TYPES OF GST
When learning about Goods and Service Tax, the first question that comes to the mind of almost every person is: What is IGST, CGST, UTGST, and SGST? On one hand it is stated that almost all indirect taxes are merged into a single tax called Goods and Service Tax, and on the other hand, it is stated that there will be four taxes as IGST, CGST, UTGST, and SGST. In this post we are going to discuss about Types of GST.
1. What are the taxes that got replaced by GST?
Unlike earlier when there were multiple taxes such as Central Excise, Service Tax and State VAT etc., under GST, there is just one tax. GST is categorized into CGST, SGST or IGST depending on whether the transaction is Intra-State or Inter-State.
2. Types of GST:
Since GST subsumed indirect taxes of both Central Government (excise duty, service tax, custom duty, etc.) and state governments (VAT, Luxury tax, etc.), both the governments now depend on GST for their indirect tax revenue. Therefore, the GST rate is composed of two rates. Intra-state transactions will carry one of CGST and one of SGST (in case of state) or CGST and UTGST (in case of union territory). Therefore, while making an Intra-state sale (i.e., sale within the same state), the CGST collected will go to the central government and the SGST collected will go the respective state government in which sale is made. Similarly, SGST or UTGST are replaced with IGST when intra-state transactions are involved.
You can also read our previous post, if you haven’t read it yet-
- What is GST in brief/ History of GST
- What are the advantages and disadvantages of GST
- List of Services exempted under GST.
- What is E-way Bill
3. What is CGST?
CGST full form is Central Goods and Service Tax. Under GST, CGST is a tax levied on Intra State supplies of both goods and services by the Central Government and will be governed by the CGST Act. SGST will also be levied on the same Intra State supply but will be governed by the State Government.
This implies that both the Central and the State governments will agree on combining their levies with an appropriate proportion for revenue sharing between them. However, it is clearly mentioned in Section 8 of the GST Act that the taxes be levied on all Intra-State supplies of goods and/or services but the rate of tax shall not be exceeding 14%, each.
e.g. – In the example above, when Mohan sales a product to Ram in the same state (Rajasthan), he has to pay two taxes. CGST is for the central government while SGST is for the state. The rate of CGST is 9%, same as SGST. So here CGST amount is 9% of 10000 i.e. 900/- and same is SGST.
4. What is SGST?
SGST full form is State Goods and Service Tax. SGST (State GST) is one of the two taxes levied on every intrastate (within one state) transaction of goods and services. The other one is CGST. SGST is levied by the state where the goods are being sold/purchased. It will replace all the existing state taxes including VAT, State Sales Tax, Entertainment Tax, Luxury Tax, Entry Tax, State Cesses and Surcharges on any kind of transaction involving goods and services. The State Government is the sole claimer of the revenue earned under SGST. Let’s understand this with an example.
e.g. – Mohan from Rajasthan wants to sell some goods to Ram in Rajasthan. The product, originally priced at Rs 10,000, will attract GST at 18% rate comprising of 9% CGST rate and 9% SGST rate. The SGST tax amount here is Rs 900 (9% of Rs 10,000) which is fully claimed by the Rajasthan State Government. The rate of the product after SGST and CGST will be Rs 11,800 i.e. including CGST of 900/- and SGST of 900/-
5. What is UTGST (or UGST)?
UTGST full form is Union Territory Goods and Services Tax. The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the GST applicable on the goods and services supply that takes place in any of the five Union Territories of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep and Daman and Diu. This UTGST will be charged in addition to the Central GST (CGST) explained above. For any transaction of goods/services within a Union Territory: CGST + UTGST
The reason why a separate GST was implemented for the Union Territories is that the common State GST (SGST) cannot be applied in a Union Territory without legislature. Delhi and Puducherry UTs already have their own legislatures, so SGST is applicable to them.
6. What is Integrated Goods and Services Tax (IGST)?
Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will be governed by the IGST Act. IGST will be applicable on any supply of goods and/or services in both cases of import into India and export from India.
Note: Under IGST,
- Exports would be zero-rated.
- Tax will be shared between the Central and State Government.
An example for IGST: Consider that a businessman Mohan from Maharashtra had sold goods to Amit from Gujarat worth Rs. 1,00,000. The GST rate is 18% comprised of 18% IGST. In such case, the dealer has to charge Rs. 18,000 as IGST. This IGST will go to the Central Government and there it share with state.
What are the standard rates under GST and How to have input credit adjustment are the questions that comes into our mind, will be discussed in next post.
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– Geetika Goyal (Team ItsLyf)
TYPES OF GST