Types of GST in India- What is CGST, SGST and IGST?
Goods and Services Tax (GST) is a comprehensive indirect tax that has replaced various indirect taxes levied by the Central and State Governments in India. The GST regime was implemented on July 1, 2017, with the aim of bringing uniformity in taxation and simplifying the tax structure. The GST regime has subsumed various indirect taxes such as central excise duty, service tax, VAT, entertainment tax, luxury tax, and many others.
Under the GST regime, all the goods and services are classified into different tax slabs, such as 0%, 5%, 12%, 18%, and 28%. The tax rate for each good or service is determined by the GST Council, which is a constitutional body that recommends measures for the implementation of GST. The GST Council also decides on the division of revenue between the Central and State Governments, and any other matter related to GST.
In the GST regime, businesses are required to register for GST if their annual turnover exceeds a certain threshold limit. Registered businesses are required to file monthly, quarterly, or annual GST returns, depending on their turnover.
One of the benefits of the GST regime is that it has brought transparency and efficiency in the tax system. It has also reduced the tax burden on the end consumer by eliminating the cascading effect of taxes, which occurred under the previous tax system.
The GST regime is a comprehensive indirect tax system that has replaced various indirect taxes levied by the Central and State Governments in India. Under the GST regime, all goods and services are classified into different tax slabs, and businesses are required to register for GST if their annual turnover exceeds a certain threshold limit. The GST regime has brought transparency and efficiency in the tax system and reduced the tax burden on the end consumer.
The main features of GST:
Goods and Services Tax (GST) is a comprehensive indirect tax system that has replaced various indirect taxes levied by the Central and State Governments in India. The main features of GST are as follows:
Single Tax System: GST has replaced multiple indirect taxes levied by the Central and State Governments, which has brought uniformity in taxation across the country. Under GST, a single tax system is followed, which has simplified the tax structure and reduced the compliance burden for businesses.
Classification of Goods and Services: All goods and services are classified into different tax slabs, such as 0%, 5%, 12%, 18%, and 28%. The tax rate for each good or service is determined by the GST Council, which is a constitutional body that recommends measures for the implementation of GST.
Input Tax Credit: GST allows businesses to claim input tax credit on the taxes paid on the purchases made for their business. This ensures that the tax burden is not passed on to the end consumer and reduces the cascading effect of taxes.
Threshold Limits: Under GST, businesses are required to register for GST if their annual turnover exceeds a certain threshold limit. This reduces the compliance burden for small businesses and provides them with relief from multiple taxes.
Online Filing of Returns: GST returns can be filed online, which has simplified the process of tax filing and reduced the compliance burden for businesses.
Composition Scheme: GST has a composition scheme for small businesses with an annual turnover of up to Rs. 1.5 crore. Under this scheme, businesses can pay a fixed percentage of their turnover as tax and are relieved from the burden of maintaining detailed records and filing regular returns.
In summary, the main features of GST are a single tax system, classification of goods and services, input tax credit, threshold limits, online filing of returns, and a composition scheme for small businesses. These features have simplified the tax structure, reduced the compliance burden for businesses, and brought uniformity in taxation across the country.
Goods and Services Tax (GST) is a comprehensive indirect tax that has replaced various indirect taxes levied by the Central and State Governments in India. GST has been implemented with the objective of bringing uniformity in taxation and to simplify the tax structure. GST is levied on the supply of goods and services, and it has multiple components such as CGST, SGST, IGST, and UTGST. In this blog, we will discuss the different types of GST and the GST council.
Types of GST:
CGST (Central Goods and Services Tax): CGST is a tax levied by the Central Government on the supply of goods and services within the same state. The revenue collected through CGST is used by the Central Government.
SGST (State Goods and Services Tax): SGST is a tax levied by the State Government on the supply of goods and services within the same state. The revenue collected through SGST is used by the State Government.
IGST (Integrated Goods and Services Tax): IGST is a tax levied by the Central Government on the supply of goods and services between different states. It is levied when the supply of goods and services is from one state to another. The revenue collected through IGST is shared between the Central and State Governments.
UTGST (Union Territory Goods and Services Tax): UTGST is a tax levied by the Union Territory Government on the supply of goods and services within the Union Territory. The revenue collected through UTGST is used by the Union Territory Government.
