Types Of GST In India- CGST, SGST, IGST & UTGST Explained.

. 9 min read
Types Of GST In India- CGST, SGST, IGST & UTGST Explained.

Table of Contents

1. GST In India

2. What Is GST And Types Of GST?

3. Types Of GST

4. Standard GST Slabs

5. GST Tracking: How Does It Work?

6. Difference Between CGST SGST IGST UTGST

7. Key Takeaways

1. GST In India

The government launched the GST or the Goods and Services Tax in July 2017. The objective of this move was to make the process of taxpaying uncomplicated and simple! Before GST made its debut as the One Nation’s ‘One Tax,’ consumers had to shuffle between paying taxes for sales, services, entry, custom, etc. separately. But such is not the case anymore. Today, a single GST bill will replace all these varied and multiple taxes. Let’s learn more about GST and how it works!

2. What Is GST And Types Of GST?

GST is an indirect tax. This means that it has subsumed all the different taxes and converted those into one homogenous tax that is collected by the Centre and/or the State. In India, the goods and services sector is divided into five different levels, and each level demands a different tax value to be collected, i.e. , 0%, 5%, 12%, 18% and 28%. These taxes either go to the State or the Central government depending on the type and mode of transaction that has taken place. This is where it becomes crucial to understand SGST, CGST, and IGST.

Different types of GST

3. Types Of GST

What is significant to know is that when one files to pay a GST tax, the tax is directly being collected by the Centre and/or the State. Then it is the responsibility of the Centre/State to reimburse the tax to all the parties that were involved in the different stages of production. The Centre/State is the supervisor distributing the taxes to the sub-parties justly. The ‘One Tax’ or the GST is divided into four sub-taxes:

1- The State Goods and Services Tax (SGST)

The SGST makes up for the tax that is collected by the State. The State government of every state imposes it and since GST’s introduction, it has subsumed all the prior-existing taxes such as sales tax, entertainment tax, and entry tax to name a few.

2- The Central Goods and Services Tax (CGST)

The CGST is the second of the two taxes (other than SGST) that is imposed on transactions and consumption of various goods and services. The Central government imposes it, and hence collected by the Centre. The CGST is inclusive of other taxes like the State tax, CST, SAD, etc.

Types of GST

3- The Integrated Goods and Services Tax (IGST)

As the name of the tax suggests, the IGST is an integrated type of tax that is levied on interstate transactions of goods and services. The IGST is only collected when the movement of the transaction is from one state to another. The IGST goes straight to the Centre from the dealer since the Centre handles the dynamics that play between two states involved in the dealership. From here on, it is distributed to the State/s since the IGST tax is shared between the Central and State Government.

4- The Union Territories Goods & Service Tax (UTGST)

UTGST is applicable when GST is levied on the Union Territories of India. The main reason behind formulating the UTGST bill is to levy and collect tax methodologically on every Intra Union Territory supply of goods and services, just like levied in the other states of India. UTGST emphasises almost similar characteristics as that of SGST and CGST cannot take care of the necessary provisions in the union territories. Hence, there was a need for forming or introducing UTGST to serve the same purpose.

4. Standard GST Slabs

5%- Only applicable for Essential day to day items like- poultry, bread, cereals, pulses, etc.

12%- Mandatory Standard Slab rate

18%- Textiles, telecom, retail, etc.

28% & above- Luxury based goods like- cars, high-end cosmetics, clothing, and more.

All these mandatorily fall under the CGST slab and will be levied inclusively during the purchases.

5. GST Tracking: How Does It Work?

How does one calculate GST and its types? How do we know what exactly SGST, CGST and IGST are? The best way to understand GST and its types is through a simple example. Refer to the chart below for clarity.

Three types of GST

Let's take a hypothetical supply chain consisting of Person A, Person B, and Person C. Person A and B are both from the state of Maharashtra, whereas Person C is based in Gujarat. In this specific example, let’s consider the tax value to be 18%. Now, when Person A supplies their goods and services to Person B, Person A will have to give 9% CGST to the Centre and 9% SGST to the state of Maharashtra. When Person B forwards this supply to Person C, who is in the state of Gujarat, Person B will have to pay 18% IGST to the Centre. This clearly shows how CGST and SGST are levied on intrastate supplies of goods and services whereas IGST is only charged on interstate supply of goods and services.

