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Business Mathematics and Basic Statistics · Ch 3 — Sales Tax, VAT and GST

Goods and Services Tax (GST) — CGST and SGST

3

Goods and Services Tax (GST) — CGST and SGST

Goods and Services Tax (GST), introduced across India from July 2017, took the same input-tax-credit idea behind VAT and extended it into a single, nationwide indirect tax covering both goods and services, replacing a cluster of older central and state taxes (VAT, Sales Tax, Central Excise Duty, Service Tax, and others) with one unified system — commonly summarised as "One Nation, One Tax."

Like VAT, GST is a multi-stage tax with full input tax credit, so it carries forward VAT's key advantage: no cascading effect (§2, §4). What GST adds is a dual structure, since India's Constitution gives both the Union (Central) government and the State governments the power to tax the supply of goods and services:

  • For a supply that takes place within the same state (an intra-state supply — the scope of this chapter), the total GST rate is split equally into two components, collected simultaneously:
    • CGST (Central GST) — collected by the Central Government.
    • SGST (State GST) — collected by the State Government.

CGST=SGST=Sale Price×r2×100,where r per cent is the total GST rate\text{CGST} = \text{SGST} = \text{Sale Price} \times \frac{r}{2\times100}, \quad \text{where } r \text{ per cent is the total GST rate}

Note

CGST and SGST Credits Are Tracked Separately

Input tax credit under GST is not pooled — the credit for CGST paid on a purchase can only be set off against CGST payable on a sale, and likewise SGST credit against SGST payable. A dealer therefore computes two parallel net-payable figures each period:

Net CGST Payable=Output CGST−Input CGST Credit\text{Net CGST Payable} = \text{Output CGST} - \text{Input CGST Credit}

Net SGST Payable=Output SGST−Input SGST Credit\text{Net SGST Payable} = \text{Output SGST} - \text{Input SGST Credit} …

Definition 6Goods and Services Tax (GST)

A single, nationwide multi-stage indirect tax on the supply of goods and services, with full input tax credit, introduced in …

Definition 7CGST (Central Goods and Services Tax)

The Central Government's half of the total GST rate charged on an intra- …

Definition 8SGST (State Goods and Services Tax)

The State Government's half of the total GST rate charged on an intra-state supply, tracked and credited se …

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