CGST, SGST, IGST, and UTGST: Full Form, Meaning, and Examples

The Goods and Services Tax (GST) system in India comprises several components, including State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), Integrated Goods and Services Tax (IGST), and Union Territory Goods and Services Tax (UTGST). Each component plays a crucial role in the country’s taxation framework. Terms like CGST, SGST, IGST or GST are common when you deal with taxation.

SGST and CGST are imposed on transactions within a state, where the state government gathers SGST and the government collects CGST. On the contrary, IGST applies to transactions between states. The government manages it. UTGST resembles SGST. It is enforced in union territories lacking an assembly. Businesses and individuals must grasp these elements to follow the rules under GST, calculate GST obligations correctly and maintain operations in India’s tax system.

Understanding SGST, CGST, IGST and UTGST

State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) form parts of the Goods and Services Tax (GST) structure in India. Individual states levy SGST, while the central government imposes CGST. IGST applies to inter-state transactions, ensuring seamless trade between states. UTGST is specific to Union Territories. Businesses must comprehend these components to ensure accurate tax payments, avoid penalties, and ensure compliance. 

Businesses and taxpayers must understand these aspects to comply with GST rules.

Understanding what is CGST and SGST is essential for businesses to ensure proper tax compliance.

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

1. CGST

CGST Full Form

CGST stands for Central Goods and Services Tax, which is charged by the central government on intrastate supplies of goods and services, and it is governed by the CGST Act of 2017.

What is CGST and When CGST is Applicable?

In simpler terms, GST Goods and Services Tax as a single tax divided between the central and state government. CGST is the central government’s share collected on intra-state transactions.

It’s an indirect tax levied by the Indian central government on the supply of goods and services within a state, also known as intra-state transactions.

If you have a pan India business, it is important to know what is SGST and CGST?

SGST is State Central Goods and Services Tax. SGST will also be levied on the same intra-state supply but governed by the State Government. This implies that both the Central and the State governments will agree on combining their levies with an appropriate proportion for revenue sharing between them.

Here’s when CGST applies:

When a seller makes a sale to a buyer within the same state. For example, if a company in Karnataka sells furniture to a customer also in Karnataka, CGST would be applicable.

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.

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2. SGST

SGST Full Form

SGST stands for State Goods and Services Tax. It is an indirect tax levied on intrastate supplies of goods and services by the State Government governed by the GST Act of 2017.

What is SGST and When SGST is Applicable?

SGST is the state government’s share of the GST on intra-state supplies. It works alongside CGST to create a unified tax system across India.

SGST applies on the supply of goods and services within a state, similar to CGST. Levied by the state government, the revenue collected from SGST goes directly to the state treasury, funding public services and development projects.

Here’s when SGST applies:

SGST applies whenever there is a sale of goods and services within the same state in India. For example, a clothing store in Maharashtra selling a dress to a customer in Maharashtra would be subject to SGST.

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.

3. IGST

IGST Full Form

IGST stands for Integrated Goods and Services Tax; it is a tax levied on all interstate supplies of goods and services. It is collected by the central government and governed by the IGST Act of 2017

What is IGST and When IGST is Applicable?

Integrated Goods and Services Tax (IGST) simplifies interstate trade in India. Unlike intrastate transactions where separate CGST and SGST apply, IGST acts as a single tax for goods and services moving across state lines, or between union territories and states.

In simpler terms, it’s like a one-stop ticket for interstate purchases, combining the central and state government’s tax share into a single levy.

Here’s when IGST comes into play:

When a seller in one state makes a sale to a buyer in a different state. For instance, if a company in Delhi ships clothes to a customer in Maharashtra, IGST would be applicable.

IGST is levied by the central government and the collected revenue is then divided between the central and state governments involved in the transaction.

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).

3. UTGST

UTGST Full Form

UTGST stands for Union Territory Goods and Services Tax. It’s a tax levied in India on the supply of goods and services within Union Territories (UTs). It functions similarly to SGST (State Goods and Services Tax) that applies within states

What is UTGST and When UTGST is Applicable?

The Union Territory Goods and Services Tax is a component of India’s Goods and Services Tax (GST) system. UTGST applies to goods and services supplied within the Union Territories of India, which include Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and the Andaman and Nicobar Islands.

One key aspect distinguishing UTGST from other GST components is that it is only specific to Union Territories. It operates within the GST law framework but has separate provisions for administration and collection.

Essentially, UTGST acts as the tax collected by the central government on sales of goods and services within specific Union Territories. The collected UTGST is then shared between the central government and the UT administration.

Example for UTGST with calculation

Let’s delve into a practical example to understand the Union Territory Goods and Services Tax (UTGST) application. 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.

Why is there a split into SGST, CGST, and IGST?

As CGST, SGST, IGST meaning is clear, let’s know the reason why there is a split between them. India’s Goods and Services Tax (GST) system comprises SGS, CGST and IGST. This breakdown reflects India’s structure, where central and state governments are authorised to impose taxes. State governments apply SGST on transactions within a state, while the government imposes CGST on the transactions. On the other hand, IGST is set by the government on transactions between states, including imports and exports. This separation ensures revenue sharing between the state governments and facilitates the smooth transfer of input tax credits nationwide. It also streamlines tax administration and compliance for taxpayers involved in state dealings. The GST system aims to establish a tax framework that enhances business operations and minimises tax cascading effects.

What Determines if CGST, SGST, IGST is Applicable?

Determining whether CGST, SGST, IGST applies to your transactions depends on various factors. When goods or services are supplied within the state, both CGST and SGST are imposed. Conversely, if the supply occurs between states, IGST is enforced.

The nature of the transaction and the specific goods or services involved also influence the GST component. Moreover, the location of both the supplier and recipient plays a role in determining the GST application. If both parties are situated in the same state, CGST and SGST are imposed. However, if they are in states, IGST becomes applicable.