GST Council
The GST Council is a constitutional body that has been established under Article 279A of the Constitution of India. The GST Council is chaired by the Union Finance Minister and consists of the Finance Ministers of all the States and Union Territories. The primary objective of the GST Council is to recommend measures for the implementation of GST, including the tax rates, exemptions, and threshold limits. The GST Council also decides on the division of revenue between the Central and State Governments, and any other matter related to GST.
Why do we need GST ?
There are several reasons why we need Goods and Services Tax (GST) in India. Here are some of the key reasons:
Simplified Tax System: GST has replaced various indirect taxes levied by the Central and State Governments, such as central excise duty, service tax, VAT, entertainment tax, luxury tax, and many others. It has brought uniformity in taxation and simplified the tax system.
Reduction in Tax Burden: GST has reduced the tax burden on the end consumer by eliminating the cascading effect of taxes, which occurred under the previous tax system. Cascading effect means that tax is levied on tax, resulting in an increase in the cost of goods and services.
Increased Transparency: GST has brought transparency in the tax system. It has reduced the scope of tax evasion and increased compliance. GST also provides businesses with an online platform to register, file returns, and make tax payments, making the process more transparent and efficient.
Boost to Economic Growth: GST has created a common market across the country, making it easier for businesses to operate across states. It has also reduced the cost of production and distribution, which can lead to increased economic growth.
Empowerment of States: Under the GST regime, the revenue collected from the tax is shared between the Central and State Governments. It has empowered the State Governments to collect tax revenue, which can be used for the development of their respective states.
Determining the application of CGST,SGST, UTGST OR IGST
CGST, SGST, and IGST are the three components of GST that are levied on the supply of goods and services in India. Let me explain the application of each of these components:
Central Goods and Services Tax (CGST): CGST is levied by the Central Government on the intra-state supply of goods and services. In other words, it is applicable when the supply of goods and services takes place within the same state. The revenue collected from CGST is retained by the Central Government.
State Goods and Services Tax (SGST): SGST is levied by the State Government on the intra-state supply of goods and services. In other words, it is applicable when the supply of goods and services takes place within the same state. The revenue collected from SGST is retained by the State Government.
Integrated Goods and Services Tax (IGST): IGST is levied by the Central Government on the inter-state supply of goods and services. In other words, it is applicable when the supply of goods and services takes place between different states or between a state and a union territory. The revenue collected from IGST is shared between the Central and State Governments in the ratio of 50:50.
To illustrate the application of CGST, SGST, and IGST, let's take an example:
Suppose a manufacturer in Gujarat supplies goods to a dealer in Maharashtra. In this case, the manufacturer will charge IGST on the value of goods supplied. The revenue collected from IGST will be shared equally between the Central and State Governments. The dealer in Maharashtra will claim the input tax credit of IGST paid on the purchase of goods from the manufacturer.
On the other hand, if the manufacturer in Gujarat supplies goods to a dealer in Gujarat, CGST and SGST will be applicable. The manufacturer will charge CGST and SGST on the value of goods supplied, and the revenue collected from CGST will be retained by the Central Government, while the revenue collected from SGST will be retained by the State Government.
In conclusion, the application of CGST, SGST, and IGST depends on the place of supply and the type of supply. CGST and SGST are applicable on intra-state supplies, while IGST is applicable on inter-state supplies.
CGST, SGST and IGST- rates of common items
| Goods | CGST | SGST | IGST |
| Household necessities like coffee (except instant), tea, spices, edible oil,and sugar. Life-saving drugs, coal and Indian sweets are coveredunder present GST slab. | 2.5% | 2.5% | 5% |
| Processed Food and computers | 6% | 6% | 12% |
| Hair oil, soap and toothpaste, Capital goods and Industrial intermediaries. | 9% | 9% | 18% |
| Luxury items, premium cars and consumers durables such as AC and refrigerator, cigarettes, aerated drinks, and High-end motorcycles | 14% | 14% | 28% |
In conclusion, GST is a comprehensive indirect tax that has replaced various indirect taxes levied by the Central and State Governments in India. The different types of GST are CGST, SGST, IGST, and UTGST. The GST Council is a constitutional body that recommends measures for the implementation of GST, including the tax rates, exemptions, and threshold limits. The GST Council plays a crucial role in the implementation of GST and ensures the smooth functioning of the tax system in India.
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knowledge.mindsset.
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