Types of GST in India: CGST, SGST, IGST & UTGST Explained
Quick Summary
- India has four main GST components: CGST, SGST, IGST, and UTGST. Which one applies depends on whether the supply is intrastate, interstate, or made within a Union Territory covered by the UTGST Act.
- For an intrastate supply, GST is usually split into two equal parts: CGST and SGST. In Union Territories covered by the UTGST Act, the split is CGST and UTGST. Interstate supplies, imports, supplies to or by SEZ units or developers, and certain cross-border transactions generally fall under IGST rules.
- Input Tax Credit utilisation follows a strict sequence. IGST credit must be used first. After that, CGST credit can be used against CGST and then IGST, while SGST or UTGST credit can be used against SGST or UTGST and then IGST. CGST credit cannot be used against SGST or UTGST, and SGST or UTGST credit cannot be used against CGST.
- Major GST rate rationalisation was recommended in the 56th GST Council meeting, with changes for most goods and services taking effect from 22 September 2025. However, the revised structure is item-specific, so businesses should not assume that every product now fits into a simple universal four-slab model. Certain tobacco-related products continue under the existing GST and compensation cess structure until the related loan and interest obligations are fully discharged.
- Place of supply under the IGST Act determines whether a transaction is treated as intrastate or interstate. That is the legal test that decides whether CGST plus SGST, CGST plus UTGST, or IGST applies.
- Supplies to SEZ units and SEZ developers are zero-rated under Section 16 of the IGST Act. A supplier may either make the supply under Bond or LUT without payment of IGST and claim refund of unutilised ITC, or make the supply on payment of IGST and claim refund of the tax paid, subject to the law and conditions in force.
What Is GST? A Brief Overview
Goods and Services Tax, or GST, is India’s unified indirect tax system that came into force on 1 July 2017. It replaced several central and state levies such as VAT, service tax, central excise duty, entry tax, octroi, and Central Sales Tax, bringing a large part of India’s indirect tax structure under one framework.
GST is a destination-based tax. In simple terms, tax revenue is meant to follow consumption. That means the state or Union Territory where goods or services are finally consumed gets the relevant share under the GST framework, rather than the state where the supply originated.
At the same time, GST in India is not literally a single tax in the way people casually describe it. India follows a dual GST model because both Parliament and the states have constitutional power to levy GST within a common structure. That is why the system contains CGST, SGST, IGST, and UTGST instead of one flat national levy.
A few important items still remain outside GST or are treated differently under the broader tax system, including alcohol for human consumption and certain petroleum products. That is why GST unified a large part of indirect taxation, but not every single category of tax in India.
This guide explains how the four GST types work, when each one applies, how place of supply affects classification, how ITC can be used, what changed after the 2025 GST rate rationalisation, and where businesses usually make practical mistakes.
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The Four Types of GST in India
Every taxable supply under GST has to be mapped into the correct tax bucket. In practice, the tax type depends on the location of the supplier, the place of supply, and whether the transaction falls into a special category such as import, export, or SEZ supply.
| Transaction Type | GST Applied | Collected By |
|---|---|---|
| Within one state | CGST + SGST | Centre + State |
| Within a UT covered by the UTGST Act | CGST + UTGST | Centre + UT administration |
| Between two states or two different GST jurisdictions | IGST | Centre |
| Imports into India | IGST, along with applicable customs duties | Centre |
| Exports from India | Zero-rated under IGST law | Refund route as per law |
| Supplies to SEZ unit or SEZ developer | Zero-rated under IGST law | Refund route as per law |
The classification is not based on what feels local or non-local. It is based on the legal place of supply provisions under the IGST Act. This matters because businesses often assume that billing and dispatch location alone decide the GST type, but that assumption fails in many service transactions and bill-to ship-to cases.
CGST - Central Goods and Services Tax
CGST stands for Central Goods and Services Tax. It is the central portion of GST on an intrastate supply. When a transaction is treated as taking place within the same state or within the same applicable GST jurisdiction, the Centre levies CGST and the state levies SGST, or the Union Territory levies UTGST where applicable.
