GST

What is the Difference between CGST and SGST in India

Difference between CGST and SGST

When we talk about the complexity of GST we do not mean only the GST, but eventually we also talk about the complexity that covers the CGST, SGST, IGST, and one more UTGST. At the time of introduction of GST, it was stated that almost all indirect taxes will get merged into a single tax called the Goods and Service Tax. However, as the rope end, we finally have four taxes as IGST, CGST, UTGST and SGST in our hand.

What is Goods Service Tax (GST)?

GST stands for Goods and Service Tax. Any supply of the goods and services that exceeds the turnover value from Rs 20lakh and 10lakh in some special categories areas or any inter-state supply or e-commerce supply irrespective of the turnover factor is liable to get its GST Registration.  Every taxpayer who was under the previous regime should get its GST Registration.

Note: The limit has been increased from 20 lakhs to 40 lakhs which will be applicable with effect from 01.04.2019.

What are the Types of GST?

Following are the types of GST –

  • Central Goods and Service tax
  • State Goods and Service tax
  • Integrated Goods and Service tax
  • Union Territory Goods and Service tax

Types of GST

Since GST has subsumed many indirect taxes of both the central (excise duty, service tax, customs duty, etc) and the state government (VAT, Luxury tax etc). Furthermore, now the government depends on GST for their indirect tax revenue. Therefore, as we know GST rates are composed of two rates.

  • Intra-state transactions carry one of the CGST and one of CGST (in case of states) or CGST and UTGST in term of the union
  • Therefore, making an intrastate sale (i.e. sale within the same state) the CGST collected will go to the central government and the SGST collected will end with the respective state government in which sale is made.
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However, SGST or UTGST are replaced with the IGST when intrastate transactions are involved.

What all taxes are subsumed under CGST, SGST, and IGST?

 

 CGST  SGST

IGST

What are Central Goods and Service tax?

Central Goods and Service tax is levied by the central government of India on any transaction of the goods and service tax within in state. It is one of the taxes that are charged on every intrastate (within one state) transaction, and the other tax is the SGST or UTGST for Union Territories.

CGST has replaced all the existing central taxes that include Service tax, Central Excise duty, CST, Customs Duty, SAD, etc.  The rate of CGST is equal to SGST rate usually. Both the taxes are charged on the basis price of the product.

Let’s us understand this with an example-

For example- Mukesh sell a product to Manoj who lives in the same state, he has to pay two taxes. CGST stands for the Central government while SGST is for the state. The rate of CGST is 9% same as the SGST. After the implication of CGST (9% for the 10,000) the final costs of the product have become Rs 11800.

As you could get the idea, all taxes in all the conditions above are borne by the end users in the final cost, not by the manufacturer or dealer of the product or service.  As we all know that GST is levied on consumption, the product in which state it is actually manufactured that is not entitled to tax collection.  If in case, the manufacturing state levies a tax then the same will be transferred to the consuming state through the central government.

What are State Goods and Service tax?

SGST means State Goods and Service Tax. It is one of the two taxes that are levied on every intrastate (within one state) transaction of goods and services. SGST is levied on the state where the goods are being sold or purchased. It will replace all the existing state taxes including VAT, Entertainment Tax State, Sales Tax, Luxury Tax, Entry Tax, State Cess and Surcharges on any kind of transaction involving goods and services. The State Government is the sole deserving of the revenue earned under SGST.

Let’s understand this with an example-

e.g. – Mohan from Uttar Pradesh wants to sell some goods to Kamlesh in Uttar Pradesh.  The product is originally priced at Rs 10,000 and will attract the GST at 18% rate comprising of 9% CGST rate and 9% GST rate. The SGST tax amount here is Rs 900 (9% of Rs 10,000) which is fully claimed by Uttar Pradesh i.e. State Government. The rate of the product after SGST will be Rs 10,900.

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What is Integrated Goods and Service tax?

