The Different Types of GST in India – CGST, SGST, IGST, and UTGST

The exchange of goods and services within and across the States can be summed up as interstate and intrastate transactions. Intrastate transactions include the collection of CGST and SGST, whereas Interstate transactions include only IGST.

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    Basics of GST

    A Brief Overview of GST

    The Central and State Governments imposed many indirect taxes during the previous tax collection regime. The States formerly collected Value Added Tax (VAT), and each State had its own set of laws and regulations. The Central Government was responsible for collecting taxes during Interstate transactions. Currently, the GST does not apply to diesel, crude oil, gasoline, natural gas, or jet fuel. Since alcohol is exempt from GST, bringing it under the tax net would require a constitutional modification.

    The Goods and Services Tax significantly altered how the previous tax structure appeared. It advanced the notion of “One Nation, One Tax.” It ensured that the various tax systems were demolished and that only one was used. All indirect taxes were merged into one. It created a simple, clear distinction between taxes on essentials and amenities. It introduced the simplicity of electronic invoices and billing.

    Since there were no additional taxes, shipping products was made more straightforward. GST ensures tax administration by both the Central and the State governments. Transparency in the tax system is now guaranteed. It aids in the revenue growth of the nation through time.

    How many Types of GST are there in India?

    There are four main kinds of GST in India:

    1. CGST (Central Goods and Services Tax): This is collected by the central government on sales made within a state.
    2. SGST (State Goods and Services Tax): This is collected by the state government on sales made within the state. Both CGST and SGST are applicable to intra-state sales, and the tax is split between the central and state governments.
    3. IGST (Integrated Goods and Services Tax): This is collected by the central government on sales between states (inter-state sales) or on imports into India.
    4. UTGST (Union Territory Goods and Services Tax): This is similar to SGST, but UGST is applicable when it comes to Union Territories like Delhi or Chandigarh, where the local government collects this tax.

    GST ensures that goods and services are taxed uniformly across the country, eliminating the previous complicated tax system. These types of GST work together to create a smooth taxation process for both buyers and sellers.

    Why Do We Need Different Types Of GST?

    These 4 types of GST ensure a streamlined system of tax collection. CGST and SGST ensure the elimination of several indirect taxes during intrastate transactions and incorporate one appropriate tax in addition to Value Added Tax. By lowering the cost of goods and services, they assist the average person in saving money. The lack of separate taxes and the consistency of agreements between the two states make business transactions easier.

    Since the introduction of GST, business professionals have had no trouble with tax filing, compliance, and paperwork-related activities. It is also discovered to be a straightforward and trouble-free process for filing returns, paying taxes, and collecting refunds.

    All corporate activities, from production to consumption, are subject to the GST. It also provides benefits for all phases of the input tax credit. As a result, the cascading effect of the tax is reduced, lowering the cost of goods.

    IGST ensures that interactions with ITC chains are simple during Interstate transactions. In an interstate transaction, neither the seller nor the buyer must make an upfront tax payment under the IGST. Since the ITC was utilised to pay the tax, the exporting state is exempt from filing a return. Since the tax system now uses digital billings and invoicing, tracking transactions between interstate dealers and federal and state governments has become simpler.

    There will be a massive boost in conformity due to all interstate dealers being electronically registered and contacted via email. It also adheres to business and consumer transactions, not just business-to-business transactions.

    What is the Central Goods and Service Tax (CGST)?

    Central Goods and Service Tax (or CGST) is a tax levied by the Central Government on transactions that occur within the same state (intrastate transactions). It is a tax that was enacted by the CGST Act 2017. The rate of GST depends on the type and category of goods and services being transacted.

    For example, let us assume that merchant A from Maharashtra sells goods worth Rs. 10,000 plus 18% GST to person B, who is also in Maharashtra. The total amount that B has to pay for these goods amounts to Rs. 11,800/- (Rs. 10,000 + Rs. 1800 GST). This Rs. 1800/- GST component will be divided equally into two parts, CGST and SGST (State Goods and Services Tax), with each type of tax being 9% of the sale amount of Rs. 10,000, i.e., Rs. 900.

    The Central Government will collect the CGST component, while the State Government of Maharashtra (in this example) will collect the SGST component of the final amount.

    All central taxes, including the service tax, central excise duty, and customs duty, were replaced by CGST in 2017.

    Features of CGST

    The features of CGST include:

    1. All intrastate supplies of goods and services are subject to CGST.
    2. By assuring their accessibility as tax collected on the provision of goods and services, it broadens the basis for input tax credits.
    3. Self-assessment by taxpayers for taxes due is made possible by CGST.
    4. In order for taxpayers to confirm adherence to the requirements of the Act, CGST performs audits.
    5. Through procedures for restraining and limiting the sale of goods and property by non-compliant taxpayers, the CGST can recoup tax arrears.
    6. In the event that taxpayers violate the CGST, the levying of GST penalties or fines is provided for in the law.
    7. The Central Goods and Services Tax enables consumers to pay less tax on various goods and services.

