What are the different types of GST (CGST, SGST, IGST, UTGST)?

Answer By law4u team

Understanding the different types of GST is crucial to grasp how the Goods and Services Tax system functions in India. The GST regime, which came into effect on July 1, 2017, unified various indirect taxes under one umbrella to streamline taxation and remove the cascading effect of taxes. India follows a dual GST structure due to its federal setup, where both the Central Government and State Governments have the authority to levy taxes on goods and services. The four main types of GST are: 1. CGST (Central Goods and Services Tax) CGST is the tax collected by the Central Government on intra-state supplies of goods and services. An intra-state supply means the transaction occurs within the same state or union territory. For example, if you buy a product in Maharashtra and it is sold and delivered within Maharashtra, CGST is applicable. The tax collected under CGST is credited to the central government's account. It is charged along with SGST on the same invoice. The rate of CGST varies depending on the goods or services but is generally half of the total GST rate for an intra-state transaction. 2. SGST (State Goods and Services Tax) SGST is the tax collected by the State Government on intra-state supplies of goods and services, the same as CGST in terms of when it applies. Using the earlier example, the same transaction within Maharashtra will attract SGST, alongside CGST. The tax collected under SGST goes to the respective state's government account. SGST and CGST are levied simultaneously and the combined rate equals the applicable GST rate for that product or service. The rates for SGST vary across states but typically mirror the CGST rates for the same transaction. 3. IGST (Integrated Goods and Services Tax) IGST is levied by the Central Government on inter-state supplies of goods and services—i.e., when goods or services are moved from one state to another or between union territories. For example, if a product is sold in Gujarat and delivered to a buyer in Rajasthan, IGST is applicable. The IGST system ensures seamless taxation across states. The tax collected under IGST is shared between the Central Government and the destination state government. IGST is designed to maintain the flow of input tax credit between states and to avoid the cascading effect. The IGST rate on a product is usually the sum of the CGST and SGST rates applicable on that product. 4. UTGST (Union Territory Goods and Services Tax) UTGST applies to transactions that occur within the Union Territories (UTs) without legislature such as Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and the Andaman and Nicobar Islands. It functions similarly to SGST but is specific to Union Territories. It is levied along with CGST on intra-UT supplies of goods and services. The revenue collected under UTGST goes to the respective Union Territory’s account. Why These Different Types? The differentiation between CGST, SGST, UTGST, and IGST is necessary due to India’s federal structure. The Constitution grants both the Centre and States powers to tax, and GST respects this by dividing tax collection accordingly. This ensures states have revenue streams while maintaining a unified tax system for the entire country. How These Taxes Work in Practice In an intra-state sale (within the same state or UT), both CGST and SGST or UTGST are charged, each typically sharing 50% of the total GST rate. In an inter-state sale, only IGST is charged by the Centre, which later distributes shares between Centre and the destination state. Example: If the GST rate on a product is 18%, in an intra-state sale, it would be split as 9% CGST + 9% SGST. In an inter-state sale, IGST would be charged at 18%. Important Points Input Tax Credit (ITC) can be claimed for CGST, SGST, IGST, and UTGST but there are specific rules about cross-utilization. For example, CGST credit can be used to pay IGST but not SGST. The GST Council, a constitutional body comprising Central and State Finance Ministers, decides rates and policies related to GST.

Answer By Ayantika Mondal

Dear Client, The nature and place of the supply are critical factors to determine the type of GST that is charged since it is either the intra-state supply (within a state or Union Territory) or inter-state supply (between states or Union Territories). The four types of GST are as follows: Central Goods and Services Tax (CGST) CGST is that part of GST, which is imposed and collected by Central Government. Applicability: CGST is applicable in intra-state supply of goods and/or services i.e. the residence of a supplier and the place of supply is located in the same state. The revenue received under CGST is transferred into the account of a Central Government. Central Goods and Services Tax Act, 2017 governs this tax. Rate Structure: There is uniformity in the rates of CGST all over India. When performing an intra-state transaction, the overall rate of GST charged will be divided into half between CGST and SGST/UTGST (e.g., a combined 18 percent GST rate would mean 9 percent CGST and 9 percent SGST). Input Tax Credit (ITC) Use: This accumulating CGST under the Input Tax Credit (ITC) could be used to pay the CGST and IGST liabilities. More importantly, there is no general cross-utilization of CGST credit and SGST/UTGST credit. State Goods and Services Tax : SGST is the element that is imposed on the intra-state supplies in parallel with CGST and which is charged by the concerned State Government. Applicability: SGST is applicable in terms of the supply of goods and services whose location of supply and place of the supplier are in the same state. The revenue obtained through SGST will be accruing to the account of the concerned State Government. The state of each state has its own State Goods and Services Tax Act, 2017. Despite the existence of various SGST legislations, there are basic legal characteristics like chargeability, classification, and the procedures, which are developed so that they are uniform across all the SGST acts in order to maintain the spirit of the dual GST. UTs SGST: UTs with their own legislatures and governments, namely and only Delhi and Puducherry, are included in the GST process as such States as a result of this exception. Integrated Goods and Services Tax: IGST is levied on intra-state supplies, and as such, it is only levied and collected by the Central Government. Applicability: IGST is applicable to inter-state supplies of goods and services, that is, the supplier and the place of supply are in other states or Union Territories. It is also applicable to imports and exports. Interstate supplies also include the supply made to or by a Special Economic Zone (SEZ) developer or an SEZ unit. IGST approximates to be the aggregate of CGST and SGST/UTGST. It applies one and the same tax rate. The Integrated Goods and Services Tax Act, 2017 governs IGST. IGST is an important mechanism in the promotion of smooth flow of credits between states. Central Government collates the IGST which is then shared between the Centre and the destination state (the state where the goods or services are consumed). Union Territory Goods and Services Tax: UTGST is a special type which is targeted at Union Territories (UTs) that lack their own elected legislatures. Imposed by the Government/Union Territory Administration. UTGST is imposed in addition to CGST on intra-UT supplies (supplies within these Union Territories). UTs that apply: This is the Andaman and Nicobar Islands, Lakshadweep, Chandigarh, Dadra and Nagar Haveli and Daman and Diu (since merged) and Ladakh. Like SGST: UTGST is likewise analogous to SGST, echoing its principles and rate structure, but is a tax that guarantees such regions a customized tax collection system. It is regulated by the Union Territory Goods and Services Tax Act, 2017. UTGST credit: UTGST may also be applied against UTGST and IGST liabilities, in the same manner as it is done with SGST. I hope this answer helps; if you have any further questions please don't hesitate to contact us. Thank you