All about CGST, SGST, IGST & UTGST

Our indirect taxation system, Goods and Service Tax (GST) came into effect on July 1st 2017. GST was introduced to replace the multiple tax system in India under ‘One Nation, One Tax’. It unifies the Indian market by levying one indirect tax across the nation.

Goods and Service Tax has three pillars based on whether the transaction is intrastate or interstate:

1. Central Goods and Service Tax (CGST)is governed by CGST Act.
2. State Goods and Service Tax (SGST)is governed by SGST Act.
3. Integrated Goods and Service Tax (IGST)is governed by IGST Act.

CGST AND SGST are levied on intrastate transactions, which refers to transactions taking place within a state i.e. when the seller and buyer’s location is in the same state. The goods travel from the seller to the buyer within the same state.

CGST is imposed by the central government, whereas SGST is imposed by the state government. India, being a federal nation, has assigned the powers to levy and collect taxes to both Central and State governments. Both governments need to generate tax revenue in order to perform their respective responsibilities. As per section 8 of the GST Act, the rate of SGST and CGST cannot exceed 14% each.

IGST is levied on interstate transactions, which refer to transactions taking place between two states i.e. when the seller and buyer’s location is not in the same state. It is applicable in both cases of import into India and export from India. Under IGST, the tax is shared between central and state governments and the export is zero rated.

Any IGST credit can be used to set off the IGST liability first and then either CGST or SGST liability can be set off as per preference.

Note: It is mandatory to generate an e-way bill to transport goods from one place to another (inter-state as well as intrastate if the value of goods exceeds more than Rs. 50,000.)

About Union Territory Goods and Service Tax (UTGST)

• UTGST is similar to SGST, it is levied on transactions taking place within the Union Territories by Union Territory Governments. When the seller and buyer’s location fall in the same Union Territory.
• Union Territories which do not have a legislature are included:

1. Andaman and Nicobar Islands
2. Chandigarh
3. Dadra and Nagar Haveli
4. Daman and Diu
5. Lakshadweep

Hence, the Union Territories of Delhi and Puducherry fall under SGST law as they have their own legislatures.

• UTGST is collected along with CGST by the central government. It is governed by UTGST Act.
• Any goods/services bought or sold outside the UT, fall under IGST. CGST along with SGST/UTGST equals IGST imposed by the central government on inter-state transactions.
• An Input Tax Credit (ITC) of UTGST should be used to set off the UTGST liability first and the balance may be used to set off any IGST liability.

For more updates and the latest GST news, check out IRIS GST Blog page.