Types of GST in India- CGST, SGST, IGST and UTGST Explained

Types of GST in India

The GST law classifies GST into 4 types -

1. Central goods and services tax (CGST)
2. State goods and services tax (SGST)
3. Union territory goods and services tax ( UTGST)
4. Integrated goods and services tax (IGST)

Now, let us understand each one in detail. Starting with our discussion first with CGST.

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What is Central Goods and Services Tax (CGST)

Central Goods and Services Tax or CGST is the indirect tax levied by the Central Government. It is levied on the transaction of goods and services that are undertaken within the state, i.e., intrastate. The tax collected under the head “CGST” is payable to the central government treasury.

The CGST is charged to compensate the central government for previously existing indirect taxes, such as

• Central Excise Duty,
• Service Tax,
• Duties of Custom,
• Surcharges,
• Cesses, etc.

The CGST is charged along with SGST or UTGST and at the same rates. This is done as per the Dual GST model followed in India, where both central and state governments have their separate taxation legislatures.

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What is State Goods and Services Tax (SGST)?

The full form of SGST is State Goods and Services Tax. SGST represents the tax imposed by the State Government. SGST is levied on intrastate sales of goods and services, i.e., sales made within a state.

SGST is charged along with and at equal rates of CGST on a good or service. All the states of India charge this tax but it has also been adopted by two union territories of

SGST is charged along with and at equal rates of CGST on a good or service. All the states of India charge this tax but it has also been adopted by two union territories of

• Puducherry and
• Delhi,

because both of these union territories have their legislative assembly and council.

The tax revenue under SGST goes to the State Government treasury or the eligible Union Territory where the consumption of goods or services has taken place.

As explained above, CGST is also levied on the same intrastate supply, but is governed by the Central government.

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Example for CGST and SGST With Calculation

Let’s say M/s Mahesh Ltd. is a dealer in Rajasthan who sold goods to M/s Suresh Ltd. in Rajasthan worth Rs.10,000. The GST rate is 18% comprising of 9% CGST or SGST rate 9%.

In this case, the dealer will collect a total of Rs.1800 GST, out of which Rs.900 will be apportioned to the Central Government Rs.900 will be apportioned to the Rajasthan Government.

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What is the Union Territory Goods and Services Tax (UTGST)?

Union Territory Goods and Services Tax or UTGST is a type of GST that is similar to SGST. The only difference is that the tax revenue goes to the treasury for the respective administration of the union territory where the goods or services have finally been consumed. There is a key difference between union territory and states. The Union Territory directly comes under the supervision of the Central Government and does not have its own elected government as in the case of States.

UGST is also charged at the same rates of CGST. But, amongst UTGST or SGST, only one at a time shall be levied together with CGST in each case.

Currently, there are 8 union territories in India:

• Chandigarh
• Lakshadweep
• Dadra and Nagar Haveli & Daman and Diu
• Ladakh
• Andaman and Nicobar Islands
• Delhi
• Puducherry
• Jammu and Kashmir

But out of these Delhi and Puducherry levy SGST and not UTGST because they have their own elected members and Chief Minister. Hence, they function as partial – states. As the SGST Act cannot be applied to a union territory that does not have its legislature. The UTGST Act was introduced by the GST Council.

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What is Integrated Goods and Services Tax (IGST)?

IGST is levied on all interstate (outside of state) supplies of goods and services by the Central Government, unlike CGST, SGST, & UTGST, which are levied upon the supply of goods or services within a state.

IGST has provided a standardization to taxation on the supply of goods and services made outside the state.

IGST applies to the supply of goods and services during both imports into India and exports from India.

Note:

• Exports are zero-rated under IGST.
• The tax collected is shared between the Central and State governments.

The rate of IGST would always be approximately equal to the CGST rate plus the SGST rate.

For Example:-

Now, let’s take a situation to understand all the taxes under GST in a nimble way;

Suppose the sale of goods is worth Rs 10 lakhs. It attracts GST @ 18%. Consider the computation of GST payable under relevant heads in the following scenarios

• The sale is made within the same state, i.e., intrastate sales
• Sale is done within the union territory, i.e., intrastate sales
• The sale is made to another state, i.e, interstate sales

Question

Let us assume that -

• Goods worth Rs. 20,000 are sold by Shubham from Gujarat to dealer Rahul in Gujarat.
• Dealer Rahul resells such goods to trader Mahesh in Uttar Pradesh for Rs. 22000
• Trader Mahesh now sells such goods to consumer XYZ in Uttar Pradesh for Rs 29,000

Solution

• Since Shubham sells goods to Rahul in Gujarat, the supply takes place in the same state (Gujarat in this case). Hence, this is like Intra state supply. Further, for this Intra State transaction between Shubham and Rahul, CGST@9% and SGST@9% each shall be applicable.
• In the second instance, dealer Rahul resells such goods in different states i.e. Uttar Pradesh to Mahesh. This is the case of interstate supply. Hence, IGST @18% shall be calculated on this particular transaction between Rahul and Mahesh.
• And at the end, Mahesh sells such goods to end users in the same state of Uttar Pradesh to XYZ. Since supply within the state falls under an Intra state supply, CGST@9% and SGST@9% each shall be levied on this supply.

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How to Determine Whether CGST, SGST or IGST is Applicable?

To identify whether CGST, SGST, or IGST applies to a taxable transaction, determine if it is an intrastate or interstate supply.

• Intrastate Supply:
  When the supplier and the buyer (place of supply) are in the same state, the transaction is considered intrastate. In this case, the seller collects both CGST and SGST from the buyer. CGST is deposited with the Central Government, and SGST is deposited with the State Government.
• Interstate Supply:
  When the supplier and the buyer are in different states, the transaction is classified as interstate. This also applies to exports, imports, and supplies to or by SEZ units, which are treated as interstate transactions. In such cases, the seller collects IGST from the buyer.

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How to set off GST amounts?

Goods and Services Tax (GST) is a destination-based tax. This means the revenue goes to the treasury of the state government in which supply has finally been consumed. We will understand the concept and trace how GST credits are set off amongst state governments by taking the same example dealt with above.

We have, by far understood about all the various types of GST. Now, it's time to take an insight into how the input tax credit is allowed under all these laws.

GST has been said to resolve one of the biggest drawbacks of the old indirect taxation system, i.e., non-availement of ITC at all stages. Since GST is a uniform one tax, its credit can be taken at all stages, and the set off amongst various prevalent kinds of GST.

From 1st Feb 2019, the set-off preferential order for output tax liabilities under Goods and Services Tax has been changed via the insertion of section 49A in CGST Act 2017. The new set-off rules are as follows -

To know more about GST, Click Here!!

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Difference Between GST Types

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