GST Basics — CGST, SGST and IGST

What GST is

The Goods and Services Tax (GST) is a single, comprehensive indirect tax on the supply (sale) of goods and services in India. It came into force on 1 July 2017 and replaced a tangle of earlier taxes such as VAT, service tax, and excise duty. GST is a destination-based tax (it accrues to the state where the goods or services are finally consumed) and a multi-stage tax collected at every stage of the supply chain, but with input tax credit (Section 7 below) so that, in effect, tax is paid only on the value added at each stage.

The three components of GST

Because India is a federation, GST is shared between the Centre and the States. Which components apply depends on whether the supply is within one state or between two states.

• CGST — Central GST: the Central Government's share, charged on an intra-state supply.
• SGST — State GST: the State Government's share, charged on the same intra-state supply. (In a Union Territory this is called UTGST.)
• IGST — Integrated GST: a single tax charged on an inter-state supply, collected by the Centre and later shared with the destination state.

The total GST rate is the same whichever way it is charged. For example, at an 18% rate:

• an intra-state sale bears CGST 9% + SGST 9% (adding up to 18%);
• an inter-state sale bears IGST 18%.

A worked example of the split

A trader in Maharashtra sells goods worth Rs 10,000 at a GST rate of 18%. …