Types of GST

Overview on Types of GST

The Goods and Services Tax (GST) is an indirect tax levied on the production, sale, and consumption of goods and services across the country. GST is regarded as one of the most significant post-independence tax reforms, combining all indirect taxes such as VAT, excise, entertainment, and other local taxes.

Goods and Service Tax reduces the cascading effect of indirect taxes levied on businesses. GST has many benefits which help boost the economy of India.

GST has eliminated double taxation, tax on tax, and tax multiplicity, providing significant relief to traders and the general public.

Types of GST

• Central GST (CGST)
• State GST (SGST)
• Union Territory GST (UTGST)
• Integrated GST
• Goods and Services (Compensation to States)

CGST

The Central Government imposes CGST, which is payable to the Centre. Central excise duty, sales tax, service tax, countervailing duty (CVD), special additional duty (SAD), additional excise duties, excise duty levied under the medical and toiletries preparation act, and other indirect taxes are all included in the CGST. The applicable GST rate for goods and services is split evenly between CGST and SGST.

SGST

SGST taxes are imposed by the state or union territory and apply to all goods and services regardless of where the transaction occurs. Along with the CGST, the SGST is levied on all states and two union territories, Delhi and Puducherry, because they have their legislature. The SGST incorporates state VAT, central sales, luxury, and other taxes.

Union Territory GST

There are two types of taxes in GST: intrastate and interstate taxes, which are levied by the central and state governments on the supply of goods and services, respectively.

According to the UTGST Bill, there is also a separate tax called Union Territory GST within the Union Territories. The state GST will not be levied.

The UGST is levied on all the seven Union Territories within India. They are

• Puducherry
• Delhi
• Daman and Diu
• Lakshadweep
• Dadra and Nagar Haveli
• Andaman and Nicobar islands
• Chandigarh.

As Delhi and Puducherry are known as semi-states and have their legislature, the state GST is only levied, not the UTGST. This is in line with the Constitution’s definition of ‘states’, where any union territory with its legislature is a state.

Here when a trade supplies goods within the states of Delhi or Puducherry, the central and state GST shall be applied. If the supply happens from Delhi or Puducherry to another state or union territory, then the interstate GST shall be applied.

Integrated GST

The IGST is a tax levied on the interstate supply of goods and services. Previously, trade or commerce between states was governed by the Central Sales Act of 1956, which the IGST Act later replaced.

The IGST applies to both goods and services imported into and exported from India. Exports would be tax-free, and the tax would be split evenly between the federal and state governments.

Goods and Services (Compensation to States) Types

The GST Compensation Bill was passed in August 2018 to compensate states that may have suffered revenue losses due to GST implementation. The central government imposes a GST Compensation Cess on the supply of certain goods and services under this act, with the proceeds going to the GST Compensation Fund.

This amount is then used to compensate states for revenue losses caused by GST. After five years, any unutilised money in the Fund is distributed so that 50% goes to the states in proportion to total revenue, and the remaining 50% goes to the centre's pool of taxes.

If any funds remain unutilised in the Fund during the transition period, half of them will be distributed to the states in proportion to their revenue in a base year. The remaining half will go to the central tax pool.

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