What is SGST, CGST & IGST?

Last Updated at: January 16, 2020
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What is SGST & CGST_

The introduction of GST (Goods & Services Tax) has brought about a significant change in the Indian taxation system. It has given powers to both the State and Centre to charge taxes on the goods and services supplied and consumed. It sought to remove the cascading effect of taxation, i.e., tax on tax. And hence, all the indirect taxes were brought under one umbrella called the GST. However, keeping conformity with the federal structure of India, the GST council decided to opt for the dual GST model and this is why the concepts of SGST, CGST, and IGST have come into existence as components of GST. We will discuss all these in our subsequent sections.

Get Online GST Registration

What are CGST and SGST?

CGST or Central GST is a tax charged by the Central Government on the supply and consumption of services and goods. As per provisions of the CGST Act, the proceeds will be attributed to the Centre.

SGST or State GST is a tax charged by the State Government on the supply and consumption of services and goods. It is governed by the provisions of the SGST Act.

Both the State and the Central Governments have agreed to distribute their levies between them with a predefined revenue-sharing proportion. However, Section 8 of the GST Act clearly mentions that the Tax rate will not exceed 14% for each of the Governments and the taxes will be charged on all the intra-state supplies (when the location of the supplier and the place of supply i.e., location of the buyer are in the same state) of services and/or goods. For a completed inter-state transaction, both the CGST and SGST will be charged at the time of collection by the seller from the buyer.  The SGST will be deposited with the concerned State Government and the CGST will be deposited with the Central Government.

The following example will make the concepts of CGST and SGST clear-

Ravi is a supplier in Bikaner, Rajasthan, who supplied capital goods worth Rs 10,000 to Rizwan Udaipur in the same state. The GST rate applicable for this intrastate supply is 18%, which is inclusive of 9% CGST and 9% SGST. Therefore, Ravi will collect a tax of Rs 1800. However, out of which, Rs 900 each will be attributed to the Central Government and the State Government of Rajasthan respectively.

What is IGST?

IGST or Integrated GST is a tax charged by the Central Government on inter-state transactions. Also, make sure to understand that when the location of consumption and the place of the supplier of a service/good fall in different states. The IGST thus collected will be shared between the Central and the concerned State Governments. It is governed by the Indian IGST Act. Also, it is applicable to the supply of goods and/or services exported from and imported into India. In cases of import or export of services and/or goods or when the supply of services and/or goods is made by/to an SEZ (Special Economic Zone) unit, the said transaction is considered to be inter-state. In all inter-state transactions, the seller needs to collect the IGST from the buyer.

The example mentioned below will make the concept of IGST clear-

Ravi is a supplier in Bikaner, Rajasthan, who supplied capital goods worth Rs 1, 00,000 to Kishan in Guwahati, Assam. The GST rates applicable for this interstate supply is 18%, which is entirely comprised of IGST. In this case, Ravi will need to charge an IGST of Rs 18,000. And this will be attributed to the Central Government.

Adjusting of Input Tax Credit (ITC) and offset liability in GST

For businesses across the country, it’s important to understand the ITC availability for the setting-off tax liability. One can avail ITC against CGST, SGST and IGST in the following manner-

  • CGST ITC – You can use it to set off CGST and IGST (in that particular order)
  • SGST ITC – You can use it to set off SGST and IGST (in that particular order)
  • IGST ITC – You can use it to set off IGST, CGST, and SGST (in that particular order)

Please note that you cannot set off CGST and SGST against one another.

 

What is SGST, CGST & IGST?

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The introduction of GST (Goods & Services Tax) has brought about a significant change in the Indian taxation system. It has given powers to both the State and Centre to charge taxes on the goods and services supplied and consumed. It sought to remove the cascading effect of taxation, i.e., tax on tax. And hence, all the indirect taxes were brought under one umbrella called the GST. However, keeping conformity with the federal structure of India, the GST council decided to opt for the dual GST model and this is why the concepts of SGST, CGST, and IGST have come into existence as components of GST. We will discuss all these in our subsequent sections.

Get Online GST Registration

What are CGST and SGST?

CGST or Central GST is a tax charged by the Central Government on the supply and consumption of services and goods. As per provisions of the CGST Act, the proceeds will be attributed to the Centre.

SGST or State GST is a tax charged by the State Government on the supply and consumption of services and goods. It is governed by the provisions of the SGST Act.

Both the State and the Central Governments have agreed to distribute their levies between them with a predefined revenue-sharing proportion. However, Section 8 of the GST Act clearly mentions that the Tax rate will not exceed 14% for each of the Governments and the taxes will be charged on all the intra-state supplies (when the location of the supplier and the place of supply i.e., location of the buyer are in the same state) of services and/or goods. For a completed inter-state transaction, both the CGST and SGST will be charged at the time of collection by the seller from the buyer.  The SGST will be deposited with the concerned State Government and the CGST will be deposited with the Central Government.

The following example will make the concepts of CGST and SGST clear-

Ravi is a supplier in Bikaner, Rajasthan, who supplied capital goods worth Rs 10,000 to Rizwan Udaipur in the same state. The GST rate applicable for this intrastate supply is 18%, which is inclusive of 9% CGST and 9% SGST. Therefore, Ravi will collect a tax of Rs 1800. However, out of which, Rs 900 each will be attributed to the Central Government and the State Government of Rajasthan respectively.

What is IGST?

IGST or Integrated GST is a tax charged by the Central Government on inter-state transactions. Also, make sure to understand that when the location of consumption and the place of the supplier of a service/good fall in different states. The IGST thus collected will be shared between the Central and the concerned State Governments. It is governed by the Indian IGST Act. Also, it is applicable to the supply of goods and/or services exported from and imported into India. In cases of import or export of services and/or goods or when the supply of services and/or goods is made by/to an SEZ (Special Economic Zone) unit, the said transaction is considered to be inter-state. In all inter-state transactions, the seller needs to collect the IGST from the buyer.

The example mentioned below will make the concept of IGST clear-

Ravi is a supplier in Bikaner, Rajasthan, who supplied capital goods worth Rs 1, 00,000 to Kishan in Guwahati, Assam. The GST rates applicable for this interstate supply is 18%, which is entirely comprised of IGST. In this case, Ravi will need to charge an IGST of Rs 18,000. And this will be attributed to the Central Government.

Adjusting of Input Tax Credit (ITC) and offset liability in GST

For businesses across the country, it’s important to understand the ITC availability for the setting-off tax liability. One can avail ITC against CGST, SGST and IGST in the following manner-

  • CGST ITC – You can use it to set off CGST and IGST (in that particular order)
  • SGST ITC – You can use it to set off SGST and IGST (in that particular order)
  • IGST ITC – You can use it to set off IGST, CGST, and SGST (in that particular order)

Please note that you cannot set off CGST and SGST against one another.

 

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