Section 32 CGST Act — Prohibition of Unauthorised Collection of GST

1. Why Section 32 matters

Searches such as “Section 32 GST”, “Section 32 CGST Act”, “can an unregistered person collect GST?”, “GST charged wrongly”, “unauthorised collection of GST” and “what happens if GST is collected but not paid?” all lead back to the principle contained in Section 32.

Section 32 is short, but its practical effect is significant. It controls the right to collect an amount as GST from a customer. The provision prevents an unregistered person from presenting an amount as tax and also prevents a registered person from collecting tax outside the authority of the GST law.

This article explains the section together with the related invoice, demand, recovery and penalty provisions so that the reader can understand the complete compliance chain.

2. What Section 32 says

Section 32 is titled “Prohibition of unauthorised collection of tax.”

It contains only two operative sub-sections:

• Section 32(1): a person who is not a registered person cannot collect, in respect of a 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.

The original GST legislative draft placed this prohibition immediately after the tax-invoice provisions of Section 31, showing the intended connection between lawful invoicing and lawful tax collection. citeturn0search1turn0search0

3. Complete statutory structure

4. Can an unregistered person collect GST?

No. Section 32(1) prohibits a person who is not registered from collecting an amount by way of tax under the CGST Act in respect of a supply of goods or services or both.

This remains true even where the customer is willing to pay the additional amount.

Example

A small service provider is not registered under GST but adds “GST 18%” to an invoice. Calling the amount GST does not make the collection lawful. The supplier cannot collect CGST merely by printing a GST amount on a commercial invoice.

5. Can every registered person charge GST?

Registration is necessary in many cases for lawful GST collection, but registration by itself is not a universal authority to charge GST on every transaction.

A registered supplier must examine:

• whether the transaction is a supply under Section 7;
• whether the supply is taxable or exempt;
• the applicable place-of-supply rule;
• whether the supplier is liable to pay CGST/SGST/UTGST or IGST;
• whether reverse charge applies instead of forward charge;
• whether the person is under a composition scheme;
• the applicable tax rate and notification; and
• whether a special mechanism changes the normal collection process.

Therefore, “I have a GSTIN” is not by itself sufficient reasoning for charging GST on every invoice.

6. Conditions for lawful GST collection

7. Connection with Section 31 tax invoice

Section 31 deals with when the tax invoice and other prescribed GST documents are issued. Section 32 deals with whether the tax amount can lawfully be collected.

The provisions therefore work together:

This sequence is useful when reviewing an invoice dispute: first establish the supply and liability, then the invoice, then the tax collection and reporting.

8. GST registration and collection

Sections 22–25 determine registration liability and the registration process. Section 32 then restricts collection by persons who are not registered.

However, the analysis must also consider Sections 23 and 24:

• Section 22 — ordinary registration liability;
• Section 23 — persons not liable to registration in specified cases;
• Section 24 — compulsory registration categories;
• Section 25 — application and grant of registration; and
• Section 32 — prohibition on unauthorised collection.

9. What happens when GST is charged wrongly?

“Wrongly charging GST” can describe several different situations and they should not be treated identically.

10. Charging GST on an exempt or non-taxable supply

A registered person should not assume that GST can be added merely because the supplier has a GSTIN.

If a supply is exempt under the applicable notification, or otherwise falls outside taxable GST collection, the supplier should use the appropriate document and reporting treatment.

Charging an amount as GST can create a liability question even where the underlying supply did not actually require GST to be charged.

11. Charging the wrong GST rate

Section 32(2) requires a registered person to collect tax according to the Act and Rules. Therefore, a registered person cannot simply select a higher rate because the customer agrees to pay it.

For example, if a supply is taxable at 5% but the supplier charges 18%, the excess collection does not become lawful merely because the invoice was issued by a registered person.

The correct response depends on whether the excess amount has been collected, reported, paid and passed to the recipient, and whether a correction through credit note/refund or other mechanism is legally available.

12. Collecting GST after cancellation

A cancelled GST registration creates a serious invoice-control issue. After cancellation, the supplier should not continue representing itself as a registered person entitled to collect GST under that registration.

If a cancellation is later revoked, the intervening period must be analysed under the revocation provisions and applicable return/invoice rules. The supplier should not simply assume that every invoice issued during the cancelled period was valid.

13. Section 76 — tax collected but not paid to Government

Section 32 is closely connected with Section 76.

Section 76 applies where a person has collected from another person any amount representing tax under the Act and has not paid that amount to the Government. The statutory provision requires payment to the Government irrespective of whether the underlying supplies were taxable.

This is a crucial distinction:

The current CBIC-published Act text states the Section 76 principle that a person who has collected an amount representing tax and has not paid it to Government must pay it, irrespective of whether the related supplies were taxable. citeturn0search0

14. Section 122 penalty connection

Unauthorised or improper GST collection can also have penalty consequences depending on the facts.

Section 122 contains specific offences and penalties, including provisions concerning:

• supplies without issuing an invoice or issuing an incorrect/false invoice;
• issuing invoices or bills without supply;
• collecting an amount as tax and failing to pay it to Government beyond the specified period; and
• collecting tax in contravention of the Act and failing to pay it beyond the specified period.

The original GST Council legislative material records these offence categories in Section 122, while the current Act should always be checked for the wording applicable to the relevant period. citeturn0search7

15. Recipient-side consequences

Section 32 primarily controls the supplier's authority to collect GST, but the recipient can also face practical consequences.

A recipient should not assume that every invoice containing a GST amount creates eligible ITC. ITC eligibility is governed separately, principally by Section 16 and related provisions.

