• Types of GST

    The new indirect tax regime under the Goods and Services Tax (GST) which was rolled out on 1 July 2017, had witnessed a considerable amount of confusion over how the new taxation system will affect businesses and the payment of taxes. The Goods and Services Tax (GST) has subsumed a number of local taxes that were levied on goods and/or services.

    What are the different types of Goods and Services Tax (GST)?

    As per the newly implemented tax system, there are 4 different types of GST:

    • Integrated Goods and Services Tax or IGST
    • State Goods and Services Tax or SGST
    • Central Goods and Services Tax or CGST
    • Union Territory Goods and Services Tax or UTGST

    Additionally, the government has fixed different taxation rates under each, which will be applicable to the payment of tax for goods and/or services rendered.

    1. Integrated Goods and Services Tax or IGST: The Integrated Goods and Services Tax or IGST is a tax under the GST regime that is applied on the interstate (between 2 states) supply of goods and/or services as well as on imports and exports. The IGST is governed by the IGST Act. Under IGST, the body responsible for collecting the taxes is the Central Government. After the collection of taxes, it is further divided among the respective states by the Central Government. For instance, if a trader from West Bengal has sold goods to a customer in Karnataka worth Rs.5,000, then IGST will be applicable as the transaction is an interstate transaction. If the rate of GST charged on the goods is 18%, the trader will charge Rs.5,900 for the goods. The IGST collected is Rs.900, which will be going to the Central Government.
    2. State Goods and Services Tax or SGST: The State Goods and Services Tax or SGST is a tax under the GST regime which is applicable on intrastate (within the same state) transactions. In case of intrastate supply of goods and/or services, both State GST and Central GST are levied. However, the State GST or SGST is levied by the state on the goods and/or services that are purchased or sold within the state. It is governed by the SGST Act. The revenue earned through SGST is solely claimed by the respective state government. For instance, if a trader from West Bengal has sold goods to a customer in West Bengal worth Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9% CGST and 9% SGST. The total amount to be charged by the trader, in this case, will be Rs.5,900. Out of the revenue earned from GST under the head of SGST, i.e. Rs.450, will go to the West Bengal state government in the form of SGST.
    3. Central Goods and Services Tax or CGST: Just like State GST, the Central Goods and Services Tax of CGST is a tax under the GST regime which is applicable on intrastate (within the same state) transactions. The CGST is governed by the CGST Act. The revenue earned from CGST is collected by the Central Government. As mentioned in the above instance, if a trader from West Bengal has sold goods to a customer in West Bengal worth Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9% CGST and 9% SGST. The total amount to be charged by the trader, in this case, will be Rs.5,900. Out of the revenue earned from GST under the head of CGST, i.e. Rs.450, will go to the Central Government in the form of CGST.
    4. Union Territory Goods and Services Tax or UTGST: The Union Territory Goods and Services Tax or UTGST is the counterpart of State Goods and Services Tax (SGST) which is levied on the supply of goods and/or services in the Union Territories (UTs) of India. The UTGST is applicable on the supply of goods and/or services in Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra and Nagar Haveli, and Lakshadweep. The UTGST is governed by the UTGST Act. The revenue earned from UTGST is collected by the Union Territory government. The UTGST is a replacement for the SGST in Union Territories. Thus, the UTGST will be levied in addition to the CGST in Union Territories.

    Difference between different types of Goods and Services Tax (GST):

    Types of GST Authority which is benefitted Priority of Tax Credit use Who is it collected by? Transactions which are applicable (Goods and Services)
    CGST Central Government CGST IGST Central Government Within a single state, i.e. intrastate
    SGST State Government SGST IGST State Government Within a single state, i.e. intrastate
    IGST Central Government and State Government IGST CGST SGST Central Government Between two different states or a state and a Union Territory, i.e. interstate
    UTGST/UGST Union Territory (UT) Government UTGST IGST Union Territory (UT) Government Within a single Union Territory (UT)

    The taxes that were replaced by the Goods and Services Tax (GST):

    The implementation of the Goods and Services Tax (GST) replaced a number of taxes of both the state and the centre. The levies that were replaced are listed below:

    • List of State taxes:
      • Value Added Tax (VAT) or Sales Tax
      • Octroi
      • Entertainment Tax
      • Tax on Lottery or Betting or Gambling
      • Purchase Tax
      • Luxury Tax
    • List of Central taxes:
      • Service Tax
      • Additional Excise Duty
      • Central Excise Duty and so on
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