What is SGST, CGST, IGST & UTGST? Types of GST Explained

Types of GST: SGST, CGST, IGST and UTGST

The Goods and Services Tax (GST) forms the cornerstone of India’s taxation system. It is divided into four distinct components, each designed for specific types of transactions:

• SGST (State GST): Levied by individual states on transactions within their borders.
• CGST (Central GST): Charged by the central government on intrastate transactions.
• IGST (Integrated GST): Applicable for interstate transactions, ensuring a seamless tax flow between states.
• UTGST (Union Territory GST): Similar to SGST, but applies in specific union territories without a legislative assembly.

1. What is SGST?

SGST stands for State Goods and Services Tax. It is an indirect tax imposed by state governments on intrastate supplies of goods and services.

As part of the GST framework, SGST ensures that state governments receive their share of tax revenue for intrastate transactions, contributing to a unified tax system across India.

SGST replaces earlier state-level taxes such as purchase tax, luxury tax, VAT, and octroi, simplifying the tax system. 

1.1 When is SGST Applicable?

SGST applies to transactions involving the sale of goods and services within the same state. For instance, if a clothing store in Maharashtra sells a dress to a customer also in Maharashtra, SGST would be applicable.

In union territories like Chandigarh, Puducherry, and the Andaman and Nicobar Islands, SGST is replaced by Union Territory Goods and Services Tax (UTGST).

1.2 SGST Example With Calculation

Let’s consider a hypothetical scenario to understand the application of State Goods and Services Tax (SGST). Imagine you run a clothing store in Maharashtra and sell a saree worth ₹10,000 to a customer within the state. The applicable GST rate on sarees is 5%, including CGST and SGST.

In this case, the SGST rate would be 2.5% (half of the total GST rate). Therefore, the SGST amount on the saree would be calculated as follows:

Calculation of SGST: 

SGST = (SGST rate/100) * Sale value

= 10,000 * (2.5/100) = ₹250

Hence, in this transaction, you would charge ₹250 as SGST, which the state government collects.

Related Read: List of Goods and Service Tax GST Rates, Slab & Revision 2024

2. What is CGST?

CGST stands for Central Goods and Services Tax. It is an indirect tax levied by the central government on intrastate supplies of goods and services, as outlined in the CGST Act of 2017.

Under the GST framework, CGST applies to transactions within a single state. It ensures that the central government receives its share of tax revenue for these intrastate supplies.

2.1 When is CGST Applicable?

CGST applies when a sale of goods or services takes place within the same state. For instance, if a company in Karnataka sells furniture to a customer also in Karnataka, CGST is applicable to that transaction.

It is charged alongside an equal amount of State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST), depending on the region. While CGST is administered by the central government, SGST or UTGST is collected by the respective state or union territory government.

2.2 CGST Example With Calculation

To illustrate the practical application of the Central Goods and Services Tax (CGST), let’s consider an example

As a business owner, you sell a product for ₹10,000. The current GST rate for the product might be 18%, which means a total GST of ₹1800 (18% of ₹10,000) needs to be added. For intrastate sales (within the state), CGST and SGST (State GST) are typically half of the total GST rate each (assuming equal rates). So, CGST would be ₹900 (9% of ₹10,000), which is half of ₹1800.

Calculation of CGST: 

GST =  Value of Goods x GST rate / 100

= ₹10,000 x 18% / 100 = ₹1800

CGST = Total GST amount / 2 (assuming equal CGST and SGST rates)

= ₹1800 / 2 = ₹900

Therefore, the CGST amount levied on this transaction is ₹900.

Check out Razorpay’s GST Verification tool, a powerful resource for streamlining GST number verification and searching for Central and State GST jurisdiction.

3. What is IGST?

IGST stands for Integrated Goods and Services Tax. It is a tax levied on interstate supply of goods and services, governed by the IGST Act of 2017. IGST is collected by the central government and plays a crucial role in simplifying interstate trade across India.

Unlike intrastate transactions where both CGST and SGST/UTGST are applied, IGST consolidates these into a single tax for goods and services moving between states or union territories. Essentially, it combines the tax share of both the central and state governments into one streamlined levy.

3.1 When is IGST Applicable?

IGST applies when a sale takes place between different states. For example, if a company in Delhi ships clothes to a customer in Maharashtra, IGST is applicable.

The central government collects IGST, and the revenue is distributed between the central and state governments involved in the transaction.

3.2 IGST Example With Calculation

In this scenario, as a business owner in Delhi, when you sell goods worth ₹10,000 to a customer in Maharashtra, the Integrated Goods and Services Tax (IGST) will be applicable at 18% per the GST regulations.