CGST is levied under Section 9 of the CGST Act . In practice, on a normal intrastate supply, the total GST rate is split equally between CGST and SGST, or between CGST and UTGST in the relevant Union Territories. The Act provides the statutory framework, while the actual notified rate depends on the goods or services involved.
How CGST works
- It applies on intrastate taxable supplies.
- It is one part of the total GST charged on the invoice.
- It is collected by the Central Government.
- It works alongside SGST or UTGST, not alone, in a normal intrastate transaction.
Example - intrastate sale
A Delhi-based software company provides services worth ₹1,00,000 to a client in Delhi. Assume the applicable GST rate is 18%.
- CGST: 9% of ₹1,00,000 = ₹9,000
- SGST or Delhi GST component: 9% of ₹1,00,000 = ₹9,000
- Total invoice value: ₹1,18,000
This two-part tax split must appear correctly on GST invoices an error in the CGST or SGST amount invalidates the ITC for your buyer. GST billing software auto-applies CGST+SGST for intrastate and IGST for interstate, based on party GSTIN state codes no manual selection required.
The key point is that the total GST burden is the same as an 18% GST rate, but in an intrastate transaction it is split into two parallel components under the GST structure.
CGST credit can be used first against CGST liability and then against IGST liability, subject to the utilisation order prescribed in law. It cannot be used against SGST or UTGST liability.
SGST - State Goods and Services Tax
SGST stands for State Goods and Services Tax. It is the state portion of GST on an intrastate supply. When a taxable transaction takes place within a state, the state levies SGST while the Centre levies CGST on the same supply.
SGST is governed by the GST law enacted by the relevant state. These state GST laws broadly mirror the CGST framework so that the country can operate through a common GST structure with state-level administration built into it.
Key features of SGST
- It applies to intrastate supplies within a state.
- It is charged together with CGST.
- The SGST portion goes to the relevant state government.
- SGST credit can be used first against SGST liability and then against IGST liability.
- SGST credit cannot be used against CGST liability.
Important practical point
Delhi, Jammu and Kashmir, and Puducherry are often casually grouped with UTGST territories, but that is incorrect. These jurisdictions have their own GST laws for intra-UT supplies and are not treated as UTGST jurisdictions under the UTGST Act in the same way as Chandigarh, Ladakh, Lakshadweep, Andaman and Nicobar Islands, and Dadra and Nagar Haveli and Daman and Diu.
IGST - Integrated Goods and Services Tax
IGST stands for Integrated Goods and Services Tax. It applies mainly to interstate supplies and imports, and it also governs zero-rated supplies such as exports and supplies to SEZ units or SEZ developers under the IGST framework.
In practical terms, IGST is used so that interstate trade can work without requiring separate CGST and SGST charging on the same interstate invoice. Instead, a single IGST amount is levied by the Centre, and the statutory settlement mechanism later apportions the tax in accordance with the law.
IGST generally applies to
- Supply of goods from one state to another
- Supply of services where the supplier’s location and place of supply fall in different states or GST jurisdictions
- Imports of goods and services
- Supplies to or by SEZ units and developers
- Stock transfers between separately registered GSTINs of the same legal entity in different states, where treated as supply under GST law
Example - interstate sale
A manufacturer in Maharashtra sells goods worth ₹5,00,000 to a distributor in Karnataka. Assume the GST rate is 18%.
- IGST: 18% of ₹5,00,000 = ₹90,000
- Total invoice value: ₹5,90,000
The Centre collects the IGST first. The final settlement between the Centre and the destination state happens through the apportionment mechanism under the GST framework. It is common to explain IGST as carrying both the central and state component, but the actual statutory settlement is more technical than a simple invoice-by-invoice 50:50 cash split.
IGST credit is the most flexible form of credit in the GST system. It must be used first, and after offsetting IGST liability it may be used against CGST and SGST or UTGST in the prescribed order.
