Types of GST

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About GST

What is GST ?

GST is an abbreviation for the Goods and Service Tax. It is basically an indirect Tax which has been replaced by many direct taxes in India. The Goods and Services Tax was passed in the Indian Parliament on 29th of March 2017. The Act came into action on 1st of July,2017. The Goods and Services Tax Law in India is a discursive, multistage, destination-based tax that is foisted on every value addition.
On the basis of various financial requirements, the GSTs have been broadly classified in various types. Let’s have an overview of the types of GST’s available in India.

Types of GST

As the GST contains indirect Taxes for both the Central Government and the State Government, both the governments are now relying on the GST for their indirect tax revenue. Hence, the value of GST is of great importance. The four main types of GST include the following:
1. The State Goods and Services Tax (SGST)
2. The Central Goods and Services Tax (CGST)
3. The Union Territory Goods and Services Tax (GST)
4. The Integrated Goods and Services Tax (IGST)

1. The State Goods and Services Tax (SGST)

The SGST is one of the two taxes which is imposed on every state transaction of goods and services. The SGST is imposed by the state where the goods are being sold or obtained. It will replace all kind of existing state taxes including the VAT, the Entertainment Tax, Luxury, Sales Tax, Entry Tax, State Cesses and the Surcharges on any kind of the transactions that are being made with the involvement of goods and services. The State Government is the main claimer of the revenue which is earned under the SGST. To make the concept of SGST more understandable let’s go through an example.
Consider Naresh who’s from Gujarat and wants to sell some goods to Krishnan in Gujarat itself. The product’s original price is Rs10, 000 which will attract GST at 18 percent comprising of 9 percent of CGST (Central Goods and Services Tax) and 9 percent SGST (State Goods and Services Tax) rate. The SGST tax amount here is Rs Nine Hundred (9 percent of Rs 10,000) which is claimed by the State Government of Rajasthan. The product rate after the attachment of GST will be Rs 10,900.

2. The Central Goods and Services Tax (CGST)


The Central Goods and Services Tax is imposed by the Central Government of India on any of the goods and services tax transactions which are taking place within a state itself. It is one of the two taxes which is charged within every state transaction, the other one being SGST or the UTGST for Union Territories. CGST replaces all of the existing Central taxes including Service Tax, Central Excise Duty, CST, Customs Duty, SAD etc. The rate of CGST is usually equivalent to the SGST rate. Both fees are charged in accordance with the basic price of the product. Let’s go through an example in order to understand the concept more precisely.
In the above example where Naresh sells a product to Krishnan within the same state that is Rajasthan, he was required to pay two taxes. One was the CGST for the Central Government while SGST was for the state. The rate of CGST was 9 percent, the same as SGST. After the applicability of the CGSY (i.e. 9 percent of Rs 10,000)  the final cost of the product becomes Rs 11,800. So after all the credit and the tax issues being settled Naresh was authorized to sell his product to Krishnan at the amount of Rs 11,800.
As expected all the taxes in all the conditions discussed above are to be bared by the consumer’s end in the final cost, not by the manufacturer or the dealer of the product or the service. Since the GST is imposed on the consumption, the state where the product is originally manufactured is not mentioned in the collected tax. If the manufacturing state-imposed tax, the same will be transferred to the consuming state through the Central Government.

3. The Integrated Goods and Services Tax (IGST)

 The IGST or the Integrated Goods and Services Tax is applicable to the interstate transactions of goods and services, as well as on the goods imports, and further will distribute it among the respective states. The IGST is charged when a product or a service is moved from one state to another.  The IGST is in place to ensure either a particular state is dealing only with the Union Government the tax amounts will be settled separately not with every state. To know more about the concept of IGST
Considering the above example again where Naresh who is a manufacturer in Rajasthan is selling his goods of 10,000 worth to Krishnan who also resides in Rajasthan. As it is an interstate transaction, IGST will be applicable here. Assuming the GST rate to be 18 percent for the particular item, So, the IGST amount that would be chargeable will be of Rs 1800 (18% of Rs 10,000) and the refined rate of the product itself would be Rs 11,800.
Now the GST is basically a consumption tax which means that only the state where the goods are actually consumed will be getting the due benefits, irrespective of the manufacturing state.

4.The Union Territory Goods and Services Tax (UTGST)

The Union Territory Goods and Services Tax is the GST which is applied on the supply of goods and services in any of the five Indian Union Territories including Chandigarh, Andaman and Nicobar Islands, Dadra and Nagar Haveli, Lakshadweep and Daman and Diu. This GST is being charged in addition to the Central GST (CGST) as explained in the previous segment.  For any of the goods or services transaction within a UT, the sum of CGST and UGST is taken into consideration.
The reason for the separate implementation of GST for the UTs is that the common State GST (SGST) cannot be applied in a UT without any legal authority. Delhi and Pondicherry UTs already have their own legal authorities, so SGST is applicable to them.Similar to any of the tax type, GST also has provisions to give tax and credit benefits. The credits are applicable to the subsequent taxes on the same products or services.To sum up, all of the three GSTs namely the IGST, SGST, and CGST credits are usable against each other. Any of the IGST credit will be first used to deal with IGST tax, then CGST, and then will be set off to SGST.
This was a brief account of the types of GSTs available in India.

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