CGST (Central Goods and Service Tax) - Meaning, Types and Slab Rates

CGST or Central Goods and Services Tax is a tax levied on the supply of goods and services within a state or union territory in India. It was introduced as a part of the Goods and Services Tax (GST) regime that was implemented in India on July 1, 2017. The GST regime replaced the existing complex tax structure and brought about a uniform tax system across the country.The CGST is levied on the value of goods and services supplied and is calculated as a percentage of the transaction value. The current rate of CGST varies depending on the nature of the goods and services supplied.The CGST is applicable to all registered taxpayers who supply goods and services within a state or union territory. A taxpayer who is registered under the GST regime is required to file regular returns and pay the CGST as per the applicable rates. The CGST collected by the Central Government is then distributed among the states or union territories where the goods and services are supplied.

Before we discuss more about CGST, let’s talk about the four types of Goods and Services Tax (GST) that are levied on various goods and services:

1. Central Goods and Services Tax (CGST): As discussed, CGST is the tax levied by the Central Government on the intra-state supply of goods and services. The revenue collected from CGST is shared equally between the Central and State Governments.
2. State Goods and Services Tax (SGST): SGST is the tax levied by the State Government on the intra-state supply of goods and services. The revenue collected from SGST is kept by the respective State Governments.
3. Integrated Goods and Services Tax (IGST): IGST is the tax levied by the Central Government on the inter-state supply of goods and services. The revenue collected from IGST is shared between the Central and State Governments.
4. Union Territory Goods and Services Tax: UTGST is a tax levied on goods and services within Union Territories in India, as part of the (GST) regime. UTGST is administered by the respective Union Territory's administration and is implemented to promote ease of doing business and uniformity in taxation across the country.

All four types of GST are based on the same tax rate structure and are calculated as a percentage of the transaction value. The GST rates vary depending on the type of goods or services being supplied. Also Read: What Are the Required Documents for GST Registration?

Here are some of the benefits of CGST:

1. Uniformity in taxation: CGST aims to create a uniform tax structure throughout the country by eliminating various state and central taxes. This simplifies the tax system and makes it easier for businesses to comply with tax regulations.
2. Elimination of cascading effect: Under the old tax regime, businesses had to pay taxes on taxes, which led to a cascading effect. CGST eliminates this by allowing businesses to claim input tax credit, which means they can offset the tax they pay on inputs against the tax they charge on output.
3. Increased compliance: CGST has made it mandatory for businesses with a turnover of over ₹20 lakh to register for GST. This has increased the number of registered taxpayers and improved tax compliance.
4. Boost to the economy: CGST has simplified the tax structure and reduced the burden of multiple taxes on businesses. This has made it easier for businesses to operate and has led to an increase in economic activity.
5. Transparency: CGST has made the tax system more transparent by introducing a unified tax system. This has made it easier for businesses to understand their tax liabilities and comply with tax regulations.

Also Read: Benefits of Goods & Service Tax in India

The slab rates for CGST depend on the type of goods or services being supplied. Currently, there are six different slab rates for CGST:

1. 0% - There are also some products that are taxed at 0%, basically, they are tax-free. Mammals, live swine, live bovine mammals, birds, insects, fish, curd, lassi, buttermilk, bananas, apples, grapes, human hair, and sanitary napkins among others.
2. 0.25% - Precious stones are taxed at 0.25% where 0.125% goes towards CGST and 0.125% goes towards SGST.
3. 3% - Coins, gold, silver, platinum, imitation jewellery, etc are taxed at 3%. Here 1.5% goes towards SGST and 1.5% towards CGST.
4. 5% - The most commonly used products that are subjected to a 5% GST rate are cream and yoghurt, paneer, cashew nut, raisins, fruit and nuts and a few others. Now for these products, 2.5% goes to the state government and the rest 2.5% goes to the CGST. Many household items are covered in this section.
5. 12% - 6% GST rate is the second slab of rates under GST. Citrus fruits, jams, sausages, 20l drinking water, statues, pots and jars, geometry box, cutlery, railway coaches, printer ink, wooden toys and more. Here for every product, 6% goes towards CGST and 6% goes towards SGST. This section covers processed food to a great extent.
6. 18% - Examples of products being taxed at 18% are bindis, chocolates, fountain pens, tripods, soap, toothpaste and industrial intermediate products are therein this slab. Here 9% goes towards SGST and 9% goes towards CGST. The central goods and services tax act 2017 has a full list of items.
7. 28% - Examples of products being taxed at a GST rate of 28% are cigarettes, caffeinated beverages, pan masala, motor cars and motorcycles, air conditioners, refrigerators etc. Mainly luxury items are covered in this sector. In this, 14% goes towards SGST and 14% goes towards CGST.

The GST's main objective is to implement a single tax system across the nation, but why are there three categories of GST? The answer lies in India's federal structure and its numerous levels of business operations. In this context, the federal system allows both the central and state governments to impose and collect taxes. Previously, there were various indirect taxes applied at different levels of government. However, under the new system, all taxes are amalgamated into one.As a result, for transactions involving goods and services within a state, state GST and central GST are applied, with both entities receiving a portion of the tax revenue. On the other hand, for transactions between states, the Integrated GST (IGST) is imposed. IGST is always a combination of CGST and SGST. The seller pays the tax at the IGST rate to the central government, after which it is shared with the states.Hence, the introduction of these three categories of GST has made the taxation system more streamlined, transparent, and efficient. It has also led to the reduction of multiple taxes, making it easier for businesses to comply with the taxation system.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.