05 Oct 2023

Introduced in July 2017, the Goods and Services Tax (GST) has significantly reformed India’s indirect taxation landscape. Replacing a slew of taxes with a more uniform and straightforward approach, GST aims at enhancing ease of doing business in India. Let’s delve into the different types of GST levied in the country.

For more details and notifications on GST, refer to the official Central Board of Indirect Taxes & Customs (CBIC) portal.

1. Introduction to GST

GST in India is a comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services throughout the country. By subsuming multiple erstwhile taxes into a single tax system, GST has brought about more simplicity and reduced the cascading effect of taxes.

2. Types of GST in India

The classification of GST in India is designed considering the federal structure, where both the central and state governments have the powers to levy taxes.

a. Central Goods and Services Tax (CGST):

CGST is collected by the central government on intra-state sales, that is, transactions taking place within a single state. This replaced central taxes like Central Excise Duty and Service Tax. The revenue collected under CGST belongs entirely to the central government.

b. State Goods and Services Tax (SGST):

SGST is collected by individual state governments on intra-state sales. This tax replaced various state taxes like VAT, Entertainment Tax, Luxury Tax, and others. The revenue generated from SGST goes to the state where the goods or services are consumed.

For intra-state transactions, both CGST and SGST are levied, ensuring both the central and state governments receive their share.

c. Integrated Goods and Services Tax (IGST):

For inter-state transactions, where goods or services move from one state to another, IGST is applied. This is collected by the central government. It ensures that states only need to deal with a single government (the central government) and not with every state individually. The revenue collected is then distributed between the central and the consumer state.

d. Union Territory Goods and Services Tax (UTGST):

For transactions taking place within a Union Territory without a legislature, UTGST is applied. It functions similarly to SGST but is specific to Union Territories like Chandigarh, Andaman and Nicobar Islands, etc.

3. Input Tax Credit (ITC)

A salient feature of the GST regime in India is the Input Tax Credit. ITC ensures that businesses can deduct the tax they’ve paid on inputs, thereby ensuring tax is paid only on the value added. This helps in eliminating the cascading effect of taxation, making the business environment more conducive.

4. Conclusion

GST has indeed reshaped the tax architecture in India, bringing about a more integrated and uniform tax structure. By grasping the different types – CGST, SGST, IGST, and UTGST – one can better comprehend the Indian tax system, ensuring compliance and informed decision-making.

Related Topics:-
GST Composition Scheme for Small Businesses
New GST Rules for Small Businesses: What You Need to Know