Types of GST in India – All You Need To know

What is GST?

The full form of GST is Goods and Services Tax also known as a value-added tax. It is levied on goods and services by the government of India. GST is an indirect tax for the country and is added to the final price of the product or service.

Under the new indirect tax, regime rolled out on 1 July 2017, the Goods and Services Tax (GST) has seen a considerable amount of benefits for the businesses.. However, the new tax regime has been beneficial in many ways and it has eliminated the cascading effects of taxes. To know more about the benefits of the GST check here.

How Many Types of GST Are There?

As per the newly implemented tax regime, there are four types of GST in India.

Let’s check them out in detail:

Types of GST and What it Means

In-depth understanding of the GST types below:

State Goods and Services Tax (SGST):

• SGST is a tax levied on the intrastate transactions of goods and services by the government. i.e. tax levied on goods and services purchased or sold within the state. During the Intrastate supply of goods or services, both SGST and CGST are imposed.
• Revenue earned via SGST is claimed solely by the respective state government.
• E.g. if a trader from Mumbai sold goods to a customer from Mumbai worth INR 3000 and the GST charged is 18% hence, it will be divided equally i.e. 9% as SGST and 9% CGST are levied. In this case, the total amount the trader charges will be INR 3540. Out of the revenue that is earned through GST under the head of SGST, i.e. INR 225, will go to the Mumbai state government in the form of SGST.

Central Goods and Services Tax (SGST):

• Similar to SGST, another type of GST is CGST is a tax levied on the intrastate transactions of goods and services by the government. I.e. tax levied on goods and services purchased or sold within the state. During the Intrastate supply of goods or services, both SGST and CGST are imposed.
• Revenue earned via CGST is solely claimed by the central government.
• If we take the same instance, if a trader from Mumbai sold goods to a customer from Mumbai worth INR 3000 and the GST charged is 18% hence, it will be divided equally i.e. 9% as SGST and 9% CGST are levied. In this case, the total amount charged by the trader ll be INR 3540. Out of the revenue earned from GST under the head of CGST, i.e. INR 225, will go to the Mumbai central government in the form of CGST.

Integrated Goods and Services Tax (IGST)

• IGST is a tax levied on the interstate supply of goods and services as well as imports and exports. The collection of IGST is the responsibility of the central government.
• Once the taxes are collected, they are further divided among the respective states by the central government.
• E.g. if a trader from Mumbai sold goods to a customer from Gujarat worth INR 3000 and the IGST charged will be based on the interstate transaction. Let’s assume IGST is 18% hence, the total amount charged by the trader will be

INR 3540. The IGST collected of INR 540, will go to the central government.

Union Territory Goods and Services Tax (UTGST/ UGST)

• IGST is a type of GST where the tax is imposed on the supply of goods and services by the Union Territories of India.
• The UTGST applies to the supply of goods or services in the Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra, Nagar Haveli, and Lakshadweep.
• The revenue earned by UGST is collected by the Union Territory government. UGST is a replacement for SGST in Union Territories. Hence, UGST will be levied in addition to CGST in Union Territories.

Conclusion

In conclusion, the implementation of Goods and Services Tax (GST) in India has revolutionized the tax system, bringing simplicity, transparency, and economic efficiency. With the types of GST in India i.e. CGST, SGST, IGST, and UTGST/UGST – catering to diverse transactions, GST has eliminated tax cascading and created a unified market. Businesses have benefited from streamlined compliance and enhanced competitiveness. Staying abreast of GST updates is crucial for businesses to leverage its advantages effectively. By embracing GST, India has paved the way for a brighter economic future, where businesses can thrive, consumers can benefit, and the nation can flourish.