    What is the State Goods and Service Tax (SGST)?

    The State government imposes and collects SGST, a kind of GST, as an indirect tax on goods bought and sold within the state borders. This tax does not apply to alcohol that is meant for human consumption. The transaction value of the delivered goods or services is taxed under section 15 of the SGST Act. The trade value is the actual cost paid or owed for the defined supply of goods or services. For instance, if a manufacturer in Maharashtra wishes to sell his goods to a customer within Maharashtra, he will be eligible for both SGST and CGST; the State government will collect the SGST, and the Central government will collect the CGST.

    Features of SGST

    The features of SGST are as follows:

    1. The SGST Act uses various methods to collect back taxes owed, including seizing and selling the commodities, real estate, and personal property of non-compliant taxpayers.
    2. The SGST grants the right to inspect and make unexpected modifications.
    3. Furthermore, it provides for fines or penalties for breaking the proposed legislation.
    4. Additionally, it benefits consumers by reducing tax incidence on products and services or both.
    5. It thoroughly explains the taxpayers’ transitional provisions to the regime of the goods and services tax.

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    What is Integrated Goods and Service Tax (IGST)?

    Integrated Goods and Service Tax refers to the tax levied and collected during Interstate transactions (transactions between two states) by the State and the Central Governments. In such a scenario, IGST is charged instead of CGST and SGST, as IGST is the sum of CGST and SGST.

    For instance, if a manufacturer in Rajasthan sells goods and services worth Rs. 5,000 plus 18% IGST to a buyer in Uttar Pradesh, the buyer will be eligible to pay IGST of Rs. 900 on top of the sale amount of Rs. 5,000. Thus, the total amount paid by the buyer is Rs. 5,900. The Central Government will collect the IGST amount of Rs. 900, which will then be divided between the Central Government and the State Government of Uttar Pradesh. Since the buyer is from Uttar Pradesh, and the buyer is the party that incurs the tax, only the State Government of Uttar Pradesh can receive their share of IGST. If the seller were from Uttar Pradesh and the buyer from Rajasthan, the State Government of Rajasthan would have received the State’s share of IGST.

    Also Know About – GST Composition Scheme

    Features of IGST

    Some of the features of IGST are:

    1. When products or services are transacted from one state to another, IGST is applicable.
    2. The central government collects taxes from the party supplying the products or services.
    3. The Central Government and the state government of the state to which the good or service is provided (the state of the consumer of the good or service) split the IGST revenue equally.
    4. While paying IGST, one may claim the input tax credit from any of the four categories of GST.

    What is Union Territory Goods and Service Tax (UTGST)?

    States and Union Territories make up India’s territory, according to Schedule 1 of the Indian Constitution. According to this Schedule, there are 29 states and 7 Union Territories. There are seven union territories, with Puducherry and Delhi having a legislature each, and the Andaman and Nicobar Islands, Dadra & Nagar Haveli, Lakshadweep, and Daman and Diu having no legislature. In Union Territories without legislatures, UTGST is collected by the Central Government; in Union Territories with legislatures, it is collected by the appropriate state government.

    Must Know About – GST Invoicing

    UTGST is an indirect tax levied and collected in conjunction with the CGST Act of 2017, where intrastate goods and services are transacted. Intrastate transactions of goods and services are when both the buying and selling processes are held within the same Union Territory. UTGST is also levied on interstate transactions of goods and services in which the buyer and seller are from different Union Territories. Every transfer of products or services into or out of a union territory will be subject to the Integrated Goods and Services Tax (IGST). The Central Government imposes IGST, which is made up of CGST, SGST, and UTGST.

    UTGST is applicable under the following situations:

    1. Transactions between a Union Territory without Legislature and a State (including UT with Legislature) where the output tax IGST will be applied.
    2. Transactions between the two Union Territories without legislature where the output tax IGST will be applied.
    3. Transactions within a Union territory without a legislature where the output taxes UTGST and CGST will be applied.

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    Features of UTGST

    Some of the features of the Union Territory of Goods and Services Tax are as follows:

    1. UTGST is applicable in Puducherry, Jammu and Kashmir, Delhi, the Andaman and Nicobar Islands, Dadra and Nagar Haveli, Lakshadweep, and Daman and Diu.
    2. SGST is not applicable in any state of India.
    3. The primary goal of the UTGST bill’s formulation is to methodically impose and collect tax on all intra-Union Territory supplies of goods and services, similar to how it is done in India’s other states.
    4. UTGST accentuates qualities practically identical to those of SGST. Since CGST cannot take care of the essential provisions in the union territories, it was necessary to establish or introduce UTGST to fulfil the same function.

