Table of Contents
What is CGST?
CGST stands for Central Goods and Services Tax, is a tax levied by the central government on the supply of goods and services within a state in India. It replaces all earlier central indirect taxes such as VAT, service tax and central excise duty, to create a unified tax structure for intrastate transactions.
Related Read: What is IGST?
How to Calculate CGST?
STEP 1: Determine the transaction value: This is the price at which goods or services are sold.
STEP 2: Identify the CGST rate: Based on the type of goods or services.
STEP 3: Apply the formula: Calculate CGST using the formula above.
Formula for Calculating CGST
The formula for calculating CGST is straightforward:
CGST = (CGST Rate / 100) * Taxable Value
CGST Calculation with Example
Common list of CGST applicable items include electronics, food and beverages, clothing, and professional services.
Here’s an example to illustrate it better:
Imagine you run a business in Delhi and sell a table for ₹10,000. The applicable GST rate on furniture is 18%, split equally into 9% CGST and 9% SGST. Therefore, ₹900 is charged as CGST and ₹900 as SGST, making the total cost for the customer ₹11,800. The ₹900 collected as CGST goes to the central government, while the ₹900 collected as SGST goes to the Delhi state government.
Related Read: GST Rate on Furniture – Latest Wooden, Plastic, & Steel Furniture GST Rates
CGST Slab Rates
CGST Slab Rate |
Examples of Goods & Services |
| 0% | Essential goods like fresh fruits, vegetables, and bread |
| 5% | Items such as essential food items, transportation services, and some medicines. |
| 12% | Products like processed foods, computers, and certain services. |
| 18% | Majority of goods and services, including smartphones, restaurant services, software and banking services |
| 28% | Luxury goods such as high-end cars, luxury hotels, tobacco, and high-end electronics. |
| Special Rates | Certain goods/services may have special rates, including specific sectors like mining or telecommunications. |
Related Read: GST on Cars in India: GST Rates for New, Used and Electric Cars
Features of CGST
The Central Goods and Services Tax (CGST) is a crucial component of India’s indirect tax regime.
Its core features include:
- Levy and Scope: CGST is imposed by the Central Government on the intra-state supply of goods and services.
- Input Tax Credit (ITC): Businesses can offset the tax paid on inputs against the tax charged on outputs, improving cash flow.
- Self-Assessment: Taxpayers are responsible for calculating and remitting the tax, promoting transparency and accountability.
- Dual Control: While the Central Government levies CGST, its administration and collection are shared with state governments.
- Technology-Driven: The GST system relies heavily on technology for registration, returns filing, and payment.
- Anti-Profiteering Measures: Provisions to ensure that the benefits of reduced tax rates are passed on to consumers.
Benefits of CGST
- Streamlined taxation: Multiple indirect taxes have been consolidated into a single tax, simplifying the tax structure for businesses.
- Input tax credit: Businesses can set off the tax paid on purchases (inputs) against the tax collected on sales (outputs), reducing the overall tax burden.
- Better compliance: The GST regime, including CGST, is technology-driven, making it easier to monitor and enforce tax compliance.
- Multiple tax slabs: Different tax rates are applied to various goods and services, allowing for differentiated taxation based on product categories.
- Composition scheme: Small taxpayers can opt for a simplified tax regime with lower compliance requirements and a fixed tax rate.
- Reduction in tax evasion: The GST system with robust tracking mechanisms has made tax evasion more difficult.
- Single indirect tax: The introduction of GST, including CGST, has created a uniform tax system across the country, eliminating cascading effects of taxes.
About CGST Act
The CGST Act, 2017 is a key component of India’s Goods and Services Tax (GST) framework. It governs the levy and collection of Central Goods and Services Tax on all intra-state supplies of goods and services. The Act outlines provisions for self-assessment by taxpayers, input tax credit, compliance audits, and recovery of tax arrears. Designed to streamline tax administration and reduce the tax burden, the CGST Act ensures a uniform tax structure across states, facilitating easier business operations and more efficient tax collection.
CGST Rules
1. Tax Invoice Issuance
- Issue a tax invoice for all taxable goods and services if registered for GST.
- For GST composition scheme registrants, issue a bill of supply instead.
2. Invoice Requirements
- Ensure each invoice has a unique serial number and is noted in sequential order.
- Include your name, address, place of supply, and GSTIN on the tax invoice.
3. GST Rates
- CGST and SGST are equally filed. For a GST rate of 18%, CGST is 9% and SGST is 9%.
- For out-of-state sales, levy IGST.
4. Purchasing Advice
- Prefer to avoid buying goods or services from unregistered dealers.
5. GST Filing
- Ensure accurate GST filing for both intra-state and inter-state transactions.
6. Documentation
- Issue a tax invoice for all chargeable sales of goods and services.
- Collect tax invoices for all purchases made.
- Include both your GSTIN and the client’s GSTIN in your documents.
7. Timely Submission
- Submit all documentation within the required time frame to avoid penalties.
Read About: Difference Between SGST, CGST, IGST, UTGST
FAQs
1. What is the full form of CGST?
The CGST full form is Central Goods and Services Tax.
2. Who is required to register under CGST?
Businesses with an annual turnover exceeding INR 20 lakhs (INR 10 lakhs for special category states).
3. What is the threshold for CGST registration?
The threshold is INR 20 lakhs for most states and INR 10 lakhs for special category states.
4. How do I register for CGST?
You can register for CGST through the GST portal by submitting the required documents and information.
5. How is the place of supply determined for CGST?
The place of supply is determined based on the location of the supplier and the place of consumption of goods or services.
6. Who bears the burden of CGST (buyer or seller)?
The buyer bears the burden of CGST as it is added to the purchase price.
7. How do I file CGST returns?
CGST returns can be filed online through the GST portal by following the prescribed format and guidelines.
8. What is the deadline for filing CGST returns?
The deadline for filing monthly CGST returns is the 20th of the following month.
9. How do I make CGST payments?
CGST payments can be made online through the GST portal using various payment methods like net banking, credit/debit cards, and NEFT/RTGS.