UTGST - Union Territory GST: Who It Applies To
UTGST stands for Union Territory Goods and Services Tax. It applies to taxable intrastate supplies made within Union Territories covered by the UTGST Act. Under that law, UTGST works in the same functional way that SGST works for states. It is charged together with CGST.
The UTGST Act extends to the Union Territories of Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu, Ladakh, Chandigarh, and other territory as specified.
Union Territories where UTGST applies
| Union Territory | GST Applied |
|---|---|
| Chandigarh | CGST + UTGST |
| Ladakh | CGST + UTGST |
| Andaman and Nicobar Islands | CGST + UTGST |
| Dadra and Nagar Haveli and Daman and Diu | CGST + UTGST |
| Lakshadweep | CGST + UTGST |
Jurisdictions often confused with UTGST, but treated differently for intra-UT GST
| Jurisdiction | GST Treatment for Intra-UT Supplies |
|---|---|
| Delhi | Own GST law, not UTGST under the UTGST Act |
| Jammu and Kashmir | Own GST law, not UTGST under the UTGST Act |
| Puducherry | Own GST law, not UTGST under the UTGST Act |
Example - sale within Chandigarh
A retailer in Chandigarh sells electronics worth ₹20,000 to a local customer. Assume the GST rate is 18%.
- CGST: 9% of ₹20,000 = ₹1,800
- UTGST: 9% of ₹20,000 = ₹1,800
- Total invoice value: ₹23,600
The most common mistake here is to treat every Union Territory in the same way. That is not how the law works. The correct tax depends on whether the territory is one to which the UTGST Act applies for that supply.
GST Types Comparison Table
| Feature | CGST | SGST | IGST | UTGST |
|---|---|---|---|---|
| Full Form | Central Goods and Services Tax | State Goods and Services Tax | Integrated Goods and Services Tax | Union Territory Goods and Services Tax |
| Applies To | Intrastate supplies | Intrastate supplies | Interstate supplies, imports, and zero-rated transactions under IGST law | Intrastate supplies in UTGST territories |
| Levied By | Central Government | State Government | Central Government | UT administration under UTGST framework |
| Works Alongside | SGST or UTGST | CGST | Usually as a single tax head on the invoice | CGST |
| Credit Utilisation | CGST first, then IGST | SGST first, then IGST | IGST first, then CGST and SGST or UTGST as permitted | UTGST first, then IGST |
| Cannot Be Used Against | SGST / UTGST | CGST | - | CGST |
| Example | Sale within Haryana | Sale within Karnataka | Maharashtra to Gujarat supply | Sale within Chandigarh |
Example - sale within Chandigarh
A retailer in Chandigarh sells electronics worth ₹20,000 to a local customer. Assume the GST rate is 18%.
- CGST: 9% of ₹20,000 = ₹1,800
- UTGST: 9% of ₹20,000 = ₹1,800
- Total invoice value: ₹23,600
The most common mistake here is to treat every Union Territory in the same way. That is not how the law works. The correct tax depends on whether the territory is one to which the UTGST Act applies for that supply.
GST Rate Slabs: What Changed After the 2025 Rationalisation
The 56th GST Council recommended significant rate rationalisation, and the official materials state that changes in GST rates for most goods and services took effect from 22 September 2025. But the changes are item-specific. So it is not safe to say that every product in India now simply falls into a neat four-slab structure of 0%, 5%, 18%, and 40%.
What businesses should understand
- Major rationalisation took effect from 22 September 2025 for most goods and services.
- Some items moved down from 12% or 28%.
- Certain specified goods now attract 40% without cess.
- Tobacco-related products remain under the existing GST plus compensation cess structure for now.
The correct rate still depends on the exact HSN or SAC and the current notification position.
GST Compensation Cess: Where It Still Applies
GST Compensation Cess was introduced to compensate states for revenue loss after GST rollout. Over time, that cess framework changed, and the 2025 Council decisions materially altered its scope.
