What is SGST, CGST, IGST and UTGST?
GST Services
Goods and Service Tax (GST) regulations are destination-based tax, in contrast to Value Added Taxation (VAT) legislation.
It indicates that it needs to be gathered and deposited in the state where the final user or consumer purchases the goods or services.
India is a federal nation where the Central and State governments are each given the authority to levy taxes and generate money.
In India, the GST is one of the most well-known tax reforms. Since Independence, it has introduced consistency to the indirect taxation system and assisted in removing the cascading effect of the many taxes that had been imposed in the past under that taxing system in various forms of GST.
GST categories
The Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax are the four major variations of GST (UTGST). They are all taxed at various rates.
The Goods and Services Tax (GST), a new indirect revenue regime, was implemented on July 1, 2017.
However, there is still a lot of uncertainty about how it would affect businesses and tax collection.
Several local taxes on imposed goods and services have been absorbed by the Goods and Services Tax (GST).
How do these taxes relate to any particular transaction?
Depending on the taxable transaction and whether it is intrastate or interstate, the applicable Goods and Services Tax (GST) will apply in a certain way.
- CGST and SGST/UTGST shall be applicable in an intra-state supply where the provider of goods or services or both and the place of supply are in the same State or Union territory. The provider of goods or services or both will collect these taxes and deposit them with the appropriate authorities. The relevant State Governments or governments of Union territories would be responsible for collecting the SGST and UTGST, while the Central Government would collect the CGST.
The different GST rates that are set down are 0.25 percent, 5 percent, 12 percent, 18 percent, and 28 percent. In any instance, the combined CGST, SGST, UTGST, or IGST rate cannot exceed 28%.
- IGST shall be applied in an interstate supply if both the supplier and the point of supply are located in separate states when providing goods or services to or by Special Economic Zones (SEZ) entities, whether, during import, export, or both, the transaction is regarded as interstate under the GST Law.
Any IGST that is collected will be paid directly to the federal government and distributed in line with the GST Council's suggestions.
Overview of the CGST, SGST, and IGST
The GST introduces a single tax with three components—CGST, SGST, and IGST—as opposed to the previous system of several taxes such as Central Excise, Service Tax, State VAT, etc.
Intra-state transactions, which deliver products or services within a state, result in the collection of both the CGST and SGST.
While only IGST will be collected when a state-to-state supply of goods or services occurs, also known as an inter-state transaction.
To determine the applicability of taxes, the use of the proper GSTIN becomes crucial.
Therefore, before entering the GST number in the sales invoice, confirm with the help of the GST search tool.
It should be noted that the GST is a destination-based tax, meaning that it is only paid by the state where the commodities are consumed and not by the state where they are produced.
Application of IGST and It’s fullform
Integrated Goods and Services Tax is the name of the tax in its entirety. Under the GST system, the IGST tax is applied to all intrastate supplies of goods and/or services between two or more states or Union Territories.
The levy and collection of IGST would also be governed by the IGST Act, 2017, as amended from time to time.
Any supply of goods and/or services, whether imported into India or exported from India, shall be subject to the IGST.
Note: In the IGST
- Exports would not be taxed at all.
- The Central and State governments will split the tax revenue.
An example of an IGST calculation
M/s Ramesh Ltd in Chandigarh sold some goods to Abhinav Ltd in Dadra & Nagar Haveli & Daman & Diu for INR 100,000.
The 18% IGST is clearly mentioned in the 18% GST rate. In this case, the merchant must add INR 18,000 as IGST.
The Center would receive this IGST payment and divide it amongst Daman & Diu and Dadra & Nagar Haveli ( depending on whether this is the ultimate consuming state).
Application of CGST and It’s fullform
It is frequently questioned, "what is the entire form of CGST." Central Goods and Services Tax is the official name of the tax.
As part of the GST, the Central Government imposes and collects the CGST tax on intrastate supplies of both goods and services.
As a result, the provisions of the CGST Act 2017, as modified from time to time, regulate the levy and collection of CGST.
The same intrastate supply will be subject to both the CGST and an equivalent amount of SGST, which the specific state government will administer.
In other words, CGST and SGST will apply if a seller sells a product to a customer inside the same state, such as Telangana.
This suggests that the federal and state governments will agree to combine their taxes and set a fair revenue-sharing ratio.
Section 8 of the CGST Act makes it clear that taxes must be paid on all intrastate supplies of goods and/or services; however, the rate of tax cannot be higher than 14% per item.
It should be noted that only CGST or IGST input tax credits may be used to offset any tax burden incurred under CGST, not SGST.
Application of SGST and It’s fullform
SGST stands for State Goods and Services Tax. Under the GST, the state government of the specific state where the sold product is consumed imposes a similar amount of SGST on intrastate supplies of both goods and services.
As a result, each state's SGST Act, 2017, as revised from time to time, such as the Telangana GST Act, governs the levy and collection of SGST.
