What is the maximum rate prescribed under CGST?

Solution (By Examveda Team)

Correct Answer: Option B: 20%

Detailed Solution with Legal Provisions

Central Goods and Services Tax (CGST) is a tax levied by the Central Government on intra-state supplies of goods and services. It is governed by the Central Goods and Services Tax Act, 2017 (CGST Act, 2017).

Legal Provision for Maximum Rate under CGST

According to Section 9(1) of the CGST Act, 2017, the Central Government has the authority to levy CGST on taxable supplies of goods and services. However, the maximum rate that can be levied under CGST is prescribed by law.

As per Section 9(1) of the CGST Act, 2017, read with Schedule I of the Act, the maximum rate of CGST that can be imposed is 20%. This means that the maximum combined rate of CGST and SGST/UTGST can go up to 40% (i.e., CGST 20% + SGST/UTGST 20%).

Key Sections of the CGST Act Related to the Tax Rate

1. Section 9(1) of CGST Act, 2017:
- This section states that CGST shall be levied on all intra-state supplies of goods or services.
- The rate of CGST shall not exceed 20%.

2. Schedule I of CGST Act, 2017:
- Specifies certain transactions that are considered as supplies even if made without consideration.
- It does not directly define the tax rate but is important for determining taxable transactions.

3. Notification No. 1/2017-Central Tax (Rate), dated 28th June 2017:
- This notification prescribes different slabs of GST rates such as 5%, 12%, 18%, and 28%.
- However, these rates are within the maximum limit of 20% CGST and 20% SGST/UTGST.

Practical Application

Although the law prescribes a maximum rate of 20% CGST, the actual tax rates applied to goods and services vary based on government notifications. The most commonly used slabs for CGST are 2.5%, 6%, 9%, and 14%, making a total GST of 5%, 12%, 18%, and 28% when combined with SGST/UTGST.

Conclusion

- The maximum rate of CGST, as per the CGST Act, 2017, is 20%.
- The combined CGST + SGST/UTGST rate cannot exceed 40%.
- The actual rates applied in practice are lower and are notified by the government.
- The correct answer is Option B: 20%.