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CGST- Central Goods & Services Tax- A Complete Guide!

CGST- Central Goods & Services Tax- A Complete Guide!

. 4 min read

What is CGST and other chief details?

The biggest tax reform in India i.e, GST India has seen many ups and downs since its launch in July 2017. The government has promised remarkable changes in the tax sector and only development for the country moving forward.

The CGST Act manages all forms of taxes that are charged by the Central Government of India. This singular taxation format has helped in relieving the companies, businesses, and the common man to get rid of the unnecessarily imposed indirect taxes via the previous rulings. It caters to all suppliers, manufacturers along with consumers who are involved with daily businesses or just regular retail services.

Before we go into the briefer details on what CGST does for our economy let us first understand its definition.

CGST is a tax that's levied by the central government in place of additional indirect taxes on intrastate supply of goods and services. This act is strictly governed and administered under the CGST Act of 2017. In some cases, SGST is also levied on similar intrastate supplies, but those will be collected by the state government.

For Example

Suppose, Mr. Kumar is a commodities dealer in Arunachal Pradesh and has sold/supplied goods to another dealer Mr. Arjun in some other city of Arunachal Pradesh worth Rs. 40,000. The general GST percentage or slab rate for intrastate goods or supplies is a total of 18%.

In this case, Mr. Kumar will be collecting Rs. 7200, out of which 3600 rupees will be levied by the Arunachal Pradesh government and the remaining amount will be charged to the Central government as GST tax.

What All Taxes Are Levied Under CGST?

The Central Government charges the following taxes-

  1. Central Excise Duty
  2. Additional Excise Duties
  3. Service Tax
  4. Additional & Special Additional Duty of Customs
  5. Central Cesses
  6. Surcharges on Goods & Services
  7. Countervailing Duty
  8. SAD (Special Additional Duty) for imported goods

Taxes Exempted From CGST

The two taxes that aren't levied on a central level are- Customs Duty, R & D Cess.

GST Fact: Maharashtra and Karnataka have consistently been the major states in the collection for the highest GST rates in the country.

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.

  • As noted in Section 8 of the GST Act, that both SGST & CGST shall be levied on all intrastate supplies of goods and services, but the rate cannot surpass the 14% tax rate slab.
  • The state and central government tax rates are always calculated with an equal percentage.
  • This law is applicable all over the country except Jammu & Kashmir.
  • No GST registration is required for businesses whose annual turnover is below 20 lakh rupees. (10 lakh for the North-Eastern states)
  • Your GST Ledger should consist of- Output CGST & Input CGST.
  • Dealers are also mandatory to pay TDS (Tax Deducted at Source) in addition to CGST.
  • Supplies within state boundaries are also obligated to pay CGST.
  • All rates are changeable anytime by the GST Council.
  • Intrastate supplies that are affected by a taxable person situated in Union Territory(UT) will be accountable to pay UTGST.
  • Maximum CGST for any slabs cannot extend over 40% including luxury goods.

Here are the few of the commonest questions asked about CGST.

What is CGST full form?

The full form of CGST is Central Goods & Services Tax, an indirect tax collected by the central government.

What is SGST and CGST?

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

What is CGST, SGST, and IGST?

CGST- Central Goods & Services Tax, refer to the example above.

SGST- State Goods & Services Tax.

IGST- Integrated Goods & Services Tax.

How much is CGST and SGST?

Both the taxes have an equal percentage of slabs and will depend on your commodities minus the exempted goods. Refer:

How to calculate CGST?

Choose the slab percentage, for example:

Products sold worth 1000 rupees will be eligible for an 18% GST rate, then the net price calculation will go like-

2000+ (2000X(18/100)) = 2000+360 = Rs. 2360.

IN CONCLUSION

GST promises a better economy and a big step towards becoming a developed country like the United States. The major issues that are being tackled are making every business getting registered under GST and going paperless. CGST has been successful in helping consumers avoid additional and indirect taxes on all items for a couple of years now.

Also Read:
A complete guide to file GST online in India
10 Things You Should Know About Before Starting A Business
Top-10 Cities to Do Business in India