The Government of India introduced the Goods and Services Tax (GST) Act across the country, including the Union Territories (UT) in 2017. This resulted in earlier taxes, such as Value Added Tax (VAT), Central Excise and Service Tax, being subsumed into a single indirect tax system, now known as GST. The main idea of raising these taxes under one umbrella is to establish a single country tax concept in India. Since GST is essentially a destination-based levy, an end-user who purchases either products or services or both are liable to pay the Goods and Services Tax (GST) levy is imposed by the State in which the goods or services are bought or both are purchased and not by the State in which the goods or services are consumed.
GST Goods and Service Tax is a reforming financial tax system incorporated in the Indian constitution for the structuring of all company units into the tax-paying entity pool with fair regard. Goods and utility taxes shall be levied in order to subsume all indirect taxes. Here we clarify all the relevant facets of taxes and the GST. There are three major tax elements, CGST, SGST, and IGST. A short introduction for beginners, as the exact nature of all these components and the role they play in the tax economy of the GST. The GST bill has been passed, the Goods and Service Tax Act will include CGST, SGST, and IGST. CGST and IGST will be charged by the Federal Government, and SGST will be levied by the Government of the Province. In this post, you will be learning about What Exactly SGST, CGST, and IGST Are?
How GST is assessed and imposed on a range of goods and services
To determine whether the Central Goods and Services Tax (CGST), the State Goods and Services Tax (SGST) or the Combined Goods and Services Tax (IGST) would apply to a taxable transaction, it is also important to first understand whether the transaction is an intra-state or inter-state supply.
Intra-state supply of products or services: an intra-state supply of goods and/or services refers to the area or position of the manufacturer and the place of supply, i.e. the location of the purchaser of goods and/or services in the same state. Thus in intra-state deals, the dealer must buy both CGST and SGST from the purchaser. The CGST shall be deposited in the accounts of the Federal Government and the SGST shall be deposited in the accounts of the Government of the State.
Interstate sale of products or services: on the other hand, interstate supply of goods and/or services applies to the region or position of the producer and to the area of supply in various states. In addition, when products and/or services are manufactured or exported, or when the delivery of goods or services is rendered to or from the SEZ (Special Economic Zones) unit, the trade is considered to be an interstate supply. In an interstate trade, the vendor/seller is expected to receive IGST from the purchaser/customer.
Tax on Goods and Services Forms (GST)
The Goods and Services Tax (GST) structure is divided into three broad forms of taxation. This is explained in the following.
- SGST (tax on public goods and services)
- CGST (Tax on Core Goods and Services)
- Integrated Goods and Services Levy (IGST)
- UTGST (Tax on Union Territory Goods and Services)
The separate state GST shall be enforced in order to preserve the constitutional rights of state governments, where they may levy taxes on different goods or services or both that are sold or bought from a specific state.
- Tax on Public Goods and Services (SGST)
The Government Goods and Services Tax (SGST) is a form of tax imposed on domestic suppliers of goods and services. The tax shall be imposed by the Government of the State in accordance with the provisions of the SGST Act, 2017. Any tax obligation gained under SGST can only be assessed against SGST or IGST (Integrated Goods and Services Tax) input tax credit (ITC). It would also eliminate all prevailing state taxes, including VAT, State Income Tax, Amusement Tax, Luxury Tax, Entry Tax, State Taxes and Surcharges on any form of activity relating to goods and services. The Government of the State is the main taxpayer of the SGST.
- Charge on Central Products and Services (CGST)
The Central Goods and Services Tax (CGST) is a form of tax imposed on domestic goods and services suppliers. The tax is levied by the central government in conjunction with the CGST Act, 2017. In addition, SGST, which is regulated by the Government of the State, is also responsible for the same intra-state procurement of goods and services. It is one of the taxes to be levied on any intra-state trade i.e. goods and services provided in that State, and the other is SGST (or UTGST for Union Territories). CGST shall replace all current Central Taxes, including Service Tax, Central Excise Duty, CST, Customs Duty, SAD, etc. In general, the price paid as a CGST is equal to the SGST limit. Both taxes shall be paid at the general price of the goods.
- Integrated Goods and Services Levy (IGST)
The Integrated Goods and Services Tax (IGST) is a form of tax levied on all interstate suppliers of goods and services and is governed under the provisions of the IGST Act, 2017. Taxes shall be levied on every supply of goods and services, both in cases where those goods and services are imported into and exported from India. In addition, the selling of goods and services is to be zero-rated under the IGST and the tax is to be shared between the state and central governments. This tax will be accumulated with the help of the central government and will in addition, be distributed to the respective states. IGST shall be charged as a commodity or commodity is moved from one state to another. It is designed to ensure that the State has to deal solely with the Government of the Union and not individually with another State in order to settle the amounts of the inter-state levy.