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

The GST (Goods and Services Tax) regime was introduced on July 1, 2017. It is one of the most significant and revolutionary indirect tax reforms in India post-independence. GST subsumed a number of indirect taxes levied by the Central and State Governments. Taxes such as Central Excise duty, Service Tax, VAT, Purchase Tax, Central Sales Tax, Entry Tax, Local Body Taxes, Luxury Tax, etc.are now non-existent.

Previously, a number of indirect taxes were prevalent in India and separate compliances under each of these laws were required to be made. Introduction of GST as one nation one tax has eased out the complete process. It has substantially saved time and efforts involved in procedural aspects and resultantly has reduced the complexities involved.

GST Taxes Subsumed

Framework under the Goods and Services Tax:

Under the GST law taxes can be further classified into these four 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.

Framework under the Goods and Services Tax

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 which 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 existed 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.


What is State Goods and Services Tax (SGST)?

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

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

  • Puducherry and
  • Delhi,

because both of these union territories have their own 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 service has taken place.


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

Union Territory Goods and Services Tax or UTGST is just the way similar to SGST. The only difference is that the tax revenue goes to the treasury for respective administration of 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 case of States.

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

Currently, there are 7 union territories in India:
  • Chandigarh
  • Lakshadweep
  • Daman and Diu
  • Dadra and Nagar Haveli
  • Andaman and Nicobar Islands
  • Delhi
  • Puducherry

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 on a union territory which does not have its own legislature. The UTGST Act has been introduced by the GST Council.


What is Integrated Goods and Services Tax (IGST)?

IGST is levied on all interstate supply 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. This applies both on a supply made outside the state and those made outside the country.

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

For Example:-

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

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

  • The sale is done within the same state i.e. intrastate sales
  • Sale is done within the union territory i.e. intrastate sales
  • The sale is done to another state i..e interstate sales
SituationAnalysisTaxes Applicable
Sales within the same stateIntra-state SupplyCGST @ 9% +SGST @ 9%
Sales within the same union territoryIntra-state SupplyCGST @ 9% +UTGST @ 9%
Supply to another stateInter-state SupplyIGST @ 18%

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 in the nature of Intra state supply. Further, for this Intra State transaction between Shubham and Rahul, [email protected]% and [email protected]% each shall be applicable.
  • In the second instance, dealer Rahul resells such goods in different state i.e. Uttar Pradesh to Mahesh. This is the case of inter state 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 user in the same state of Uttar Pradesh to XYZ. Since,supply within the state falls under an Intra state supply [email protected]% and [email protected]% each shall be levied on this supply.

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 government by taking the same example dealt above.

Particulars Amount collected as Tax By State and Central
StepTransaction betweenSale priceGujarat Uttar Pradesh Central
1Shubham to Rahul20,00020000*9=1800—— 20000*9=1800
2Rahul To Mahesh22000 22000*[email protected]%3960
(-) CGST ITC1800
(-) SGST ITC1800
Net360
3Mahesh to XYZ29000 29000*9%=261029000*9%= 2610
(-) Balance IGST credit =1350(-) IGST ITC= 2610
Net1260Net0
4Total Receipt 18001260 2160
5Adjustment adjust with Centre (-1800)Coming from centre(+1350) (+450)
Final Tax Revenue to respective government 0 2610 2610

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

GST has said to resolve one of the biggest ill of the old indirect taxation system i.e. non availment of ITC on all stages. Since GST is a uniform and one tax its credit can be taken at all stages and the set off amongst various prevalent  kinds of GST can be better understood as under

Type of GST PaymentSet off  in preferential order from
IGST1. IGST
2. CGST
3. SGST
CGST1. CGST
2. IGST
SGST / UTGST1. SGST / UTGST
2. IGST

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

Type of GST PaymentSet off  in preferential order from
IGST1. IGST
2. CGST
3. SGST
CGST1. IGST
2. CGST
SGST / UTGST1. IGST
2. SGST / UTGST

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Frequently Asked Questions

Q - Can IGST credit be used for making payment of SGST ?

After the IGST input tax credit has already been used for payment of IGST then the remaining ITC can be used to pay tax liability under CGST and later SGST.


Q - Can I set off IGST against CGST ?

As prescribed by GST Law, IGST Input credit needs to be utilized first to set off IGST tax liability. The remaining ITC can be used to first set off CGST and then against the SGST liability, in that order.


Q -How is IGST calculated ?

GST is applicable on all imports into India and Interstate supply in the form of levy of IGST. IGST is levied on the value of imported goods + any customs duty chargeable on the goods. Hence, IGST must be calculated after adding the applicable customs duty to the value of imported goods.


Q -Can CGST credit be used for paying SGST ?

No, CGST credit can be used for CGST itself and can also be used for IGST. But CGST credit can not be used to set off for SGST liability.


Q -Can SGST credit be used for setting off CGST ?

No, SGST input credit can be utilized first to set off SGST liability and the remaining ITC can be used for IGST but SGST credit can not be used to set off for CGST liability.


Q -What is IGST?

IGST is a part of Goods and Service Tax (GST). IGST means Integrated Goods and Service Tax, one of the three categories under Goods and Service Tax (CGST, IGST and SGST). It is charged on inter state supply of goods or services, which means on transaction with other state or country. For example, if goods are moved from Tamil Nadu to Kerala, IGST is levied on such goods.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.