Types of GST in India: IGST, SGST, CGST & UGST. Learn what they are and which taxes they replaced under the GST regime

India has four types of GST: Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). This simple division makes it easy to tell the difference between interstate and intrastate goods. It also reduces indirect taxes. Read about these three kinds of GST to find out more.

Types of GST in India

There are 4 GST types in India:

• Integrated Goods and Services Tax (IGST): Levied on inter-state transactions.
• State Goods and Services Tax (SGST): Imposed by state governments on intra-state sales.
• Central Goods and Services Tax (CGST): Collected by the central government on intra-state supplies.
• Union Territory Goods and Services Tax (UTGST): Applicable to transactions in Union Territories.
• GST aims to streamline taxation by replacing multiple indirect taxes with a unified system, promoting ease of compliance and reducing tax cascading.
   

Components of GST and its explanation
 

1. State Goods and Services Tax or SGST

• State tax: SGST is levied by state governments on intra-state supplies of goods and services.
• Revenue sharing: Revenue collected under SGST goes directly to the respective state government.
• Part of dual GST: SGST operates alongside Central GST (CGST) in the dual GST structure.
• Compliance: Businesses must comply with SGST provisions and file returns with state tax authorities.
• Input Tax Credit: Input tax credit is available on SGST paid, which can be utilised against SGST liability.
• Rates: SGST rates are uniform across states but can vary by product or service.

2. Central Goods and Services Tax or CGST

• Central tax: CGST is levied by the Central Government on intra-state supplies of goods and services.
• Revenue collection: The revenue collected under CGST goes directly to the Central Government.
• Dual GST structure: CGST works alongside State GST (SGST) for intra-state transactions.
• Input Tax Credit: Businesses can claim input tax credit on CGST paid, which can be set off against CGST or IGST liabilities.
• Compliance: Businesses must comply with CGST provisions and file returns with central tax authorities.
• Uniform rates: CGST rates are standardized across India, varying by product or service category.

3. Integrated Goods and Services Tax or IGST

• Inter-state tax: IGST is levied on inter-state supplies of goods and services, including imports and exports.
• Revenue distribution: The revenue collected under IGST is shared between the Central and State Governments based on the destination state.
• Single tax: IGST replaces separate taxes on inter-state transactions, providing a streamlined tax structure.
• Input Tax Credit: IGST also helps you claim an input tax credit. It is a facility that checks cascading taxes and allows business owners to save at every stage of the supply chain.
• Compliance: Businesses involved in inter-state trade must comply with IGST provisions and file returns accordingly.

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Additional read: E-Way Bill.
 

4. Union Territory Goods and Services Tax or UGST

• Union territory tax: UTGST is levied on intra-Union Territory supplies of goods and services, applicable in Union Territories without a legislature.
• Revenue collection: The revenue collected under UTGST goes directly to the Union Territory’s administration.
• Dual GST structure: UTGST is implemented alongside Central GST (CGST) for intra-Union Territory transactions.
• Input Tax Credit: Businesses can claim input tax credit on UTGST paid, which can be used against UTGST liabilities.
• Compliance: Businesses in Union Territories must comply with UGST provisions and file returns with the Union Territory tax authorities.
• Applicable areas: UTGST applies in Union Territories like Chandigarh, Lakshadweep, and Andaman & Nicobar Islands.
   

Difference between types of GST

Taxes replaced by GST

GST was implemented with the aim of achieving “One Nation, One Tax” to simplify the complexities of multiple registrations for various indirect taxes. As a result, GST consolidated several Central and State indirect taxes, including:

Types of GST Tax

The main types of GST are determined based on the nature of the transaction, and include:

• Inter-state transactions: These transactions occur between two different states, where the GST is allocated between the Central government and the state where the goods are consumed or the service is utilised.
• Intra-state transactions: A transaction that takes place within the same state is referred to as an intra-state transaction. In this case, the GST is shared between the Central government and the state where the transaction occurs.

Application of different types of GST

Who is liable to pay GST?

The following categories of individuals are responsible for paying GST:

• Individuals registered under GST and engaged in making taxable supplies.
• GST-registered persons who are required to pay under the reverse charge mechanism.
• Persons registered under GST and obligated to deduct tax at source (TDS).
• E-commerce operators registered under GST.
• E-commerce operators registered under GST and required to collect tax at source (TCS).
• Individuals supplying goods or services on behalf of a supplier or manufacturer (agents).

Conclusion

Understanding how CGST, SGST, IGST, and UTGST function helps businesses manage taxes efficiently and remain compliant. To support cash flow or business growth, you can check the latest business loan interest rates and use a business loan eligibility calculator to identify the right loan that meets your financial requirements and keeps your operations running smoothly.

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