Types of GST: What is SGST, CGST, IGST and UTGST?

GST charged and collected can be of different types- CGST, SGST, IGST and UTGST. The tax authorities collect CGST and SGST/UTGST or only IGST depending upon whether the transaction is intrastate or interstate, respectively. Let's dive into the meaning and applicability of these terms along with examples.

Key takeaways-

• GST in India has four components – CGST, SGST, IGST, and UTGST. The charge depends upon whether the transaction is intra-state or inter-state.
• The Central Government charges CGST, while the State Governments and Union Territories levy SGST and UTGST respectively, on intra-state supplies.
• IGST is imposed on inter-state supplies, import, and export transactions and thereafter shared between Centre and the consuming State/UT.
• GST is a destination-based tax. It means the revenue goes to the state/UT where the goods or services are finally consumed.
• Correct identification of supply type (intra-state vs inter-state) is crucial to apply the right GST component and claim Input Tax Credit (ITC) properly.

Types of GST in India

Unlike pre-GST regime when there were multiple taxes such as Central Excise, Service Tax, State VAT, etc., the GST law introduces just one tax with four components- 

• CGST: Central Goods and Services Tax 
• SGST: State Goods and Services Tax
• UTGST: Union Territory Goods and Services Tax and 
• IGST: Integrated Goods and Services Tax

How to determine type of GST?

When the supply of goods or services happens within a state or union territory, also called intra-state transactions, then both the CGST and SGST/UTGST will be collected. Whereas, if the supply of goods or services happens between the states, also called inter-state transactions, then only IGST will be collected.

The use of correct GSTIN becomes important to identify the applicability of tax components. Hence, validate with the help of the GST search tool before using the GST number in the sales invoice. It is to be noted that the GST is a destination-based tax, which is received by a State in which the goods are consumed but not by a state in which such goods are manufactured.

IGST full form and applicability

The full form of IGST is Integrated Goods and Services Tax. Under GST, IGST is a tax levied on all interstate supplies of goods and/or services or across two or more states/Union Territories. Further, IGST levy and collection will be governed by the IGST Act, 2017, as amended from time to time.

IGST will be applicable on any supply of goods and/or services in both cases of import into India and export from India. Exports would be zero-rated. Tax will be shared between the Central and State governments.

IGST example with calculation

Consider that a businessman M/s Rajesh Ltd from Chandigarh in India had sold goods to Anand Ltd from Dadra & Nagar Haveli & Daman & Diu in India worth Rs.1,00,000. The GST rate is 18% referring particularly to the 18% IGST. In such a case, the dealer has to charge Rs.18,000 as IGST. This IGST will go to the Centre, later split between the Centre and Dadra & Nagar Haveli & Daman & Diu (if this is ultimate consuming state).

CGST full form and applicability

To answer your question on ‘what is the full form of CGST', CGST is Central Goods and Services Tax. CGST is a tax levied on intrastate supplies of both goods and services by the Central Government and collected by it for its coffers. Accordingly, the levy and collection of CGST are governed by the provisions of the CGST Act, 2017 as amended from time to time.

Together with CGST, an equal value of SGST will also be levied on the same intrastate supply but will be governed by the particular state government. It is clearly mentioned in Section 8 of the CGST Act that the taxes be levied on all intrastate supplies of goods and/or services but the rate of tax shall not be exceeding 14%, each. Any tax liability obtained under CGST can be set off against CGST or IGST input tax credit only and not any SGST.

SGST full form and applicability

SGST means State Goods and Services Tax. Under GST, an equivalent amount of SGST is a tax levied on intrastate supplies of both goods and services by the particular state government where the product sold is consumed.

Therefore, levy and collection of SGST are governed by the respective state’s SGST Act, 2017 as amended from time to time, for instance, Telangana GST Act. After the introduction of the SGST, all the state taxes such as the value-added tax, entertainment tax, luxury tax, entry tax, etc. were merged under SGST. Any tax liability obtained under SGST can be set off against SGST or IGST input tax credit only and not CGST.

CGST & SGST example

If a seller sells a product to a buyer within the same state, say Chattisgarh, then CGST and SGST will apply. This implies that both the Central and state governments will agree on combining their levies with an appropriate proportion for revenue sharing between them.

