Components of GST and Explanation

We will discuss the components of GST, SGST, CGST, IGST, UTGST and understand why GST is split in these Acts.

There are 4 different types of GST -

SGST(State Goods and Services Tax)

SGST is a tax levied on Intra State supplies of both goods and services by the State Government and governed by the SGST Act. Due to SGST as the transaction occurred within the state. The revenue collected through State Goods and Service Tax is earned by the state government where the transaction is made. For example – Suppose goods manufactured and sold within Haryana state, then SGST will be collected by the Haryana state. SGST subsumes before taxes such as VAT, entertainment tax, luxury tax, octroi, lottery, and purchase tax.

CGST(Central Goods and Services Tax)

Like the State GST, CGST's Central Goods and Services Tax is a tax under the GST regime that applies to similar (within-state) transactions. Both the central and state governments agree on combining their levies with appropriate ratios for their revenue sharing. However, it is mentioned in Section 8 of the GST Act that all intra-state supplies of goods and services will be taxed, but the tax rate will not exceed 14%.

IGST(Integrated Goods and Services Tax)

Integrated Goods and Services Tax is the tax levied on inter-state goods and services transactions. It is applicable to imports and exports as well. The IGST Act governs the IGST. Under IGST, the body responsible for collecting the taxes is the Central Government.

IGST also helps you claim the Input Tax credit. It's a facility that checks cascading tax and allows business owners you save at every stage of the supply chain.

UTGST(Union Territory Goods and Services Tax)

Union Territory Goods and Services Tax or UTGST is a model of the State Goods and Services Tax (SGST), which is charged on the supply of goods and services in the Union Territories (UTs) of India. The Union Territory Government collects the revenue earned from UTGST. UTGST is a replacement for SGST in union territories. Thus, UTGST is levied in addition to CGST in the Union Territories. The UTGST Act governs UTGST. UTGST applies to the supply of goods and services in the Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra and Nagar Haveli, and Lakshadweep.

Why split into SGST, CGST, and IGST?

India is a federal country where both the Center and the States are delegated powers to levy and collect taxes. The two governments have different responsibilities to perform according to the constitution, which requires them to raise tax revenue. The Center and the state are simultaneously implementing GST.

Three types of tax structures are implemented to help taxpayers take the credit against each other, thus ensuring "one nation, one tax".

CGST, SGST, and IGST- rates of common items

Goods	CGST	SGST	IGST
Household necessities like coffee (except instant), tea, spices, edible oil, and sugar. Life-saving drugs, coal, and Indian sweets are covered under the present GST slab.	2.5%	2.5%	5%
Processed Food and computers	6%	6%	12%
Hair oil, soap and toothpaste, Capital goods, and Industrial intermediaries.	9%	9%	18%
Luxury items, premium cars, and consumers durables such as AC and refrigerator, cigarettes, aerated drinks, and High-end motorcycles	14%	14%	28%

Disclaimer: This article is intended for general consumption only. The information in the article was accurate at the time of publication, but it is subject to change due to changes in government rules and regulations. The contents of the blog may not be copied unless prior permission is obtained.

Our GST guidebook and experts will help you with all your Goods and Services Tax Queries. Please contact us on [phone] to know more.