SGST, CGST, IGST & UTGST

Table of Contents

The central government will collect CGST, SGST, or IGST depending on whether the transaction is intrastate or interstate under the GST law.

When goods or services are supplied within a state, this is referred to as intra-state transactions, and both the CGST and SGST are collected. When goods or services are supplied between states, this is referred to as an inter-state transaction, and only IGST is collected.

It should be noted that the GST is a destination-based tax that is collected by the state where the goods are consumed but not by the state where the goods are manufactured. Unlike in the past, when there were multiple taxes such as Central Excise, Service Tax, State VAT, and so on, GST has only one tax with three components: CGST, SGST, and IGST.

India is a federal republic in which both the Centre and the States have the authority to levy and collect taxes. According to the Constitution, both governments have distinct responsibilities for which they must raise tax revenue.

GST is being levied by the Centre and the States at the same time.
The three types of tax structures are in place to allow taxpayers to take a credit against each other, ensuring “One Nation, One Tax.”

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SGST

Central Goods and Services Tax (CGST)

The Central Government will levy CGST on intra-state supplies of both goods and services under GST, and the CGST Act will govern it. The same Intra State supply will also be subject to SGST, which will be governed by the State Government.

This implies that both the Central and State governments will agree to combine their levies in an equitable proportion for revenue sharing. However, Section 8 of the GST Act clearly states that taxes must be levied on all intra-state supplies of goods and/or services, but the rate of tax cannot exceed 14%, each.

State Sales and Use Tax (SGST)

SGST is a tax levied by the State Government on intra-state supplies of both goods and services under GST and will be governed by the SGST Act. As previously stated, CGST will be levied on the same intra-state supplies but will be governed by the Central Government.

Please keep in mind that any SGST liability can only be offset against SGST or IGST input tax credit.

Assume Rajesh is a Maharashtra dealer who sold goods worth Rs. 10,000 to Anand in Maharashtra. The GST rate is 18%, which includes the CGST rate of 9% and the SGST rate of 9%. In this case, the dealer receives Rs. 1800, of which Rs. 900 goes to the Central Government and Rs. 900 goes to the Maharashtra Government.

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Union Territory Goods and Services Tax (UTGST)

Union Territory Goods and Services Tax, or UTGST, is levied by the Union Territory governments in the same way that SGST is levied by state governments on intra-state supply of goods and services. It is a tax levied on intra-Union Territory supplies of goods and services. The UTGST Act governs it, and it is levied alongside the CGST.

UTGST, like SGST, is levied in Union Territories that lack their own legislature. The UTGST is levied on supplies made in the Union Territories of Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep. Please keep in mind that the Union Territories of Delhi and Puducherry will be subject to SGST law because they have their own legislature. The order of ITC applications for UTGST is similar to that of SGST. UTGST ITC should first be offset against UTGST. Any remaining balance may be used to offset any IGST liability.

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Integrated Goods and Services Tax (IGST)

The IGST Act will govern the IGST, which is a tax levied on all inter-state supplies of goods and/or services under GST. In both cases of import into India and export from India, IGST will be levied on any supply of goods and/or services.

Take note: Under IGST, Exports would be tax-free.

The tax will be split between the federal and state governments.

As an example of IGST:

Consider this: Rajesh from Maharashtra sold goods worth Rs. 100,000 to Anand from Gujarat. The GST rate is 18%, which includes the 18% IGST. In this case, the dealer is required to charge Rs. 18,000 as IGST. This IGST will be directed to the Centre.

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