The official GST Council material states that for most goods and services, the revised rate structure took effect from 22 September 2025. However, pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco, and bidi continue at the existing GST and compensation cess rates where applicable until the loan and interest payment obligations under the compensation cess account are completely discharged.
What that means in practice
- Compensation cess is no longer something you should describe as continuing in the same old way for all traditional cess items.
- It still remains relevant for certain tobacco-related and similar notified categories.
- You should not assume that an item that earlier attracted compensation cess still does so today.
- You should also not assume that cess credit can be used like regular GST credit.
ITC on compensation cess
Compensation cess credit can be used only against compensation cess liability. It cannot be used for CGST, SGST, UTGST, or IGST liabilities. That remains an important practical compliance point for businesses with legacy cess balances or products in notified categories.
ITC Cross-Utilisation Rules: Sections 49A, 49B and Rule 88A
Understanding the right GST type is only one part of GST compliance . The second part is knowing how input tax credit can actually be used. This is where many businesses make mistakes, especially when they have balances under multiple tax heads. The utilisation framework is driven by Section 49, Section 49A, Section 49B, and Rule 88A.
ITC utilisation priority table
| ITC Available | Can Be Used Against | Cannot Be Used Against |
|---|---|---|
| IGST credit | IGST first, then CGST and SGST or UTGST in the prescribed manner | - |
| CGST credit | CGST first, then IGST | SGST / UTGST |
| SGST credit | SGST first, then IGST | CGST |
| UTGST credit | UTGST first, then IGST | CGST |
| Compensation Cess credit | Compensation Cess only | CGST, SGST, UTGST, IGST |
The restriction that creates cash-flow issues
CGST credit cannot be used against SGST or UTGST liability. SGST or UTGST credit cannot be used against CGST liability. So even if a taxpayer has enough total credit in aggregate, a mismatch across tax heads can still force cash payment.
Worked example - ITC utilisation
A business has the following month-end position:
| Account | ITC Balance | Tax Liability |
|---|---|---|
| IGST | ₹80,000 | ₹60,000 |
| CGST | ₹30,000 | ₹40,000 |
| SGST | ₹10,000 | ₹35,000 |
Step 1: Use IGST credit against IGST liability first.
IGST used = ₹60,000
Remaining IGST credit = ₹20,000
Remaining IGST liability = ₹0
Step 2: Use remaining IGST credit against CGST or SGST liability in the permitted manner. Assume it is used against CGST.
IGST used = ₹20,000
Remaining CGST liability = ₹20,000
Remaining IGST credit = ₹0
Step 3: Use CGST credit against CGST liability.
CGST used = ₹20,000
Remaining CGST liability = ₹0
Unused CGST credit = ₹10,000
Step 4: SGST liability is ₹35,000, but only ₹10,000 of SGST credit is available.
SGST used = ₹10,000
Remaining SGST liability = ₹25,000
That ₹25,000 must generally be paid in cash if no eligible IGST balance remains. The unused ₹10,000 CGST credit cannot be used against the SGST liability. That is the exact kind of situation that confuses businesses which think total ITC alone is enough.
ITC mismatches at the tax-head level also affect what appears in GSTR-2B data ; a discrepancy there can trigger reconciliation issues before you file.
The 1% Cash Payment Restriction Under Rule 86B
A very common error in GST content is to attribute the 1% cash payment rule to Section 49A. That is incorrect.
The relevant provision is Rule 86B of the CGST Rules, which restricts use of the electronic credit ledger to discharge output tax beyond 99% in certain cases where the value of taxable supply other than exempt supply and zero-rated supply in a month exceeds ₹50 lakh, subject to the rule’s exceptions.
Place of Supply: How to Determine Which GST Type Applies
Place of supply is the legal test that decides whether a transaction is intrastate or interstate. It is one of the most important concepts in GST because it directly determines whether CGST plus SGST, CGST plus UTGST, or IGST applies.
