CGST Act 2017 Section 3
Detailed guide on Central Goods and Services Tax Act, 2017 Section 3 covering levy of CGST and its implications.
The Central Goods and Services Tax Act, 2017 is a landmark legislation that governs the levy and collection of central goods and services tax in India. It forms the backbone of the GST regime, ensuring a uniform tax structure across the country. Section 3 of this Act specifically deals with the levy of CGST on taxable supplies within the territory of India.
Understanding Section 3 of the CGST Act is crucial for taxpayers, businesses, professionals, and GST officers. This section lays down the foundation for when and how CGST is levied, which directly impacts compliance, tax liability, and the overall GST framework. The Act, commonly referred to as the CGST Act, provides clarity on the scope and mechanism of central tax levy.
Central Goods and Services Tax Act, 2017 Section 3 – Exact Provision
Section 3 of the CGST Act mandates the imposition of CGST on all intra-state supplies of goods and services. This means any supply happening within a single state is subject to central tax under this provision. The levy excludes alcoholic liquor for human consumption, which is separately taxed. The value on which CGST is charged is determined as per the valuation provisions in the Act.
CGST is levied on intra-state supplies of goods and services.
Alcoholic liquor for human consumption is excluded.
Tax is calculated on the value determined under the Act.
Section forms the basis for central tax collection.
Applies uniformly across all states and union territories.
Explanation of CGST Act Section 3
This section states that CGST is charged on all intra-state supplies of goods or services. It applies to every registered person making such supplies within a state or union territory.
Section 3 states levy of CGST on intra-state supplies.
Applies to suppliers registered under GST within a state.
Excludes alcoholic liquor for human consumption.
Triggered when supply of goods or services occurs within one state.
Taxable value is as per valuation rules under the Act.
Purpose and Rationale of CGST Act Section 3
The purpose of Section 3 is to establish a clear and uniform levy of central tax on intra-state supplies. It ensures that the central government receives its share of GST revenue and that taxation is consistent across states.
Ensures uniform indirect taxation across states.
Prevents tax evasion by clearly defining levy.
Streamlines compliance for intra-state transactions.
Promotes smooth flow of input tax credit.
Supports central government revenue collection.
When CGST Act Section 3 Applies
Section 3 applies whenever goods or services are supplied within the same state or union territory, excluding alcoholic liquor for human consumption.
Applies to intra-state supply of goods or services.
Relevant at the time of supply.
Linked to place of supply within a state or UT.
Impacts registration and turnover thresholds.
Excludes alcoholic liquor for human consumption.
Tax Treatment and Legal Effect under CGST Act Section 3
Under Section 3, CGST is levied and collected on the value of intra-state supplies. This tax forms part of the overall GST liability and interacts with other provisions like input tax credit and valuation.
The tax is computed on the transaction value determined under the Act. It is mandatory for registered persons to charge and remit CGST on taxable supplies within their state.
CGST is levied on taxable intra-state supplies.
Tax liability computed on transaction value.
Interacts with ITC and valuation provisions.
Nature of Obligation or Benefit under CGST Act Section 3
Section 3 creates a mandatory tax liability for suppliers making intra-state taxable supplies. It imposes compliance obligations to collect and pay CGST, benefiting the government revenue system.
Registered persons must comply with this levy, while the government benefits from a steady revenue stream.
Creates mandatory tax liability on suppliers.
Compliance obligation to collect and remit CGST.
Benefits central government revenue.
Applies conditionally based on intra-state supply.
Stage of GST Process Where Section Applies
Section 3 applies primarily at the supply stage when goods or services are provided within a state. It influences invoicing, return filing, and payment of tax.
Supply or transaction stage – levy of CGST.
Invoicing must reflect CGST charged.
Return filing includes CGST details.
Payment of CGST to government.
Assessment and audit may verify compliance.
Penalties, Interest, or Consequences under CGST Act Section 3
Failure to comply with Section 3 levy provisions can attract interest on unpaid tax, penalties for non-payment, and prosecution in severe cases. Non-compliance disrupts revenue collection and may lead to legal action.
Interest on delayed or non-payment of CGST.
Penalties for evasion or default.
Prosecution possible for willful non-compliance.
Consequences include demand notices and recovery.
Example of CGST Act Section 3 in Practical Use
Supplier X, registered in Maharashtra, sells goods worth INR 1,00,000 to a buyer in Pune. Since the supply is within the same state, CGST is levied on the transaction value. Supplier X charges CGST at the applicable rate and remits it to the government. This ensures compliance with Section 3 and proper tax collection.
CGST applies on intra-state supply by Supplier X.
Tax charged and remitted as per Section 3.
Historical Background of CGST Act Section 3
Introduced in 2017, Section 3 was part of the original GST framework to unify indirect taxes. It replaced multiple state and central levies, simplifying taxation on intra-state supplies. Amendments have refined exclusions and valuation rules.
Introduced with GST rollout in 2017.
Replaced earlier central excise and service tax levies.
Amended to clarify exclusions and valuation.
Modern Relevance of CGST Act Section 3
In 2026, Section 3 remains fundamental for GST compliance. Digital tools like GSTN, e-invoicing, and e-way bills facilitate accurate levy and reporting of CGST on intra-state supplies, supporting efficient tax administration.
Digital compliance via GSTN and e-invoicing.
Policy relevance for uniform taxation.
Practical usage in daily business transactions.
Related Sections
CGST Act, 2017 Section 7 – Scope of supply.
CGST Act, 2017 Section 9 – Levy and collection of tax.
CGST Act, 2017 Section 16 – Eligibility for input tax credit.
CGST Act, 2017 Section 31 – Tax invoice.
CGST Act, 2017 Section 39 – Furnishing of returns.
CGST Act, 2017 Section 73 – Demand for non-fraud cases.
Case References under CGST Act Section 3
No landmark case directly interprets this section as of 2026.
Key Facts Summary for CGST Act Section 3
Section: 3
Title: Levy of Central Tax
Category: Levy
Applies To: Registered persons making intra-state supplies
Tax Impact: Imposes CGST on intra-state supplies
Compliance Requirement: Charge, collect, and remit CGST
Related Forms/Returns: GST returns including GSTR-1 and GSTR-3B
Conclusion on CGST Act Section 3
Section 3 of the CGST Act, 2017 is a cornerstone provision that establishes the levy of central goods and services tax on all intra-state supplies of goods and services. It ensures that the central government receives its rightful share of tax revenue in a uniform and consistent manner.
For taxpayers and businesses, understanding this section is essential for proper compliance, accurate tax calculation, and timely payment. It also supports the broader GST framework by promoting transparency and reducing tax evasion, thereby strengthening India's indirect tax system.
FAQs on CGST Act Section 3
What does Section 3 of the CGST Act cover?
Section 3 covers the levy of Central Goods and Services Tax on all intra-state supplies of goods or services, except alcoholic liquor for human consumption.
Who must comply with Section 3?
All registered persons making taxable intra-state supplies of goods or services must comply by charging and remitting CGST as per Section 3.
Is CGST charged on inter-state supplies under Section 3?
No, Section 3 applies only to intra-state supplies. Inter-state supplies are subject to Integrated GST under separate provisions.
Are there any exclusions under Section 3?
Yes, alcoholic liquor for human consumption is excluded from CGST levy under Section 3.
What happens if CGST is not paid as per Section 3?
Non-payment can lead to interest, penalties, and possible prosecution, along with recovery actions by tax authorities.