GST Section 33 and Rule 35 Explained: Tax Indication & Inclusive Pricing Under CGST

Section 33 of the CGST Act, 2017 mandates that every person liable to pay GST must prominently indicate the tax amount in all relevant documents such as invoices and agreements, ensuring transparency and aiding in Input Tax Credit (ITC) claims. Complementing this, Rule 35 of the CGST Rules, 2017 provides the formula for calculating the tax component when the value is inclusive of GST.

Together, these provisions promote clarity, prevent tax evasion, and uphold compliance in India’s GST framework. Understanding and implementing these rules correctly is essential for businesses to maintain lawful and efficient tax practices.

Decoding GST Section 33 and Rule 35: Ensuring Transparency in Tax Transactions

In the realm of India’s Goods and Services Tax (GST) regime, transparency is not just a compliance requirement—it’s the cornerstone of ethical financial conduct. Among the many provisions of the Central Goods and Services Tax (CGST) Act and its associated Rules, Section 33 of the CGST Act, 2017 and Rule 35 of the CGST Rules, 2017 stand out as twin mechanisms crafted to ensure tax clarity in business transactions.

In this comprehensive article, we unravel the depth of these provisions, how they interplay, and why their correct application is critical for all GST-registered businesses.

Section 33 of CGST Act: The Mandate for Tax Indication

Section 33 establishes a compulsory legal obligation for all registered taxpayers to disclose the tax component of a supply explicitly in invoices and relevant documents.

Legal Text:
“…every person who is liable to pay tax for such supply shall prominently indicate in all documents…the amount of tax which shall form part of the price…”

✅ Key Takeaways from Section 33

Overriding Provision: Section 33 overrides all other conflicting provisions in the CGST Act or any other law.

Mandatory Disclosure: Taxpayers must prominently indicate the amount of GST in all relevant documents.

Documents Covered:
Includes:

• Tax Invoices
• Assessment-related documents
• Debit Notes, Credit Notes
• Revised Invoices
• Bills of Supply (where applicable)
• Contracts/Agreements stipulating price and tax

Tax as Part of Price: The tax disclosed must form an integral part of the price charged for the supply.

Purpose Behind Section 33

According to AUBSP, the purpose of Section 33 is both preventive and facilitative in nature:

Enhanced Transparency: It allows buyers to clearly see how much tax they’re being charged.

Support for ITC Claims: Without a clear tax disclosure, recipients cannot claim input tax credit (ITC) accurately.

Deterrence Against Tax Evasion: Explicit tax indication leaves little room for manipulation or suppression.

Legal Safeguard: Non-compliance could trigger penalties and disallowance of ITC, directly impacting business operations.

Rule 35 of CGST Rules: Calculating Tax When Value is Inclusive

Often, suppliers quote a single price—say ₹1,000 inclusive of GST. Rule 35 helps extract the tax component from such all-inclusive amounts.

Rule 35 Formula:
Tax Amount = (Inclusive Value × Tax Rate %) ÷ (100 + Tax Rate %)

Understanding the Formula

Let’s decode this with AUBSP’s practical approach.

Scenario Example:

A retailer sells a product for ₹590 (inclusive of GST at 18%).

Applying Rule 35:

Tax = (590 × 18) / (100 + 18)
     = 10,620 / 118
     = ₹90

➡ Tax-exclusive value of the product = ₹590 – ₹90 = ₹500

Interplay Between Section 33 and Rule 35

Both provisions are symbiotic:

• Section 33 mandates the clear display of tax.
• Rule 35 provides a standard method to calculate the tax from inclusive pricing.

For example, if a business issues an invoice for ₹1,000 (inclusive of tax), Rule 35 enables backward tax computation, and Section 33 ensures that the tax value is clearly shown in the invoice.

Effective Dates and Regulatory Context

Conclusion: AUBSP’s Expert Insight

In the ever-evolving GST framework, Section 33 and Rule 35 act as crucial safeguards that uphold tax transparency and accountability. They are not just statutory mandates but essential tools that facilitate smooth trade practices, reduce disputes, and enable accurate ITC flow.

AUBSP recommends every GST-registered entity to:

1. Review their invoicing systems for tax visibility.
2. Apply Rule 35 wherever prices are quoted as inclusive.
3. Ensure staff training on these provisions for full compliance.
4. Consult a GST expert if uncertainties arise in complex transaction structures.

By embedding these norms into everyday operations, businesses can avoid penalties, streamline audits, and build trust with customers and tax authorities alike. For more such authoritative GST analysis, always rely on AUBSP, your trusted guide in Indian tax and finance laws.