Where GST has been charged by an unregistered person or has otherwise been collected contrary to law, the recipient should investigate the legal basis before treating the amount as eligible input tax credit.

16. Refund and unjust-enrichment issues

Where an amount has been collected as tax, correction is not simply an accounting reversal. The treatment depends on whether tax was actually payable, whether it was paid to Government, whether it was borne by the supplier or recovered from the recipient, and which refund mechanism applies.

Section 76 is particularly important because the law protects Government revenue where an amount has already been represented to another person as tax.

Any refund analysis should therefore be performed under the applicable refund provisions rather than by netting the amount against an unrelated future liability without legal support.

17. Construction and business examples

18. Detailed practical examples

Example 1 — unregistered consultant

A consultant below the registration threshold issues an invoice stating “Professional fees ₹1,00,000 + GST ₹18,000” without GST registration. The consultant cannot collect ₹18,000 as GST under the CGST Act merely by showing it separately.

Example 2 — registered supplier, exempt supply

A registered trader sells an exempt product but the billing system automatically adds 18% GST. The registration itself does not authorise that collection. The invoice should be corrected under the applicable provisions.

Example 3 — registered supplier, wrong rate

A supplier applies 18% instead of the legally applicable 12%. The excess amount requires review of tax liability, correction documents and recipient treatment.

Example 4 — GST collected but not deposited

A supplier collects ₹1,80,000 as GST from customers but does not pay it to Government. Section 76 can require payment of the collected amount and may lead to additional consequences.

Example 5 — GST after cancellation

A GSTIN is cancelled and the business continues issuing invoices showing the old GSTIN and GST amount. This is a serious compliance issue and should be stopped immediately.

Example 6 — customer agrees to GST

An unregistered supplier tells the customer that “the customer can claim ITC anyway because it agreed to pay GST.” Agreement cannot create statutory authority to collect GST.

Example 7 — wrong CGST/SGST vs IGST

A supplier treats an inter-State supply as intra-State and collects CGST and SGST. The tax-head correction should be analysed under the specific wrong-tax provisions rather than simply treating the two tax heads as interchangeable.

Example 8 — composition taxpayer

A composition taxpayer cannot collect tax from the recipient as a normal tax invoice. Composition status and Section 32 should be checked together with Section 10 and the applicable Rules.

Example 9 — invoice without actual supply

A registered person issues an invoice showing GST even though no goods or services were supplied. Section 32 is only one part of the problem; Section 122 and other provisions can become relevant.

Example 10 — advance incorrectly labelled as GST

A supplier receives a commercial deposit and describes it as GST without establishing the statutory tax liability. The accounting treatment should be reviewed under the advance/time-of-supply rules rather than automatically labelling every amount as tax.

19. Legislative development

The GST Council's 11th meeting records the addition of a provision specifically prohibiting unauthorised collection by registered persons as part of the legislative development. citeturn0search20

20. GST Council background

Section 32 was included in the original GST legislative architecture as a consumer-protection and revenue-protection measure.

The original GST Council draft expressly stated both limbs now found in Section 32: an unregistered person cannot collect tax, and a registered person can collect tax only according to the Act or Rules. citeturn0search1

21. Legal authorities to check

This article deliberately does not embed external reference hyperlinks. The following provisions should be checked in their current form for the relevant transaction date:

22. Professional workflow

23. Internal controls

24. Common mistakes

• Assuming a GSTIN permits GST collection on every transaction.
• Allowing an unregistered vendor to show GST merely because the customer requests an invoice.
• Charging GST on an exempt supply.
• Using an outdated tax-rate master.
• Collecting CGST/SGST when IGST is legally applicable.
• Charging forward GST where the supply is subject to reverse charge.
• Continuing to charge GST after cancellation of registration.
• Collecting GST but failing to report/pay it.
• Assuming an amount labelled “GST” automatically gives the recipient ITC.
• Ignoring Section 76 where tax has been collected but not paid.
• Using credit notes as a substitute for analysing whether the original GST collection was lawful.
• Failing to preserve invoice, return and payment evidence.

25. Section 32 GST FAQs

What is Section 32 of the CGST Act?

Section 32 prohibits unauthorised collection of GST. An unregistered person cannot collect an amount as tax under the CGST Act, and a registered person can collect tax only according to the Act and Rules.

Can an unregistered person charge GST?

No. Section 32(1) prohibits an unregistered person from collecting an amount by way of CGST on a supply.

Can a registered person charge GST on every invoice?

No. The particular supply must be taxable and the supplier must apply the correct charging mechanism, rate and tax type.

What happens if GST is collected wrongly?

The consequences depend on the facts. Section 32, Section 76, Section 122 and other provisions can become relevant.

What if GST is collected but not paid to Government?

Section 76 specifically deals with amounts collected as tax but not paid to Government and can require payment of that amount regardless of whether the underlying supply was taxable.

Can a supplier charge GST after GST registration is cancelled?

The supplier cannot continue to represent the cancelled GSTIN as an active registration entitled to collect GST. If cancellation is later revoked, the intervening period must be analysed under the applicable revocation and invoice rules.

Does a customer agreeing to pay GST make an unregistered supplier's collection valid?

No. Private agreement cannot create statutory authority to collect GST.

Does showing GST on an invoice make ITC available?

No. ITC depends on the statutory conditions, including the requirements under Section 16 and related provisions.

What is the difference between Section 32 and Section 76?

Section 32 prohibits unauthorised collection. Section 76 deals with tax amounts already collected from another person but not paid to Government.

Why is Section 33 relevant?

Section 33 separately requires the amount of tax to be prominently indicated in specified documents. Section 32 determines whether the collection itself is authorised.

26. Related provisions