For goods
Broadly, place of supply rules for goods depend on delivery location, movement of goods, and special cases such as bill-to ship-to transactions. In a simple interstate movement of goods, the place of supply is generally the destination state where the goods are delivered.
| Scenario | Likely GST Treatment |
|---|---|
| Goods supplied and delivered within the same state | CGST + SGST |
| Goods moved from one state to another | IGST |
| Goods supplied within a UT covered by the UTGST Act | CGST + UTGST |
| Bill-to ship-to transaction | Depends on the statutory place of supply rule |
| Import of goods | IGST, along with applicable customs duties |
For services
For services, the rules are more nuanced. Where the location of supplier and recipient are both in India, Section 12 of the IGST Act applies. The general rule is:
- for services supplied to a registered person, the place of supply is the location of that recipient
- for services supplied to an unregistered person, the place of supply is generally the location of the recipient if the address on record exists, and otherwise the location of the supplier, subject to specific exceptions in the law
Examples where service place of supply matters
| Service Type | General Position |
|---|---|
| General B2B service | Location of registered recipient |
| General B2C service | Recipient’s location if address exists, otherwise supplier’s location |
| Immovable property service | Location of property |
| Restaurant and catering service | Location where supplied |
| Event-related service | Location of event, subject to the relevant provision |
| Online database and information services | Governed by specific rules depending on the transaction |
How IGST Works in Interstate Trade
IGST exists so that interstate trade can function smoothly without breaking the input credit chain. The Centre collects IGST first, and apportionment takes place through the settlement mechanism laid down under GST law.
People often explain this by saying that IGST is later split between the Centre and the destination state. That explanation is useful at a high level because GST is destination-based, but it should not be treated as a simplistic transaction-by-transaction formula in every case. The actual settlement system operates through statutory adjustment and apportionment rules.
Why this matters in business terms
Without IGST, interstate trade would create major credit breaks and tax disputes between states. IGST allows the receiving business to claim credit in the normal GST chain while preserving the destination-based principle of GST. That is one of the core reasons the post-GST system works better than the old CST-based structure for interstate trade.
GST on SEZ Supplies: Zero-Rated Treatment
Supplies to SEZ units and SEZ developers are zero-rated under Section 16 of the IGST Act. That is the correct legal framing. It is better than casually saying "SEZ supply means 0% IGST" because the compliance route is more specific than that.
The two broad routes available under the law
- Supply under Bond or LUT without payment of IGST, and claim refund of unutilised ITC
- Supply on payment of IGST, and claim refund of the tax paid, subject to the legal provisions and conditions in force
Practical implication
If your customer is an SEZ unit or SEZ developer, you should not treat the transaction like an ordinary local sale just because both parties are located in the same state. Under the IGST framework, supplies to SEZs are treated as zero-rated. That classification affects invoicing, refund handling, and compliance workflow.
Multi-Stage Supply Chain: How ITC Flows Across States
To understand how the GST types work together, it helps to look at a basic interstate chain.
Scenario
Manufacturer in Maharashtra -> Wholesaler in Rajasthan -> Consumer in Delhi
Product value at first stage: ₹1,00,000
GST rate assumed: 18%
| Stage | Transaction | GST Charged | ITC Claimed | Net Position |
|---|---|---|---|---|
| 1 | Maharashtra manufacturer to Rajasthan wholesaler | IGST ₹18,000 | None at first stage | Wholesaler receives eligible IGST credit subject to law |
| 2 | Rajasthan wholesaler to Delhi buyer | IGST on onward sale | Wholesaler uses available IGST credit | Tax chain continues without break |
What this example shows
- Interstate supplies use IGST
- The buyer in the next stage can generally claim eligible IGST credit
- Tax does not get stuck merely because the trade crosses state borders
- The old CST-style cascading problem is avoided to a significant extent under GST when the transaction is properly structured and compliant
The real value of GST shows up here: the tax chain continues across states instead of creating structural credit loss at each border movement.
