CGST Act: A Study

Table of Contents

Goods and Service tax was introduced in India several times but actually got into effect from July 1, 2017 onwards. The idea of bringing about GST subsumed all the taxes that prevailed in the country earlier, and are now categorised differently as CGST, SGST and IGST.

Central Goods and Service Tax (CGST):

CGST subsumed all the taxes levied by the central government. For example: central excise duty, central surcharges, cess and other central indirect taxes that were earlier applicable.ย 

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State Goods and Service Tax (SGST):

SGST subsumes all taxes levied by the state government, thatโ€™s state indirect taxes. For example: VAT, Sales Tax, State Cesses and Surcharges.

Integrated Goods and Service Tax (IGST):

IGST levied on interstate movement of goods and services.

There are few products that do not come under the ambit of GST and sales tax/ VAT are still applicable on them. For example: Natural gas, Airline fuel, Petrol, Diesel, Alcohol and a few others

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CGST

Example of services where GST is not applicable are wages and salary, electricity and a few others. The Central Goods and Service Tax Act 2017 states that CGS applies to the whole of India except Jammu & Kashmir.

CGST stands for Central Goods and Services Tax. It subsumes all the taxes that were earlier applicable as central indirect taxes. They are levied by the central government for intrastate movement of goods and services. Intrastate means within one state.

Central Goods and Services Tax Act of 2017, India Code. Go! Long Title: An Act to provide for the levy and collection of tax by the Central Government on intra-State supply of goods or services, or both, and for matters connected with or incidental thereto.

The Central Goods and Service tax under GST has replaced the existing tax services tax, excise tax, etc. SGST means the state goods and service tax that has replaces the existing tax like the sales tax, luxury tax, etc. This tax is levied by the state government.

As per the Central Goods and Services Tax (CGST) Act, the maximum GST rate that can be levied on the supply of goods and services cannot be more than 14%.

Under former taxation laws, the central government levied taxes on the manufacture of goods in the form of central excise duty, interstate sale of goods in the form of central sales tax, and certain services that provide in the form of service tax.

Currently, the types of GST in India are CGST, SGST, and IGST. This simple division helps distinguish between inter-state and intra-state supplies and mitigates indirect taxes. The GST rate is 18% consisting of CGST rate of 9% and SGST rate of 9%.

The GST council meeting was September 2019. These rates are as of October 1, 2019.

1) 5% : The most commonly used products that are subjected to a 5% GST rate are Cream and Yogurt, Paneer, Cashew nut, Raisins, Fruits and Nuts and a few others. Now for those products, 2.5% goes to the state government and the rest 2.5% goes to the CGST. Many household items are covered in this section.

2) 12% : This is the second slab of 6% GST rates. Citrus fruits, Jams, Sausages, 20L Drinking water, Statues, Pots and jars, Geometry box, Cutlery, Railway Coaches, Printer ink, Wooden Toys and many more. Here for every product, 6% goes towards CGST and 6% goes towards SGST. This section covers processed food to a great extent.

3) 18% : The products being taxed at 18% are Bindis, chocolates, Fountain Pens, Tripods, Soap, Toothpaste, and industrial intermediate products covers in this slab. Here 9% goes towards SGST and 9% goes towards CGST.

4) 28% : The products cover in this slab are Cigarettes, Caffeinated beverage, Pan masala, Motor Cars and Motor Cycles, Air Conditioners, Refrigerators etc. This slab mainly covers luxury items. In this 14% goes towards SGST and 14% goes towards CGST.

5) 3% : This slab covers Coins, Gold, Silver, Platinum, Imitation Jewellery etc. are taxed at 3% . Here 1.5% goes towards SGST and 1.5% towards CGST.

6) 0% : There are also some products that are taxed at 0%, so basically they are tax free. Mammals, Live Swine, Birds, Insects, Fish, Curd, Lassi, Buttermilk, Bananas, apples, grapes, Human Hair, Sanitary napkins among others.

India is a federal country. We have too many layers and levels of business. The federal system means that both state government and central government are allowed to levy and collect taxes. In the old tax system, we had varying indirect taxes that were levied on the state and central government level. Now all the taxes are subsumed under one.

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