Types of Goods & Service Tax (GST)

GST is regarded as India's most significant indirect tax reform. The GST Bill's principal goal is to create a single tax system that applies from the manufacturing stage to the delivery of products or services to the final consumer. It's a single tax that includes a full set-off for taxes paid earlier in the global marketplace.

GST is a consumption based tax levied on sale, manufacture and consumption on goods & services at a national level. This tax will be substitute for all indirect tax levied by state and central government. GST would apply to all goods other than diesel, motor spirit, crude petroleum, aviation turbine fuel and natural gas. It would apply to all services barring a few to be specified.

Types of GST and its Explanation:

As per the newly implemented tax system, there are 4 different types of GST:

Central Goods and Services Tax (CGST)

State Goods and Services Tax (SGST)

Union Territory Goods and Services Tax (UTGST)

Integrated Goods and Services Tax (IGST)

Let's discuss about all GST levy one by one.

About the Central Goods and Services Tax (CGST) -

Under GST, CGST is a tax levied on Intra State (with in states) supplies of both goods and services by the Central Government and will be governed by the CGST Act. SGST will also be levied on the same Intra State supply but will be governed by the State Government.

It is collected along with the SGST or UGST, and the revenues collected are distributed between the State and the Central govt.

For example – If the goods or services are provided within State of Haryana, then along with SGST, CGST will also be collected.

Meaning of the State Goods and Services Tax (SGST) -

Under GST, SGST is a tax levied on Intra State supplies of both goods and services by the State Government and will be governed by the SGST Act. As explained above, CGST will also be levied on the same Intra State supply but will be governed by the Central Government.

GST imposed by specific State governments on the intra-State trade and services or trade within the state is called SGST. Here the revenues are earned by the State govt. due to SGST as the transaction occurred within the state.

Example: Let’s suppose Rajat is a dealer in Haryana who sold goods to Anurag in Haryana worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case, the dealer collects Rs. 1800 of which Rs. 900 will go to the Central Government and Rs. 900 will go to the Haryana Government.

What is Union Territory Goods and Services Tax (UTGST)?

Similar to how SGST is levied by the state governments on the intra-state supply of goods and services, UTGST is levied by the Union Territory governments. It refers to the tax levied on the intra-Union Territory supply of goods and services. It is governed by the UTGST Act and is levied along with CGST.

UTGST is similar to SGST and is levied in Union Territories which do not have their own legislature. UTGST is applicable on the supplies that take place in the Union Territories of Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep.

Please note that the Union Territories of Delhi and Puducherry will fall under SGST law as they have their own legislature. The order of ITC utilization of UTGST is similar to SGST. ITC of UTGST should first be set off against UTGST. Any balance remaining may be used to set off any IGST liability.

What is Integrated Goods and Services Tax (IGST)?

Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will be governed by the IGST Act. Here the SGST portion of the tax collected is given to the state, which is the consumer of the said goods or services. The IGST earned is then divided between the state and the central government.

IGST will be applicable on any supply of goods and / or services in both cases of import into India and export from India.

Example: A businessman Rajesh from Maharashtra had sold goods to Anand from Gujarat worth Rs. 1,00,000. The GST rate is 18% referring to 18% IGST. In such a case, the dealer has to charge Rs. 18,000 as IGST. This IGST will go to the Centre.