Why Four Types of GST Exist: India’s Dual GST Model
India did not adopt a pure single-layer GST model because both Parliament and the states had to retain their constitutional role in indirect taxation within the new system. That is why GST in India functions as a dual model rather than a single tax levied only by one government.
CGST preserves the Centre’s share in intrastate taxation. SGST preserves the state’s share. UTGST performs a similar role in specified Union Territories. IGST acts as the interstate mechanism so that trade across states and GST jurisdictions can happen without breaking the tax credit chain.
What may look complex at first is actually the structure that allows India to run a destination-based GST within a federal system.
Taxes Replaced by GST
GST replaced or subsumed a large number of earlier indirect taxes at the central and state level. The commonly cited list includes central excise duty, service tax, additional customs duties in relevant contexts, VAT, entry tax, octroi, entertainment tax in many cases, luxury tax, and Central Sales Tax in the sense that interstate taxation shifted into the IGST framework.
| Previous Tax | Broad GST Replacement |
|---|---|
| Central Excise Duty | CGST / IGST framework |
| Service Tax | CGST / SGST / IGST framework |
| Central Sales Tax | IGST framework |
| VAT | SGST / UTGST framework |
| Entry Tax / Octroi | GST framework |
| Luxury Tax | GST framework |
| Entertainment Tax in many cases | GST framework |
| Purchase Tax in many cases | GST framework |
Petroleum products in the broader notified sense, alcohol for human consumption, and certain other levies remain outside the normal GST structure or continue under separate legal treatment.
Who Needs to Register for GST?
This topic is often mishandled in simplified content, so it is better to be precise and cautious.
The standard threshold framework commonly explained in GST materials is broadly:
- for suppliers of goods, ₹40 lakh in many normal category states and ₹20 lakh in special category states, subject to conditions and notifications
- for suppliers of services, ₹20 lakh in normal category states and ₹10 lakh in special category states, subject to applicable law and notifications
But threshold is not the whole story.
Practical caution
A business should not assume that crossing or staying below a headline threshold alone decides everything. Registration can also depend on the type of supply, the state involved, whether the person is making only exempt supplies, whether supplies are made through e-commerce operators, whether special compulsory registration provisions apply, and whether a notification grants relaxation in a particular class of cases.
One important example
It is inaccurate to say, without qualification, that every interstate supplier of taxable services must always register regardless of turnover. Official GST material explains that small suppliers of services can, in relevant cases, still avail threshold exemption even when supplying services outside the state, subject to the applicable rules and exclusions.
Safer business takeaway
If your business is close to the threshold, operates in multiple states, supplies through online platforms, or deals in mixed taxable and exempt supplies, registration should be checked against the exact facts instead of using a one-line rule.
How BUSY Accounting Software Helps with GST Workflows
Managing GST type selection is not just about knowing the law. In day-to-day business, the real challenge is applying that law consistently across invoices, branches, GSTINs, tax heads, and return workflows.
A practical accounting software can help businesses with:
- separating intrastate and interstate transactions correctly
- handling CGST, SGST, IGST, and UTGST tax heads in books and invoices
- tracking multi-state GSTIN activity
- preparing data for return filing
- maintaining purchase and sales tax classification records
- helping users review mismatches before filing returns
For businesses operating in more than one state, or dealing with high invoice volumes, even a small tax-head classification error can create return mismatches, ITC issues, or cash payment pressure. Software helps most when it reduces repeated manual judgment at the voucher and invoice level.
GST accounting software automatically classifies each voucher as CGST+SGST or IGST based on party state codes, eliminating the most common tax-head error at the point of entry.
Explore All BUSY Calculators for Easy GST Compliance
Conclusion
India’s GST structure contains four main tax components because the law has to serve two goals at the same time: maintain a unified tax system and preserve the constitutional role of the Centre and the states or relevant Union Territories. That is why intrastate supplies usually attract CGST plus SGST, specified Union Territory supplies attract CGST plus UTGST, and interstate supplies fall under IGST.
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