All state taxes, including the value-added tax, entertainment tax, luxury tax, admission tax, etc., were combined under the SGST after it was introduced.
As previously stated, the same intrastate supply will be subject to CGST, which the Central Government will administer.
CGST and SGST calculation examples
Assume M/s Rajesh Ltd., a Chattisgarh-based merchant, sold Vijay Ltd. products valued at Rs. 10,000. The GST rate is 18% and is made up of 9% for the CGST and 9% for the SGST.
In this scenario, the dealer gathers Rs. 1,800 in total and deposits it on the GST portal, of which Rs. 900 will be divided between the Central Government and Rs. 900 will go to the Chattisgarh Government.
Application of UGST and It’s fullform
The Union Territory Goods and Services Tax is known as UTGST. UTGST is a tax imposed on the supply of goods and services inside a Union Territory by a small number of Union Territories governments, just like the state governments impose SGST.
It refers to the tax imposed on the provision of goods and services within a Union Territory. It is assessed alongside CGST and is controlled by the UTGST Act, 2017, as amended from time to time.
A tax known as UTGST, comparable to SGST, is levied in Union Territories devoid of a legislature. In Jammu & Kashmir, Ladakh, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep, the Andaman & Nicobar Islands, and Dadra & Nagar Haveli, UTGST is charged on purchases.
Please be aware that because they have their legislatures, Delhi and Puducherry, both of which are Union Territories, would be subject to SGST law.
The UTGST ITC is used in a similar order as the SGST ITC. Before triggering the ITC of UTGST, UTGST should be considered. Any IGST liability may be offset with the remaining balance.
Why was the tax divided into SGST, CGST, and IGST?
India is a federal nation, and its Constitution grants both the federal government at the Center and the states the authority to levy and collect taxes.
Both governments must raise money through taxation in the form of GST to fulfil their various duties.
GST is being collected concurrently by the Center and the States. The three-type tax structure is used to enable taxpayers to claim credits against one another and uphold the principle of "One Nation, One Tax."
How can you know if the CGST, SGST, or IGST is applicable?
To determine which tax is applicable—the Central Goods & Services Tax (CGST), the State Goods & Services Tax (SGST), or the Integrated Goods & Services Tax—determine whether the transaction is an intrastate delivery or an interstate delivery (IGST).
- When the location of the supplier and the site of supply, or the location of the buyer, are in the same state, that situation is known as an intrastate supply of products or services. Sellers must obtain both CGST and SGST from buyers in intrastate transactions. Deposits for both the CGST and SGST are made with the State and Central governments, respectively.
- When the place of supply and the supplier's location are in different states, there has been an interstate supply of products or services. Additionally, a transaction is deemed interstate when products or services are exported or imported or supplied to or by an SEZ unit. Sellers are required to collect IGST from customers while conducting interstate business.
How are credits for input taxes adjusted? GST Offset Liability
The reasoning used to reconcile the input tax credits for CGST, SGST, and IGST with those taxes' obligations is outlined in the CGST Rules.
One must abide by the guidelines to avoid future fines because proper ITC utilisation is essential.
Let's say that manufacturer A sells goods for Rs. 10,000 to dealer B in Maharashtra from Maharashtra.
For Rs 17,500, Dealer B resells them to Trader C in Rajasthan.
Ultimately, trader C sells to final consumer D in Rajasthan for Rs. 30,000.
The hypothetical tax rates are as follows: CGST = 9%, SG = 9%, and IG = 9 + 9 = 18%.
Since A is selling this to B within the state of Maharashtra, CGST at 9% and SGST at 9% will be applied.
Trader C purchases goods from Dealer B (of Maharashtra) (Rajasthan). This sale is, therefore, interstate and subject to IGST at 18%.
Rajasthani trader C sells to end-user D, who is also a resident of Rajasthan. Again, it is an intra-state sale; thus, CGST at 9% and SGST at 9% will be applied.
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Conclusion
The Goods and Services Tax (GST) is a destination-based tax system implemented in India on July 1, 2017 that replaced various local taxes on goods and services.
The GST has four different versions: the Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST), each with a distinct taxing rate.
In intra-state supplies, the provider of goods or services or both and the place of supply being in the same state or Union territory will collect and deposit CGST and SGST/UTGST with the central and state governments, respectively.
IGST will be collected and paid directly to the federal government in inter-state supplies.
FAQs Related to What is SGST, CGST, IGST and UTGST
1. What is GST's full name?
Goods and Services Tax is the official name of the GST. On the supply or sale of specific goods, products, and services, it imposes an indirect tax in the form of a charge.
2. What GST variations exist?
The several kinds of GST are CGST, SGST, UTGST, and IGST. Sometimes a cess is imposed as well.
3. What taxes are applied to intrastate supplies?
The taxes assessed on an intra-state supply are CGST and the corresponding SGST. If the transaction takes place inside a Union Territory, UTGST is added to the CGST.
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