GST stands for Goods and Services Tax. It is charged on the sale of goods and services. Under the GST regime, there are three different types of taxes introduced – IGST, CGST, SGST / UTGST. In addition to this, GST Compensation Cess is charged on specified goods.
1. IGST – Integrated GST
- IGST is charged in case of Inter-state supply i.e. when there is a sale of goods or services outside the state.
- It is collected by the Central Government. However, the revenue generated from IGST is shared by both the Central Government and State Government.
- The rate of IGST is equal to CGST+SGST. For example: If the GST Rate of a product is 18%, IGST would be charged at 18% of the sales value.
2. CGST – Central GST
- CGST is charged in case of Intra-state supply i.e. when there is a sale of goods or services within the state.
- Revenue generated from CGST goes to the Central Government.
- The rate of CGST is equal to SGST. For example: If the GST Rate of a product is 18%, CGST would be charged at 9% of the sales value and SGST would be charged at 9% of the sales value.
3. SGST – State GST or UTGST – Union Territory GST
- SGST or UTGST is applicable in case of Intra-state supply i.e. when there is a sale of goods or services within the state/ union territory.
- The revenue generated from SGST goes to the State Government and
- The revenue generated from UTGST goes to the concerned union territory authority
- Rate of SGST is equal to CGST. For example: If the GST Rate of a product is 18%, CGST is applicable at 9% of the sales value and SGST is applicable at 9% of the sales value.
Taxpayer should deposit IGST, CGST, SGST collected from the customer with the GST Department and report such sales in the GST Return.
Example – IGST, CGST, SGST / UTGST
Mr.A in Gujarat sells goods to Mr.B in Gujarat for Rs.50,000. Mr.B resells these goods to Mr.C in Madhya Pradesh for Rs.1,00,000. Now, let us understand the applicability of GST below.
Transaction 1 between Mr A & Mr B: Intra-State Sale
Since the goods are moving from one place to another within the State, CGST @9% and SGST @9% would apply.
CGST = Rs.50,000*9% = Rs.4,500
SGST = Rs.50,000*9% = Rs.4,500
- The invoice would show amounts of CGST and SGST separately.
- Mr.A would be liable to collect & pay an output tax of Rs.4,500 to the Central Government and Rs.4,500 to the Gujarat Government.
- Mr.B would get an Input Tax Credit of CGST Rs.4,500 and SGST Rs.4,500.
Transaction 2 between Mr.B and Mr.C: Inter-State Sale
Since the goods are moving from one state to another state, IGST @18% would apply.
IGST = Rs.1,00,000*18% = Rs.18,000
- The invoice would show the amount of IGST charged.
- Mr.B would be liable to pay an output tax of Rs.9000 (18,000-4500-4500)* to the Central Government after adjusting Input Tax Credit on the purchase.
- Mr.C would get an Input Tax Credit of IGST Rs.18,000.
* Adjust the CGST Credit with first CGST and then IGST. Adjust the SGST Credit with first SGST and then IGST.
UTGST i.e. Union Territory GST applies when there is sale of goods or services within a union territory. Following are the union territories in India:
* Daman and Diu
* Dadra and Nagar Haveli
* Andaman and Nicobar Islands
Eg: Mr.A located in Chandigarh sells goods to Mr.B in Chandigarh for Rs.10,000 taxable at GST @ 12%. In this case, Mr.A will collect CGST @ 6% of Rs. 600 and UTGST @ 6% of Rs. 600 from Mr.B.
Goods/sectors that are out of the GST ambit include alcohol and specified petroleum products like petroleum crude, high-speed diesel, motor spirit, aviation turbine fuel and natural gas. Alcohol for human consumption continues to attract state excise duty and VAT. Tobacco and tobacco-based products attract both excise duty and GST. Taxes such as stamp duty, toll tax, road tax, electricity duty etc. are not part of GST.
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Customs duty and cess as applicable along with IGST+ GST compensation cess. IGST and GST compensation cess shall be paid after adding all customs duty and customs cess to the value of imports.
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