There are 4 types of GST in India, namely IGST (Integrated Goods & Services Tax), SGST (State Goods & Services Tax), CGST (Central Goods & Services Tax) and USGST (Union Territory Goods & Services Tax).
When discussing taxes in India, a common question is, "how many types of GST" are there? GST, or Goods and Services Tax, is designed to ensure that taxes are fairly applied to goods and services.
To manage this, GST is split into four key types: CGST, SGST, IGST and USGST. Each type plays a unique role in distributing tax revenue between the central and state governments.
Let's explore these types of GST to understand their roles more clearly.
4 Types Of GST In India
There are four types of GST in India:
- Integrated Goods & Services Tax
- State Goods & Services Tax
- Central Goods & Services Tax
- Union Territory Goods & Services Tax
This is the full explanation of these four taxes:
1. Integrated Goods & Services Tax (IGST)
The Integrated Goods and Services Tax (IGST) is a type of tax that comes into play when goods or services are traded between two different states or across international borders. This tax is managed under the IGST Act.
The central government is in charge of collecting IGST. After collecting the tax, the central government then distributes the appropriate shares to the states involved in the transaction.
For instance, imagine a trader in West Bengal sells products worth Rs. 5,000 to a customer in Karnataka.
Since the sale is happening between two states, IGST will apply.
If the GST rate for these goods is 18%, the total cost to the customer will be Rs. 5,900.
Of this amount, Rs. 900 is IGST, which is sent to the central government for further distribution.
2. State Goods & Services Tax (SGST)
SGST, or State Goods and Services Tax, is a tax that state governments in India charge when goods or services are sold within the same state.
The rate of SGST varies depending on the specific goods or services being sold.
This tax allows state governments to collect revenue directly from transactions within their borders.
The money collected through SGST is used by the state to fund important projects like building infrastructure, improving public services, and investing in future development.
For businesses, SGST offers a benefit—they can use the SGST they’ve paid as a credit to reduce their overall GST liability.
This means businesses can lower the total tax they owe by subtracting the SGST they've already paid on their purchases.
3. Central Goods & Services Tax (CGST)
CGST, which stands for Central Goods and Services Tax, is a tax collected by the Central Government when goods or services are sold within a state.
This tax works alongside SGST, the tax collected by the state government. Businesses that are registered under GST must regularly file reports that include the CGST they owe on transactions within the state.
For instance, if a businessman in Madhya Pradesh sells goods worth Rs. 5,000 to a customer in the same state, both CGST and SGST will be charged.
If the GST rate on the sale is 18%, it is split equally between CGST and SGST, with each tax being 9%.
The customer will then pay a total of Rs. 5,900, which includes Rs. 5,000 for the goods and Rs. 900 for the GST.
Out of the Rs. 900 GST, Rs. 450 goes to the Central Government as CGST, and the other Rs. 450 goes to the State Government as SGST.
This ensures that both the central and state governments receive their share of the tax from the transaction.
4. Union Territory Goods & Services Tax (UTGST)
UTGST, or Union Territory Goods and Services Tax, functions similarly to SGST but is specifically for Union Territories.
Just as SGST is imposed by state governments for sales within their state, UTGST is used by the governments of Union Territories for transactions within their regions.
This tax applies to the sale of goods and services within Union Territories that lack their own legislative bodies.
The rules governing UTGST are outlined in the UTGST Act, 2017, and it is collected alongside CGST, the Central Goods and Services Tax.
UTGST is applied in Union Territories such as Ladakh, Andaman and Nicobar Islands, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, and Lakshadweep.
These areas do not have their own state governments, so UTGST is used there.
In contrast, Union Territories with their own legislative assemblies, such as Delhi, Jammu & Kashmir, and Puducherry, use SGST instead.
This means that these territories follow a different tax system compared to those without legislative bodies.
Difference Between IGST, UTGST, SGST and CGST
| Type | Full Form | Applicability | Collected By | Example |
|---|---|---|---|---|
| CGST | Central Goods and Services Tax | Within a single state | Central Government | Goods sold within Delhi |
| SGST | State Goods and Services Tax | Within a single state | State Government | Goods sold within Tamil Nadu |
| IGST | Integrated Goods and Services Tax | Inter-state transactions | Central Government | Goods sold from Delhi to Maharashtra |
| UTGST | Union Territory Goods and Services Tax | Union Territories | Central Government | Goods sold within Chandigarh |
Types Of GST Tax
In India, GST transactions fall into two main categories: intra-state and inter-state. These categories help ensure fair tax distribution between the Central and State Governments and simplify tax compliance for businesses.
- Inter-state transactions: These occur when goods or services are transferred between different states. In these cases, the Central Government collects a tax known as IGST (Integrated Goods and Services Tax). The Central Government then shares this tax with the states involved based on their respective shares.
- Intra-state transactions: These transactions happen within the same state. For these, the tax is split between the Central Government and the State Government. The Central Government receives CGST (Central Goods and Services Tax), while the State Government gets SGST (State Goods and Services Tax).
Therefore, whether a transaction is within one state or between states determines whether CGST, SGST, IGST, or UTGST (Union Territory Goods and Services Tax) will apply.
Replace Taxes with GST
| Type of Tax | What It Is | Where It Applies |
|---|---|---|
| GST (Goods and Services Tax) | A single tax for all goods and services | Across the whole country |
| VAT (Value Added Tax) | A tax added at each stage of production | Specific regions or states |
| Octroi | A tax on goods entering a city | City boundaries |
| Entertainment Tax | A tax on movie tickets, shows, etc. | Specific to certain events |
| Tax on Lottery | A tax on lottery winnings | Everywhere lotteries are held |
| Luxury Tax | A tax on high-end goods | Specific to luxury items |
| Purchase Tax | A tax on buying certain goods | Specific regions or states |
| Service Tax | A tax on services provided | Specific to service providers |
| Additional Excise Duty | An extra tax on certain goods | Across the country, on specific goods |
| Central Excise Duty | A tax on manufacturing goods | Across the country |
FAQ (Frequently Ask Question)
Q1. What are the 5 types of GST rates?
Ans. The GST rates are currently structured into five slabs: 0%, 5%, 12%, 18%, and 28%. Each rate is designated to specific categories of goods and services to ensure a comprehensive and balanced tax system across the nation.
Q2. What are the 4 types of GST?
Ans. CGST (Central Goods and Services Tax), SGST (State Goods and Services), IGST (Integrated Goods and Services Tax) and UTGST (Union Territory Goods and Services Tax).
Q3. What is CGST, SGST, and IGST?
Ans. There are primarily three different types of GST – State Goods and Services Tax or SGST. Central Goods and Services Tax or CGST. Integrated Goods and Services Tax or IGST.
Q4. What is RCM in GST?
Ans. The Reverse Charge Mechanism (RCM) in GST is a system where the recipient of goods or services is liable to pay the tax instead of the supplier.
Q5. How is GST calculated?
Ans. The GST Calculator operates based on a straightforward formula: GST Amount = (Selling Price x GST Rate) / 100.
.png)
0 Comments