Calculation of IGST: 

• IGST = (Value of Goods) x (IGST Rate/100)
• = ₹10,000 x (18/100)
• = ₹1,800

Therefore, the IGST amount levied on this interstate transaction is ₹1,800.

The collected IGST of ₹1,800 by the central government is then divided, with ₹900 going to the central government and ₹900 to the receiving state (Delhi).

4. What is UTGST?

UTGST stands for Union Territory Goods and Services Tax. It is a tax levied on the supply of goods and services within Union Territories (UTs) in India. UTGST functions similarly to SGST, but it applies specifically within UTs instead of states.

UTGST is a component of India’s GST system and applies to Union Territories like Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and the Andaman and Nicobar Islands. It follows the GST framework but has unique provisions for administration and collection.

4.1 When is UTGST Applicable?

UTGST applies when goods or services are supplied within a Union Territory that does not have its own legislative assembly. For example, transactions occurring in Chandigarh or Lakshadweep would be subject to UTGST.

4.2 Example for UTGST with calculation

Suppose you are a business owner in Chandigarh and sell goods for ₹15,000. The GST rate is 12%, with UTGST applicable at 6%. 

Calculation of UTGST: 

• UTGST = (Value of Goods) x (UTGST Rate/100)
• = ₹15,000 x (6/100)
• = ₹900

Therefore, the UTGST amount levied on this transaction is ₹900.

Key Difference Between CGST, SGST, and IGST

Let’s discuss the key difference between IGST, CGST, and SGST:

Feature	CGST (Central Goods & Services Tax)	SGST (State Goods & Services Tax)	IGST (Integrated Goods & Services Tax)
Nature	Central Government Tax	State Government Tax	Central Government Tax
Applicability	Intrastate transactions (within a state)	Intrastate transactions (within a state)	Interstate transactions (between states)
Collection	Collected by Central Government	Collected by the respective State Government	Collected by Central Government
Purpose	Generates revenue for the Central Government	Generates revenue for the respective State Government	Facilitates seamless trade and revenue sharing between Central & State Governments
Example	Sale of goods from a store in Delhi to a customer in Delhi	Sale of services by a company in Mumbai to a client in Mumbai	Sale of goods from a factory in Haryana to a distributor in Karnataka

How Different Types of GST Are Applied in Transactions

Scenario	Applicable GST	Split or Rate	Reason
Seller & Buyer in Same State (e.g., Maharashtra)	SGST & CGST	9% each (if total GST rate is 18%)	Divided between state and central government
Example: Seller in Maharashtra sells to a buyer in Maharashtra (Rs. 10,000)	– SGST: Rs. 900 – CGST: Rs. 900	Total GST: Rs. 1,800
Seller & Buyer in Different States (e.g., Maharashtra to Karnataka)	IGST	18% (if total GST rate is 18%)	Simplifies interstate trade by collecting a single tax
Example: Seller in Maharashtra sells to a buyer in Karnataka (Rs. 10,000)	IGST: Rs. 1,800	Total GST: Rs. 1,800

Additional Factors:

While the location of supplier and recipient is primary, the nature of the transaction and specific goods/services involved might influence the GST component in rare cases. Refer to government-issued GST rules for such specific situations.

Verifying GST Applicability:

Businesses and individuals can utilize their GST Identification Number (GSTIN) to confirm the applicable GST component for their transactions. Additionally, government-provided GST guidelines offer further clarification.

Understanding the Split: Why SGST, CGST, and IGST?

India’s GST system utilizes SGST, CGST, and IGST for a reason:

• SGST (State GST): Lets state governments to collect tax on intrastate transactions (within a state), promoting fiscal autonomy.
• CGST (Central GST): Provides central control with a consistent tax component across all states.
• IGST (Integrated GST): Simplifies interstate trade (between states) with a unified tax structure, facilitating seamless movement of goods and services.

Benefits of the GST Split System

• Enhanced Revenue Sharing: The clear division ensures a fair distribution of tax revenue between the central and state governments.
• Streamlined Tax Administration: It simplifies compliance for businesses operating both within and across states, minimizing administrative burdens.
• Reduced Tax Cascading: The GST system, through separate taxes, aims to eliminate the “tax on tax” effect, leading to a more efficient tax structure.
• Improved Business Environment: A unified and predictable tax framework fosters a more business-friendly climate, encouraging economic activity across India.

How Are Input Tax Credits Adjusted?