Suppose M/s Rajesh Ltd is a dealer in Chattisgarh who sold goods to Vijay Ltd in Chattisgarh worth Rs.10,000. The GST rate is 18% comprising a CGST rate of 9% and an SGST rate of 9%. In such a case, the dealer collects a total of Rs. 1,800 and deposits over the GST portal, out of which Rs. 900 will be apportioned to the Central Government and Rs. 900 will go to the Chattisgarh Government.

UTGST full form and applicability

UTGST stands for the Union Territory Goods and Services Tax. It is similar to how SGST is levied by the state governments on the intra-state supply of goods and services. UTGST is levied by the handful of Union Territory governments which do not have their own legislature. It refers to the tax levied on the supply of goods and services inside the Union Territory. It is governed by the UTGST Act, 2017 as amended from time to time and is levied together with CGST. The order of ITC utilisation of UTGST is similar to SGST. The ITC of UTGST should first be set off against UTGST. Any balance remaining may be used to set off any IGST liability.

UTGST is applicable to the supplies that take place in the Union Territories of Ladakh, Andaman and Nicobar Islands, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, and Lakshadweep. Please note that the Union Territories of Delhi, Jammu & Kashmir and Puducherry will fall under SGST law as they have their own legislature. 

Why is there SGST, CGST, and IGST?

India is a federal country where both the Centre and states have been assigned the powers to levy and collect taxes by our Constitution. Both governments have distinct responsibilities to perform for which they need to raise tax revenue, in the form of GST.

The Centre and states are simultaneously levying GST. The three-type tax structure is implemented to help taxpayers take the credit against each other, thus ensuring “One Nation, One Tax”.

How to check applicability?

To determine whether Central Goods & Services Tax (CGST), State Goods & Services Tax (SGST) or Integrated Goods & Services Tax (IGST) applies in a taxable transaction, find if the transaction is intrastate or an interstate supply.

• Intrastate supply of goods or services is when the location of the supplier and the place of supply i.e., the location of the buyer are in the same state. In Intrastate transactions, a seller has to collect both CGST and SGST from the buyer. The CGST gets deposited with the Central Government and SGST gets deposited with the State Government.
• Interstate supply of goods or services is when the location of the supplier and the place of supply are in different states. Also, in cases of export or import of goods or services or when the supply of goods or services is made to or by an SEZ unit, the transaction is assumed to be interstate. In an interstate transaction, a seller has to collect IGST from the buyer.

How is ITC offset done?

The CGST Rules define the logic of adjusting CGST, SGST and IGST input tax credit with the tax liabilities of CGST, SGST and IGST. One must follow the rules since accurate ITC utilisation is crucial to avoid fines later on.

Let us consider that goods worth Rs.10,000 are sold by manufacturer A from Maharashtra to Dealer B in Maharashtra.

Dealer B resells them to Trader C in Rajasthan for Rs.17,500.

Trader C finally sells to end-user D in Rajasthan for Rs. 30,000.

Suppose the applicable tax rates for the goods sold are CGST= 9%, SGST=9%, and IGST=9+9=18%

Since A is selling this to B in Maharashtra itself, it is an intra-state sale and so, CGST@9% and SGST@9% will apply.

Dealer B (Maharashtra) is selling to Trader C (Rajasthan). Hence, this is an interstate sale, with  IGST@18%.

Trader C (Rajasthan) is selling to end user D also in Rajasthan. Once again it is an intra-state sale and hence, CGST@9% and SGST@9% will apply.

How to collect GST?

*** Any IGST credit will first be applied to set off in this order:

• First set off against IGST liability.
• Then either set off with CGST or SGST liability, at your preference.

GST is a consumption-based tax the state where the goods were consumed(Rajasthan) will receive GST. By that logic, Maharashtra (where goods were sold) should not get any taxes. State Rajasthan and Central Government should have got (30,000*9%) = 2,700 each.

Thus, Maharashtra (exporting state) will have to transfer credit of SGST of Rs. 900 (used in payment of IGST) to the Centre.

In turn, Central Government will transfer to the state Rajasthan (importing state) Rs. 450 IGST.

The above example shows the need for three taxes: SGST, CGST, and IGST. All three together will serve the two purposes of GST :

• One Nation, One Tax – so all taxes on all purchases are available as credits.
• Dual tax system – both the Centre and states have their revenue.

Difference between types of GST