Goods and Service Tax (GST) is a single inclusive tax for the entire country. The introduction of Goods & Service Tax replaced several indirect taxes in India, including the tax levied by Central Government on manufacture (Central Excise duty), provision of services (Service Tax), special additional duties of customs etc. Other than this the tax levied by State Governments on retail sales (VAT), Luxury Tax, entry of goods in the State (Entry Tax), etc. also fall under GST. GST further is divided into four types which include SGST, CGST, IGST, UTGST.
GST is charged on supply of goods or services or both at each stage of the supply chain from manufacture or import and till the last retail level. This means that all the taxes that were levied by the Central or State Government on the supply of goods or services fall under the umbrella of GST.
The introduction of GST is aimed at creating a single national market, common tax base, and common tax laws for States and the Centre. Other significant features of GST include the use of technology through Goods and Services Tax Network (GSTN), which helps in creating transparency in tax burden and improve the accountability of the tax administrations of Centre and State governments. In this blog we shall discuss in detail GST and its types including SGST, CGST, IGST and UTGST.
Taxes Replaced by GST
State Taxes replaced by introduction of GST:
Central Taxes replaced by the introduction of GST:
Types of GST
There are four types of GST, namely:
Integrated Goods and Service Tax (IGST): Tax levied by the Central Government when the location of the supplier of goods/service and place of consumption lies in a different state.
State Goods and Services Tax (SGST): Tax collected by the State government on the sale within the state.
Central Goods and Services Tax (CGST): The Tax collected by the Central Government on an intra-state sale.
Union Territory Goods and Services Tax (UTGST): Tax collected by Union Territories when a good is both manufactured and sold within the Union Territory.
Points of difference between types of GST
Types of GST
Area of transaction
Within the same state (intrastate transactions)
Within the same state (intrastate transactions)
Between two different states or a state and a Union Territory (interstate transaction)
Union Territory Government
Within the Union Territory
Applicability of SGST, CGST, IGST
The applicability of SGST, CGST, IGST depend upon the locations of the supplier of the goods/services and that of consumers. Therefore, to determine the applicability of CGST, SGST and IGST it is important to know whether the taxable transaction is an Intra-State or an Inter-State supply.
Intra-State Transactions: In case of Intra-State transactions where the supply of goods happens within the same state, the seller collects both SGST and CGST from the buyer. SGST is deposited with the State Government whereas CGST gets deposited with the central Government.
Inter-State Transactions: In case of Inter-State transactions where the supply of goods happens between two different states, the supplier charges IGST. For an Inter-State transaction, a seller has to collect IGST from the buyer.
Detailed Explanation of SGST, CGST, IGST
Following is the detailed explanation of SGST, CGST, IGST and UTGST:
State Goods and Service Tax (SGST): SGST is a tax under the GST regime charged on intrastate supplies of goods and services by the State Government and is governed by the SGST Act. The revenue earned through SGST is claimed by the respective State Government. Along with SGST, CGST is also levied on the same Intra-State supply which is governed by the Central Government.
Example of SGST: If a Punjab based supplier sells his goods worth Rs 30,000 within Punjab, then the GST applicable on the transaction will be partly CGST and partly SGST. If the GST rate charged is 18%, it will be divided equally in the form of 9% CGST and 9% SGST. Therefore, the supplier of the goods will collect Rs 5,400, of which Rs 2,700 goes to the Punjab State Government, and another Rs 2,700 goes to the Central Government.
Central Goods and Service Tax (CGST): CGST is a tax charged by the Central Government on intra-state (within the same state) goods and service transactions and is governed by the CGST Act, 2017. The revenue generated through Central Goods and Service Tax is collected by the Central Government. Along with CGST, SGST is also levied on the same intra-state supply; however, it is governed by the State Government.
Example of CGST: If a Punjab based supplier sells his goods worth Rs 30,000 within Punjab, then the GST applicable on the transaction will be partly CGST and partly SGST. If the GST rate charged is 18%, it will be divided equally in the form of 9% CGST and 9% SGST. Therefore, the supplier of the goods will collect Rs 5,400, of which Rs 2,700 goes to the Central Government, and another Rs 2,700 goes to the Punjab State Government.
Integrated Goods and Services Tax (IGST): IGST is a tax under the GST regime levied on Inter-State (between 2 states) supply of both goods and services as well as on imports and exports from India. The IGST is governed by the IGST Act, 2017. It is collected by the Central Government and then further divided among the respective states.
Example of IGST: Suppose Sachin from Madhya Pradesh sells his goods of worth Rs 40,000 to Rakesh from Punjab, then IGST will be applicable since the transaction is an Inter-State transaction. The GST rate charged is 18% comprising of 18% IGST as it is an inter-State supply. In such a case, the dealer will charge Rs 7,200 as IGST. The collected IGST goes to the Central Government.
Union Territory Goods and Services Tax (UTGST): The Union Territory Goods and Services Tax are similar to that of SGST and is levied on the supply of goods and services in Union Territories (UTs) of India. It is governed by the UTGST Act and the revenue generated from UTGST is collected by the respective UT government. Therefore, we can say that UTGST is a replacement of SGST in Union Territories.
GST Input Tax Credit (ITC)
First, let us understand what is Input Tax Credit?
The Input Tax Creditmeans while paying tax on the output (final product) one can reduce the tax already paid on inputs (purchase).
For example, you are a manufacturer, and you have to pay Rs 500 as the tax on output (final product), and you have paid Rs 300 as the tax on input (purchase). Here, you can claim Input Credit of Rs 300, and you will only have to pay Rs 200 in taxes.
Conditions to claim Input Tax Credit:
Input Tax Credit applies to the business activities registered under the GST Act, and only a registered taxable person is applicable to claim the benefit of Input Tax Credit of GST. Further, the registered person needs to fulfill the following conditions to claim ITC:
The person should have the Tax invoice or any other document that specifies the payment of tax.
The person has received the goods or services.
In case the person received inputs in installments, he would be eligible to avail ITC only after receiving the last installment.
To utilize IGST credit: First, IGST credit will be used followed by CGST or SGST as per the preference of taxpayer.
To utilize CGST credit: First, CGST credit will be used followed by IGST.
To utilize SGST credit: First, SGST credit will be used followed by IGST.
Documents required for claiming ITC
Invoice issued by the supplier of goods or services.
Invoice issued by the recipient along with the proof of payment of Tax.
Debit note issued by the supplier.
Document issued by the Input Service Distributer.
Some Important Points related to GST Input Tax Credit
A person who has applied for GST registration within 30 days of becoming liable for the registration is applicable to claim ITC with respect to the goods that are held in stock on the day immediately preceding the date from which he becomes liable to pay tax.
In case the tax paid on inputs is more than the tax paid on output, the ITC can either be carried forward or claimed as a refund.
After claiming the Input Tax Credit, the balance tax shall be deposited with the government by 20th of the next month in GSTR 3
ITC is also allowed on GST paid on Capital Goods.
In case depreciation has been claimed on the tax component of capital goods, no ITC would be allowed.
If you are facing any difficulty in registering for GST or want to clarify your doubts on Input Tax Credit provisions our team of experts will be glad to get the job done for you. If you wish to learn more about the details of SGST, CGST, IGST, and UTGST stay in touch with Enterslice.
A passionate legal content writer, a nature enthusiast, an avid reader, and a part-time thinker. By means of conducting in-depth research on industry related topics, Shubham often builds flawless and intelligible legal content for populace from all walks of life.