Types of GST in India: CGST, SGST & IGST Explained

India imposes a comprehensive indirect tax known as GST (Goods and Services Tax) on the supply of products and services.It was implemented on July 1st, 2017, and it has since replaced a number ofindirect taxes, including the service tax, central excise duty, value-added tax (VAT) , and others.Since GST is a consumption-based tax, it is imposed at the time that products and services are consumed or sold.Because it is a destination-based tax, the state where the ultimate consumption of the goods or services occurs is assumed to be the one that receives the tax revenue.GST is a single tax that is applied to all products and services at various stages of production and distribution, from the manufacturer to the customer.With four main tax slabs of 5%, 12%, 18%, and 28%, it is assessed at different rates depending on the type of goods or services.Overall, GST has eased company tax burdens, increased compliance, and simplified India's indirect tax system.

In India, there are primarily four kinds of GST that are applied to the supply of goods and services.These include Integrated Goods and Services Tax (IGST) , State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST).Each of them imposes taxes at a varying rate.

State Goods and Services Tax (SGST)

In India, the State Government imposes a tax known as the State Goods and Services Tax (SGST) on the supply of products and services within the state.SGST is one of two parts of the GST imposed within a state, the other being the Central Goods and Services Tax. (CGST).The value of the products or services supplied within the state is the basis for the SGST, which is collected by the state government.The total tax rate is calculated by adding the SGST and CGST rates, which are typically identical to one another.The state uses the SGST income it receives to advance the state's goals and ensure the welfare of its people.For example, the GST that applies to the transaction will be split between CGST and SGST if a Maharashtra-based trader sells products worth Rs. 10,000 to a Maharashtra-based customer.If there is an 18% GST fee, it will be split evenly into 9% CGST and 9% SGST. In this instance, the trader will charge a sum of Rs. 11,800, out of which, Rs. 900 from the total GST of Rs. 1800, will be going directly to the State Government. Also Read: Benefits of Goods & Service Tax in India

Central Goods and Services Tax (CGST)

Central Goods and Services Tax (CGST) is a tax levied by the central government of India on the intra-state supply of goods and services.All intrastate purchases of products and services are subject to the CGST , and the central government is responsible for collecting the associated revenue.Similar to the example given above, if a trader from Maharashtra supplies goods worth Rs. 10,000 to a consumer in Maharashtra and an 18% GST (Rs. 1800) is charged on it, then one portion of the GST, which is 9% (Rs. 900) of the GST, will go to the Central Government as a component of the CGST.

Union Territory Goods and Services Tax (UTGST)

The Union Territories in India charge a tax known as the Union Territory Goods and Services Tax (UTGST) on the supply of goods and services inside of their separate borders.In Union Territories like the Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Lakshadweep, and Puducherry, UTGST is charged on all intra-state supplies of products and services.The respective Union Territory governments are responsible for collecting the UTGSTgenerated revenue.The Union Territory Goods and Services Tax is the equivalent of the State Goods and Services Tax (SGST).As a result, in Union Territories, the UTGST will be imposed in addition to the CGST.

Integrated Goods and Services Tax (IGST)

The interstate supply of products and services in India is subject to the Integrated Products and Services Tax (IGST).The Central Government imposes IGST on the exchange of products and services between two different states.When there are interstate transactions, the tax money is split between the central and state governments according to a predetermined ratio.The CGST and SGST that would have been due on the same transaction within the state are added together to create the IGST, which is assessed at a rate set by the GST Council.The IGST rate is typically the same as the sum of the CGST and SGST rates, but it can occasionally be lower or greater than the result of the two rates added together.The IGST system ensures that the tax revenue is collected by the state where the final consumption of goods or services takes place and helps to eradicate the cascading effect of taxes that existed under the previous indirect tax system.Additionally, it streamlines the compliance procedure for companies doing business in numerous Indian states.For example, if a trader from Maharashtra has sold goods to a customer in Goa worth Rs.10,000, IGST will then be applied because the transaction is an interstate one. If the rate of GST on goods is 18%, then the trader will charge Rs. 11,800 to the customer in Goa out of which Rs. 1,800 is the total GST amount applicable, and the central government will receive Rs. 900 as a part of IGST. Also Read: Regular Scheme Under GST: What is Composition Scheme? Overall, the Goods and Services Tax (GST) system has a number of advantages, including a unified tax structure,a decline in tax evasion, the elimination of the cascading impact of taxes, and the simplification of tax laws and procedures.But there have also been some difficulties with the GST's execution, including problems with compliance, issues with technology, and a complex tax system.To sum up, the introduction of GST has fundamentally changed the tax structure in India and is regarded as a key move towards the creation of a more straightforward and effective tax structure.Ready to make the most of your money? Start your tax planning journey now!