Input Tax Credit (ITC) allows businesses to reduce the GST paid on purchases from their GST liability arising from the sales of goods and services. The rules for claiming ITC under GST are:

1. To Pay IGST: First, use IGST credit, followed by CGST or SGST as per the taxpayer’s preference.
2. To Pay CGST: Start with CGST credit, then use IGST credit.
3. To Pay SGST: Use SGST credit first, followed by IGST credit.

Example of ITC Adjustment

Assume:

• Manufacturer A in Maharashtra sells goods worth INR 10,000 to dealer B in Maharashtra.
• Dealer B resells the goods to dealer C in Gujarat for INR 15,000.
• Dealer C sells the goods to an end-user in Gujarat for INR 30,000.
• GST rates: 9% CGST, 9% SGST (intrastate), 18% IGST (interstate).

Here’s how the tax collection and ITC adjustment work:

Step	Description	Maharashtra	Gujarat	Central Government
Step 1	Goods of INR 10,000 from A to B	10,000 * SGST @ 9% = INR 900		10,000 * CGST @ 9% = INR 900
Step 2	Goods of INR 15,000 from B to C		15,000 * IGST @ 18% = INR 2,700	(-) CGST credit = INR 900 (-) SGST credit = INR 900 Net tax payable = INR 900
Step 3	Goods of INR 30,000 from C to D		30,000 * SGST @ 9% = INR 2,700	(-) IGST credit = INR 2,700 Net payable = NIL
			30,000 * CGST @ 9% = INR 2,700	(-) IGST credit = INR 2,700 Net payable = NIL

Summary:

• Maharashtra: Final tax payable = NIL
• Gujarat: Final tax payable = INR 2,700
• Central Government: Final tax payable = INR 2,700

Adjustment:

• Maharashtra’s INR 900 is adjusted and transferred to the Central Government.
• Gujarat receives INR 2,700 as the final payable amount.

You will have to issue GST-compliant invoices to pass on the credit for the taxes paid. The invoice should include the necessary details such as name, address, GSTIN of the supplier and the recipient of goods, HSN codes of the goods supplied, and so on. And if you want to know how to generate a GST invoice, refer to our GST invoice guide and create GST-compliant invoices using Razorpay Invoices.

Key Points to Remember About GST

• Unified Tax System: GST integrates multiple indirect taxes into a single tax system, simplifying the taxation process.
• Intrastate vs. Interstate: SGST and CGST apply to intrastate transactions, while IGST applies to interstate transactions.
• Tax Credits: Input Tax Credit (ITC) allows businesses to offset GST paid on purchases against GST liability on sales, reducing overall tax burden.
• Compliance: Businesses must be registered under GST if their turnover exceeds the prescribed threshold limit, and they must comply with periodic filing and payment requirements.
• Invoice Requirements: GST-compliant invoices must include details like GSTIN, HSN codes, and the tax amounts (CGST, SGST, IGST).
• Digital Filing: GST returns and payments are processed through the GST portal, requiring businesses to maintain digital records.
• Revenue Sharing: Revenue from CGST and SGST is retained by the central and state governments, respectively, while IGST revenue is shared between both.
• Penalties: Non-compliance with GST regulations, including incorrect filing or failure to pay taxes, can result in penalties and legal consequences.

Frequently Asked Questions

1. What is the full form of CGST?

CGST stands for Central Goods and Services Tax.

2. What is the full form of SGST?

SGST means State Goods and Services Tax.

3. What is the full form of UGST?

UGST stands for Union Territory Goods and Services Tax.

4. What is the full form of IGST?

IGST stands for Integrated Goods and Services Tax.

5. How is IGST Adjusted Against CGST and SGST?

IGST is first used to offset IGST liability. Any remaining credit is applied to CGST, and if there’s still leftover credit, it can be used to offset SGST or UTGST.

6. What taxes are levied on an intra-state supply?

For intra-state supplies (transactions within the same state), the following taxes are levied:

1. CGST (Central Goods and Services Tax): Charged by the central government.
2. SGST (State Goods and Services Tax): Charged by the state government.

7. How many types of SGST are there?

There is only one form of SGST, which represents State Goods and Services Tax.

8. How many UTGST are there in India? 

India has only one form of UTGST implemented in the country’s union territories.

9. What types of transactions are subject to UTGST?

UTGST applies to supplies of goods and services within Union Territories of India, such as Chandigarh and Puducherry.

10. Can IGST be adjusted against future CGST or SGST liabilities?

Yes, IGST can be adjusted against future CGST and SGST liabilities. Businesses can claim a credit for IGST paid on inputs or purchases against their CGST and SGST liabilities for intra-state transactions.