the tax in the context of the GST law and must account for it appropriately.
If a person is not authorised to collect GST, or if a registered person collects an amount contrary to the applicable provisions, the issue can affect:
- the supplier;
- the recipient;
- tax reporting;
- tax payment;
- accounting records;
- tax invoices;
- potential recovery proceedings; and
- applicable penalties or other consequences.
Therefore, businesses should verify the GST treatment of a transaction before separately collecting tax.
Important Compliance Points Under Section 32
Businesses can follow some basic compliance practices to avoid unauthorised GST collection.
Verify GST Registration Status
A business should ensure that its GST registration status is correct before representing itself as a registered supplier.
Determine Whether the Supply Is Taxable
GST should be charged only after determining the applicable tax treatment of the supply.
Apply the Correct Tax Rate
The supplier should identify the correct classification and applicable GST rate before issuing the invoice.
Use the Correct Tax Component
The supplier should determine whether CGST and SGST/UTGST or IGST applies based on the applicable GST and place-of-supply provisions.
Check Reverse Charge Provisions
Where reverse charge applies, the supplier should not incorrectly collect GST as though the transaction were under the normal forward-charge mechanism.
Maintain Proper Invoices and Records
The amount of tax collected should be properly reflected in the relevant invoice and accounting records.
Do Not Treat GST as Business Revenue
GST collected from customers should be appropriately accounted for as a tax-related liability rather than being treated as ordinary sales income.
Difference Between Section 32 and Section 33
Section 32 and Section 33 are closely connected but deal with different matters.
| Basis | Section 32 | Section 33 |
|---|---|---|
| Main subject | Unauthorised collection of tax | Amount of tax to be indicated in documents |
| Main concern | Whether tax can lawfully be collected | Showing the tax amount prominently |
| Unregistered person | Cannot collect GST | Section 33 deals with tax indication in relevant documents |
| Registered person | Must collect only according to Act and rules | Must prominently indicate applicable tax amount in prescribed documents |
| Purpose | Prevent unauthorised tax collection | Transparency regarding tax forming part of the price |
Section 32 therefore focuses primarily on authority to collect, whereas Section 33 focuses on indication of the tax amount in documents.
Difference Between Section 32 and Section 76
| Basis | Section 32 | Section 76 |
|---|---|---|
| Main purpose | Prohibits unauthorised collection | Provides for payment of tax collected but not paid to Government |
| Main focus | Whether collection is authorised | Amount already collected as representing tax |
| Applies to | Unregistered persons and registered persons as specified in Section 32 | Person who has collected an amount as representing tax and has not paid it to Government |
| Nature | Prohibition | Recovery/payment mechanism |
Both provisions are important when analysing improper GST collection.
Difference Between Section 32 and Section 77
Section 77 deals with tax wrongfully collected and paid to the Central Government or State Government in specified situations involving the incorrect treatment of a transaction as intra-State or inter-State.
Section 32, by contrast, deals with the authority to collect tax in the first place.
Therefore, the two provisions address different situations.
For example, a registered person may genuinely treat a transaction as intra-State and pay CGST and SGST, but the transaction may subsequently be determined to be inter-State. Section 77 provides relief in such circumstances subject to its conditions.
That is different from a person simply collecting GST without legal authority.
Practical Checklist for Businesses
Before collecting GST from a customer, a supplier should consider the following questions:
- Is the supplier registered under GST where registration is required?
- Is the particular supply taxable?
- Is the supply exempt or otherwise not liable to GST?
- What is the correct classification of the goods or services?
- What GST rate applies?
- Is the transaction intra-State or inter-State?
- Does reverse charge apply?
- Is the supplier permitted to collect GST from the recipient?
- Has the correct tax component been applied?
- Has the tax been correctly shown in the tax invoice?
- Has the amount collected been properly accounted for and reported?
- Does any special GST provision apply to the transaction?
This checklist can help reduce the risk of collecting an amount as GST without proper legal support.
Key Takeaways of Section 32 of CGST Act
Section 32 establishes a simple but important principle in the GST system: tax should not be collected from a recipient without authority under the law.
The major points are:
- An unregistered person cannot collect an amount as GST under the CGST Act.
- A registered person cannot collect GST except in accordance with the CGST Act and the rules.
- GST registration does not mean that GST can be charged on every transaction.
- The supplier must determine whether the particular supply is taxable.
- The correct rate and tax component must be applied.
- Special provisions such as reverse charge and composition levy must be considered where applicable.
- Unauthorised collection may have consequences under other provisions of the GST law.
- Section 76 becomes relevant where an amount has been collected as representing tax but has not been paid to the Government.
- Section 32 should be read together with Sections 31 and 33 and the wider GST framework.
👉 Read More → Section 31A – Facility of digital payment to recipient
Frequently Asked Questions About Section 32 of CGST Act
Conclusion
Section 32 of the CGST Act, 2017 protects the GST system from unauthorised collection of tax. It clearly establishes that an unregistered person cannot collect an amount as GST under the CGST Act, while a registered person can collect tax only in accordance with the Act and the rules.
For businesses, GST registration should never be treated as a blanket permission to charge GST on every transaction. The supplier must examine the nature of the supply, applicable tax treatment, rate, place of supply and other relevant provisions before collecting tax from the customer.
Proper invoicing, accurate tax classification, correct tax collection and timely payment of the amounts collected are therefore essential parts of GST compliance.
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