    Types of GST Tax

    There are four main kinds of GST in India:

    1. CGST (Central Goods and Services Tax): This is collected by the central government on sales made within a state.
    2. SGST (State Goods and Services Tax): This is collected by the state government on sales made within the state. Both CGST and SGST are applicable to intra-state sales, and the tax is split between the central and state governments.
    3. IGST (Integrated Goods and Services Tax): This is collected by the central government on sales between states (inter-state sales) or on imports into India.
    4. UTGST (Union Territory Goods and Services Tax): This is similar to SGST, but UGST is applicable when it comes to Union Territories like Delhi or Chandigarh, where the local government collects this tax.

    GST ensures that goods and services are taxed uniformly across the country, eliminating the previous complicated tax system. These types of GST work together to create a smooth taxation process for both buyers and sellers.

    Difference Between CGST, SGST, IGST and UGST

    Type of GST Collected by Applicable On Example
    CGST Central Government Intra-state sales A sale made in Gujarat, within Gujarat
    SGST State Government Intra-state sales A sale made in Maharashtra, within Maharashtra
    IGST Central Government Inter-state sales or imports Goods shipped from Karnataka to Delhi
    UTGST Union Territory Government Sales within Union Territories A sale made in Andaman and Nicobar Islands

    Taxes Replaced by GST

    Old Tax Replaced by GST Type of GST
    VAT (Value Added Tax) Yes SGST/UTGST
    Service Tax Yes CGST/IGST
    Central Excise Duty Yes CGST
    CST (Central Sales Tax) Yes IGST
    Entertainment Tax (state level) Yes SGST
    Entry Tax Yes IGST

    Who is Liable to Pay GST?

    Generally, any business whose turnover exceeds ₹40 lakh (₹20 lakh for some special category states) is required to register for GST and pay it. For service providers, the threshold limit is ₹20 lakh (₹10 lakh for special category states).

    Businesses selling goods and services within and across states must collect GST from customers and pay it to the government. However, certain small businesses can opt for the GST Composition Scheme, where they pay GST at a lower rate and file simplified returns.

    Example for Each Type of GST with Calculation

    Let’s consider the sale of a product worth ₹10,000 with an 18% GST rate:

    CGST and SGST (Intra-state Sale):

    A seller in Maharashtra sells the product to a buyer in Maharashtra.

    GST rate: 18% (9% CGST + 9% SGST)

    • CGST = ₹10,000 × 9% = ₹900
    • SGST = ₹10,000 × 9% = ₹900
    • Total GST paid: ₹900 (CGST) + ₹900 (SGST) = ₹1,800
    • Total amount payable by the buyer = ₹10,000 + ₹1,800 = ₹11,800

    IGST (Inter-state Sale):

    A seller in Maharashtra sells the product to a buyer in Gujarat.

    GST rate: 18% IGST

    • IGST = ₹10,000 × 18% = ₹1,800
    • Total amount payable by the buyer = ₹10,000 + ₹1,800 = ₹11,800

    UTGST (Sale in Union Territory):

    A seller in Delhi sells the product to a buyer in Delhi.

    GST rate: 18% (9% CGST + 9% UTGST)

    • CGST = ₹10,000 × 9% = ₹900
    • UTGST = ₹10,000 × 9% = ₹900
    • Total GST paid: ₹900 (CGST) + ₹900 (UTGST) = ₹1,800
    • Total amount payable by the buyer = ₹10,000 + ₹1,800 = ₹11,800

    This simple structure ensures that tax is collected at each stage, making it fair and transparent.

    Conclusion

    GST aims to portray a transparent tax structure that incorporates all indirect taxes into one. The different GST types in India simplify transacting goods and services within and across states. Both the State and the Central governments keep an eye on the various forms of GSTs, which results in an organised approach to focusing on the tax system.

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    Frequently Asked Questions

    • What are the taxes levied on an intra-state supply?
      In an intra-state supply, both CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) are levied. The tax is split equally between the central and state governments. For example, if the GST rate is 18%, 9% will be CGST and 9% will be SGST.
    • What is the maximum rate at which IGST can be levied?
      The maximum rate for IGST (Integrated Goods and Services Tax) is 28%. IGST is applicable on inter-state supplies and imports into India. The rate depends on the type of goods or services being sold.
    • Who collects the CGST amount?
      CGST (Central Goods and Services Tax) is collected by the Central Government. It is charged on intra-state supplies of goods and services, where both CGST and SGST are applied.
    • Who collects the IGST amount?
      IGST (Integrated Goods and Services Tax) is collected by the Central Government. It is applicable on inter-state supplies and imports, ensuring that tax is shared between the central and state governments.
    • Who collects the SGST amount?
      SGST (State Goods and Services Tax) is collected by the respective state governments. It is levied on intra-state supplies, where the tax is split between the central and state governments.
    • Who collects the UTGST amount?
      UTGST (Union Territory Goods and Services Tax) is collected by the government of the Union Territory. It is similar to SGST but applies to sales made within Union Territories like Delhi or Chandigarh.
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