Section 32 of the Central Goods and Services Tax (CGST) Act, 2017, plays a crucial role in safeguarding the GST system by strictly regulating who can collect GST and how it should be collected. This section is designed to prevent unauthorized collection of tax, protecting both consumers and the government revenue from misuse or fraud.

Prohibition of Unauthorized Collection of Tax

Section 32 prohibits unauthorized persons from collecting GST and ensures that even registered taxpayers collect tax strictly in accordance with the law. It enforces accountability and compliance in the process of tax collection related to goods and services supplied under GST.

Detailed Explanation and Provisions

1. Unauthorized Collection by Unregistered Persons (Section 32(1)):
   • No individual or business entity without a valid GST registration (GSTIN) is allowed to collect any amount as GST on the supply of goods or services.
   • If such a person collects tax, they are liable to pay the collected amount to the government along with applicable interest. This acts as a deterrent against illegal tax collection practices by unregistered dealers or suppliers.
2. Obligations of Registered Persons (Section 32(2)):
   • Registered taxpayers must collect GST only as per the provisions outlined in the CGST Act and relevant rules.
   • They cannot collect tax on exempt supplies or in excess of the prescribed tax rates. Any tax collected must be properly accounted for, and an appropriate tax invoice should be issued.
   • Failure to comply with these rules makes the registered person responsible for paying the unauthorized amount to the government, along with penalties and interest as prescribed.

Importance of Section 32

• Consumer Protection: It safeguards buyers from being charged illegal or excess taxes by unauthorized persons.
• Ensuring Compliance: Makes sure only registered and lawfully authorized persons collect GST, promoting a transparent business environment.
• Safeguarding Government Revenue: Prevents leakages in government revenue by ensuring that unauthorized collections are not retained by suppliers.

Related Legal Provisions and Enforcement

• Section 76 of the CGST Act mandates the recovery of any tax collected unlawfully under Section 32 with interest.
• Section 122 imposes penalties and potential prosecution on those who fail to pay the illegally collected amount within three months.
• Non-compliance attracts penalties up to ₹10,000 and other strict legal consequences.

Notifications and Amendments

• Notifications like Notification No. 32/2017 – Central Tax (Rate) periodically update the GST rates and procedures to supplement Section 32.
• Amendments and clarifications issued by the GST Council and CBIC ensure stronger enforcement of unauthorized tax collection prohibitions.
• Recent updates emphasize stricter oversight and define the responsibilities of various stakeholders to prevent unauthorized tax practices.

Practical Insights

• Businesses must ensure timely GST registration before collecting any GST amount.
• Proper invoicing and strict adherence to notified GST rates and rules are mandatory.
• Authorities actively monitor and penalize unauthorized collection cases to maintain public confidence in the GST framework.

Conclusion

Section 32 is a fundamental provision that protects the GST system, consumers, and government interests by banning unauthorized tax collection. It enforces that only authorized, registered persons collect GST under the prescribed rules, thereby maintaining order, fairness, and trust in the GST regime. Regular notifications and amendments continuously strengthen this provision to adapt to evolving business and economic contexts.