FAQs on Section 33 of CGST Act 2017

What is Section 33 of the CGST Act, 2017?
Section 33 mandates that every person liable to pay GST must prominently indicate the tax amount in all documents related to a supply, such as tax invoices and assessment records.

When did Section 33 come into effect?
Section 33 came into effect on July 1, 2017, through Notification No. 9/2017-Central Tax, G.S.R. 658(E) dated 28.06.2017.

What is meant by ‘prominently indicate’ under Section 33?
It means the tax amount must be clearly and unmistakably disclosed in documents such as invoices, ensuring transparency for the recipient.

Which documents are covered under Section 33?
It applies to tax invoices, assessment-related documents, debit/credit notes, revised invoices, and any documents that relate to the supply and pricing.

Does Section 33 override other GST provisions?
Yes, Section 33 has an overriding effect and prevails over any contrary provisions in the CGST Act or other laws.

Who is required to comply with Section 33?
Every GST-registered person making a taxable supply for consideration must comply with this provision.

What happens if Section 33 is not followed?
Non-compliance can lead to penalties under Section 122 of the CGST Act and possible denial of Input Tax Credit (ITC) for recipients.

How does Section 33 help recipients of goods or services?
It provides tax clarity, enabling recipients to claim accurate ITC and understand the exact tax charged on a transaction.

What is Rule 35 of the CGST Rules, 2017?
Rule 35 prescribes the formula for calculating the GST amount when the price of supply is inclusive of tax.

Why is Rule 35 important?
It helps determine the tax component in inclusive pricing, ensuring correct disclosure as required by Section 33.

What is the formula under Rule 35 for inclusive value?
Tax Amount = (Value inclusive of tax × Tax Rate) ÷ (100 + Tax Rate)

Can Rule 35 be used for both inter-state and intra-state supplies?
Yes, it applies to both. For intra-state supplies, the tax is split into CGST and SGST/UTGST. For inter-state, it’s calculated as IGST.

What happens if a supplier quotes a tax-inclusive price?
The supplier must use Rule 35 to compute and disclose the tax amount separately, in line with Section 33.

Is ITC claim possible without tax being separately shown?
Generally, no. ITC can only be claimed if the tax amount is clearly mentioned on a valid tax invoice.

Does Section 33 apply to exempt or nil-rated supplies?
Not directly, since no tax is charged. However, bills of supply must still comply with general invoice norms under GST.

How do Section 33 and Rule 35 complement each other?
Section 33 enforces tax visibility, while Rule 35 provides a method to calculate the tax from inclusive values, ensuring compliance even in lump sum pricing.

Is it mandatory to issue invoices with separate tax components under GST?
Yes, except where the price is inclusive of tax (then Rule 35 is used), all taxable invoices must show tax amounts separately.

How can businesses ensure compliance with Section 33 and Rule 35?
By designing their billing and accounting software to highlight tax components and use Rule 35 where needed for inclusive pricing.

Does non-compliance with Rule 35 attract penalties?
While Rule 35 itself doesn’t prescribe penalties, failure to properly compute and disclose tax can lead to violations under other provisions of the CGST Act.

Can contracts also be considered documents under Section 33?
Yes, if they stipulate pricing and tax, contracts or agreements can be considered as “like documents” requiring tax disclosure.

Are handwritten invoices acceptable under Section 33?
Yes, if they are clear, legible, and prominently show the tax amount, though electronic invoicing is encouraged.

What is the significance of ‘tax forming part of the price’ in Section 33?
It emphasizes that GST is a part of the final price, and should not be hidden or treated as an additional cost afterward.

Can Rule 35 be applied manually or only through software?
It can be applied manually, especially in small businesses, but accounting software automates the process and reduces errors.

What if a customer disputes the tax charged in a tax-inclusive price?
The supplier can use Rule 35 to back-calculate the tax portion and show transparency in pricing.

How often should businesses review their invoices for Section 33 compliance?
Regularly, ideally monthly, to ensure accurate tax disclosure and to prevent issues during GST audits or assessments.

Is there any format prescribed for tax indication under Section 33?
No specific format, but the tax must be prominently and clearly shown in any accepted invoice format.

Does Rule 35 allow segregation of IGST, CGST, and SGST in inclusive pricing?
Yes, based on the nature of the transaction (inter-state or intra-state), the tax calculated via Rule 35 should be split accordingly.

Is compliance with Section 33 and Rule 35 relevant during GST audits?
Absolutely. Auditors verify whether tax has been correctly calculated and disclosed, and non-compliance can lead to penalties.

What is the role of accounting software in complying with Section 33 and Rule 35?
Most GST-compliant software automatically calculates tax under Rule 35 and ensures it is clearly displayed as required by Section 33.

Does Section 33 apply to services as well?
Yes, it applies to all taxable supplies, including goods and services.