6. Difference Between CGST SGST IGST UTGST

  • GST or Goods and Services Tax levied out in India are categorised into 4 types exclusively.
  • They are known as- IGST CGST SGST UTGST
  • Let's understand their full form-
  • IGST- Integrated Goods and Services Tax
  • SGST- State Goods and Services Tax
  • UTGST- Union Territory Goods and Services Tax
  • CGST- Central Goods and Services Tax

7. Key Takeaways

GST was introduced as the new method of tax registration just so that filing several taxes could be avoided. With GST also came the added benefit of knowing the difference between intrastate and interstate supplies and identifying how much of your tax is benefitting the State and how much is collected by the Centre. Within GST, these categories, i.e. SGST, CGST, IGST, have excellently provided a level of transparency to the taxpayers. Along with that, GST also brings about transparency in the taxes imposed on goods and services.

The three types of taxes under GST compensate for the several taxes that used to exist before. GST and its three categories are meant to make India’s objective of ‘One Nation, One Tax’ a worldwide success and a prime example of the ease of taxpaying!

Also read:
Goods & Services Tax: The Ultimate FAQ Guide
How to pay GST online? Step-by-Step Guide

GST type and its collections

FAQs

Q. What are the 4 types of GST?

Ans- The four different types of GST are:

  1. State Goods and Services Tax (SGST)
  2. Central Goods and Services Tax (CGST)
  3. Integrated Goods and Services Tax (IGST)
  4. Union Territory Goods and Services Tax (UTGST)

Q. What are the different types of GST slabs?

Ans- The GST Council has divided the collection units under four tax slabs of 5%, 12%, 18% and 28%.

Q. What is SGST in GST?

Ans- The full form of SGST in GST is State Goods & Services Tax. It is one of the sub-taxes levied by the respective state government on intra-state transactions of goods and services.

Q. What is SGST and CGST?

Ans- The SGST tax is collected by the State Government while the CGST tax is collected by the Central Government.

Q. What is IGST, CGST & SGST?

  1. CGST- Levied by Central Government.
  2. SGST- Levied by State.
  3. IGST- Levied when there are interstate transactions.

Q. How to calculate GST?

Ans- The GST Calculator process for all transactions is done with keeping in mind the following percentages:

Electronics, Cinema Theatres, Alcohol- 28% and above

Public transportation, food, dairy, restaurants, and fuel- 5%

Handicrafts, textiles, retail, and telecom services- 18%

Luxury items, shopping, and dining- 30%

Along with that, you have to calculate on the types of GST, the bill is generated for i.e, CGST, SGST, UTGST, & IGST.

To add GST:

GST Amount= (Original Cost x GST%)/100

Net Price= Original Cost + GST Amount

To remove GST:

GST Amount= Original Cost – [Original Cost x {100/(100+GST%)}]

Net Price= Original Cost – GST Amount.

Q. What are the benefits of GST?

Ans- The following are the benefits or advantages of GST:

  1. It has eliminated the cascading impact of tax and increased the threshold for registration.
  2. Online payment and purchase procedure has become easier.
  3. Advanced performance of logistics and regulation of unorganised sectors between companies.
  4. Encouraged in lowering prices and helping the poor and middle class.
  5. Same pricing for branded products across the country and transparency amongst buyers.

Q. What items are exempted from GST?

Ans- The services exempted or not applicable for GST Law are- Poultry, Hotels priced under 1000, Stationary, Handlooms, Contraceptives, Education, and Healthcare.

Q- What Is Exempted From GST?

Ans- The GST exemption list 2021 includes-

  1. Poultry
  2. Dairy
  3. Pulses
  4. Cereals
  5. Hotels priced under 1000 Rupees
  6. Stationary
  7. Handlooms
  8. Contraceptives
  9. Education
  10. Healthcare

Q. Is there a major difference between the 3 sub-types of GST?

Ans- The significant and major difference between the 3 types of Goods and Services Tax, i.e. CGST, SGST, IGST is while the first two focus on taxes levied on Intrastate transactions, the third type of GST, i.e. IGST emphasises on taxes levied on Interstate transactions or exchange.

Q. Why are there 3 different types of GST?

Ans- This distinction in GST (SGST, CGST, IGST) is made so that identifying taxes levies for transactions within a state and between different states becomes easier. There is a distinction so that it helps differentiate between inter and intrastate transactions. The taxpayer can know how much tax accounts for the State government and how much tax will go to the Central government and It helps ease the presence of any indirect taxes

Q. Who levies taxes in India?

Ans- India is a federal country where the power to levy taxes is given to both, the Centre and the State. Hence, in India, the Goods and Services Tax (GST) is levied by the Central government and the State government.