Businesses and individuals can use their GST identification number (GSTIN) to confirm which GST component applies to their transactions. They can also refer to government-provided GST rules and guidelines for clarification.

How Are Input Tax Credits Adjusted?

Input Tax Credit (ITC)  means one can reduce the credit of taxes already paid on purchases from his GST liability arising from the sales of goods and services. 

Here are the rules to claim ITC under GST: 

1. To pay IGST – First, IGST credit will be used, followed by CGST or SGST as per the taxpayer’s preference.
2. For paying CGST – Starting from CGST credit, IGST credit will be used.
3. To pay SGST –  First SGST credit and the IGST credit will be used.

Suppose manufacturer A from Maharashtra sold goods worth INR 10,000 to dealer B in Maharashtra only. Then, dealer B resells the goods to dealer C in Gujarat for INR 15,000. Finally, dealer C sells the goods to an end-user in Gujarat for INR 30,000. Let’s assume that the goods sold are at 9% CGST, 9% SGST (for intrastate supplies), and 18% IGST (for interstate supplies). 

Here’s how the collection of tax happens after input tax credit adjustment:

	Maharashtra	Gujarat	Central Government
Step 1: For goods of INR 10,000 sold from A to B	10,000* SGST @ 9%= INR 900		10,000* CGST @ 9%= INR 900
Step 2: For goods of INR 15,000 sold by B to C			15,000*18%= INR 2,700  (-) CGST credit = INR 9,00 (-) SGST credit = INR 9,00 Net tax payable = INR 900
Step 3: For goods of INR 30,000 sold by C to D		30,000* SGST @ 9%= INR 2,700 (-) IGST credit = NIL Net payable = INR 2,700	30,000 CGST @ 9%= INR 2,700 (-) IGST credit = INR 2,700 Net payable = NIL
Total	900	2700	1800
Adjustment	(-) 900 Going to the centre		(+) 900
Final tax payable	NIL	INR 2,700	INR 2,700

 

Since GST is a destination-based tax, the state consuming the goods (in this case, Gujarat) will receive the GST amount. The state of Gujarat and the central government will receive INR 2,700 each. 

So this way, the central and state governments collect IGST, CGST, SGST.

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 GST invoice, refer to our GST invoice guide and create GST-compliant invoices using Razorpay Invoices. 

If you want more in-depth details about GST, stay updated with Razorpay Learn. 

Difference between CGST, SGST, and IGST

Let’s discuss the key difference between IGST CGST and SGST in this section. As a business owner or taxpayer, it’s vital to grasp the difference between CGST, SGST, and IGST in the Goods and Services Tax (GST) system. 

CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) are charged by central and state governments on the identical transactions made within a state. The central government collects CGST, while the state manages the SGST for each state. On the other hand, IGST (Integrated Goods and Services Tax) is collected by a central government on inter-state transactions. 

In contrast, SGST is collected by respective state governments on intrastate sales. CGST and SGST are designed to be internally limited to the states; this gives local governance autonomy, but IGST brings together a centralised system for inter-state transactions. However, these diverse provisions may simplify or complicate business tax compliance, primarily based on their operational location, determining the revenue collection venue.

Now as difference between IGST, CGST and SGST is totally clear, let’s dive into how IGST, SGST, and CGST are Collected.

How are IGST, SGST, and CGST Collected?

The collection of IGST, SGST, and CGST follows a process set up by governmental agencies operating at different administrative levels. For Integrated Goods and Services Tax (IGST), which is imposed on transactions between states, the government collects the tax. This ensures tax revenue distribution between the authority and the receiving state. In contrast, State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) are collected by the state governments and the central government, respectively, for transactions within a state.

While there may be variations in collection methods for each type of GST, they generally follow procedures. Businesses and individuals must register under GST. They are responsible for collecting tax from their customers and forwarding it to the government bodies. Failure to comply can lead to fines or legal repercussions.

In conclusion, Understanding the difference between CGST, SGST, IGST, and UTGST is crucial for businesses and individuals navigating India’s Goods and Services Tax (GST) system. While CGST and SGST apply to intrastate transactions, IGST covers interstate dealings, and UTGST is specific to union territories. Mastering these distinctions is essential for accurate GST compliance and efficient tax management in diverse scenarios.

Frequently Asked Questions (FAQs)

1. What kind of tax is GST?

GST meaning, which stands for Goods and Services Tax, is a value-added tax levied on the consumption of goods and services.

2. How do you find your HSN code?

The HSN (Harmonized System of Nomenclature) code is a Service Accounting Code (SAC) allotted to goods under GST. To find your HSN code, you can check out the GST portal. Alternatively, you can refer to the HSN code list found on various government websites. You must understand HSN & SAC meaning for accurately classifying goods and services.

3. Can you find the GST number by name?

Certainly, you can search for a taxpayer’s GST number or GSTIN (Goods and Services Tax Identification Number) using their name. The official GST portal offers a search feature where you can input the taxpayer’s name and access their GSTIN along with details such as GST registration documents ,  GST registration status, and GST registration date. If you face any problem in searching GST by name, you can also search GST by PAN from the official GST portal.

4. How many types of SGST are there?

There is only one form of SGST, which represents State Goods and Services Tax. State governments impose this tax on transactions involving goods and services.

5. What is IGST in simple words?

IGST stands for Integrated Goods and Services Tax. It applies to transactions involving the supply of goods and services between states or union territories within India.

6. What is the GST number?

The Goods and Services Tax Identification Number (GSTIN), commonly referred to as the GST number, comprises a 15-character code given to every taxpayer enrolled under the GST system.

7. How many UTGST are there in India? 

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