Integrated Goods and Service tax is applicable on the interstate (between two states) transactions of the goods and service as well as Imports. The tax will be collected by the central government and will further distributed among the respective states. IGST is in the place to ensure that a state has to deal with only Union government and not with every state that is separate to settle the interstate tax amounts.

Let us understand this with an example-

Rakesh is a manufacturer in Jharkhand who sold the goods worth Rs 10,000 to Sahil in Jharkhand. Since it is an interstate transaction IGST will apply here. Let’s understand this with an example- the GST rate is 18% for the particular item. So, the IGST amount that is charged by the central government that will be Rs 1800(18% of Rs 10,000) and then it is refined rate of the product that will be Rs 11,800.

Now, GST is like a consumption tax that means only the state where the goods are actually consumed that will get the tax benefits, irrespective of the manufacturing state.

What are United Territory Goods and Service tax?

The Union Territory Goods and Service tax is also called out as UTGST. It is levied on the goods and services that are supplied in any of the Union territory of India including Dadar and Nagar, Andaman and Nicobar, Chandigarh, Lakshadweep and Daman and Diu, Haveli.

The UTGST will be charged in along with the Central GST as explained above. For any transaction of goods or services within a union territory, there are two taxes applied to them: UTGST+CGST.

The state GST is not applied in a union territory GST without legislature as they both have their respective areas. However, Delhi and Pondicherry UTs already have their respective legislatures, so SGST is applicable to them.

Now, after the details explanation let’s find out their differences-

What is the Difference between CGST, SGST, IGST, and UTGST?

Types of Difference CGST         SGST IGST UTGST
Meaning CGST means Central goods and service tax that replace the existing tax like service tax, excise tax etc. SGST means the state goods and service tax, replaces the existing tax like sales tax, entry tax, luxury tax etc. this tax Is levied by the state government. IGST means the integrated goods and service tax and it is combined form of CGST and IGST that is levied by the central government. The Union Territory Goods and Service tax also called out as UTGST. It is levied on the goods and services that are supplied in any of the Union territory of India including Dadar and Nagar, Andaman and Nicobar, Chandigarh, Lakshadweep and Daman, and Diu, Haveli
Collected of tax Central Government State Government Central Government UT Government
Benefitting authorities

 

Tax credit use

Central Government State Government Central Govt. and State Govt. UT Government
Tax credit use priority CGST SGST IGST &CGST UTGST and IGST
Applicable transactions(Goods & Service) Intrastate (within one state ) Intrastate (within one state ) Inter-state between one or two states or one UT and imports Within one Union territory
Registration No registration till the turnover exceeds Rs  20lakh (10 lakh for northeastern states) No registration till the turnover exceeds 20lakh ( 10 lakh for northeastern states) Registration is mandatory
Composition The dealer can use the benefit up to Rs 75 lakh under the composition scheme The dealer can use the benefit up to Rs 75 lakh under the composition scheme The composition scheme is not applicable in interstate supply.
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How to get GST Registration?

To get the GST Registration you need to file the application form for registration on GST Portal[1] or what you can do is just contact us we will finish all the leftover.

What are the advantages of GST Registration?

  1. The following are the advantages for Registered Business-
    1. Input Tax Credit
    2. Interstate sales without Restriction
  2.  The following are the advantages for Composition Dealer-
    1. Less tax Liability
    2.  High Working Capital
    3. Few Comp0liances
  3. The following are the advantages for voluntarily opted GST Registration in India-
    1. The benefit with Input Tax Credit
    2. Interstate supply with no restriction
    3. Easy Registration for E-commerce websites
  4. Some more advantages under GST Registration in India-
    1.  Facility of Composition Scheme
    2.  Simple and easy online GST Registration process
    3.  Fewer compliance for small business owners
    4.  Threshold limit for Registration
    5.  Eliminates the cascading effect of the tax

In Conclusion

A brief classification has been discussed above on difference between the IGST, CGST, and SGST. However, there is no doubt GST is so wide and complicated that there will always be some miseries unanswered. Hence, in case of any doubt contact Enterslice.

Read our article:Do you know the Impact of GST on Food Services & Restaurant Business?

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