When learning about goods and services taxes, almost every person think about What is CGST, SGST, IGST, and UTGST? At starting, It was said that every tax merges into a single tax called goods and service tax. But in the end, we got finally four taxes, CGST, SGST, IGST, and UTGST. So In this articles we will talk about types of GST
What are the Types Of GST
GST is the source of indirect tax revenue for both State governments and the central government. The GST Rate is made up of two rates. The intra-state transaction will bring one of CGST and UTGST (in case of union territory) and SGST (in case of state) or CGST. SGST or UTGST is put back with IGST when intra-state transactions are required.
Hence, we can say that there are four types of GST:
- Central Goods & Service Tax (CGST)
- State Goods & Services Tax (SGST)
- Integrated Goods & Services Tax (IGST)
- Union Territory Goods & Services Tax (UTGST)
We will know briefly one by one. So, let’s start with Central Goods & Service Tax (CGST).
CGST stands for Central Goods & Service Tax. CGST refers to the Central GST tax which is levied by the Government of India on any transaction of goods and services tax occurring within a state. It is one of two taxes levied on each intrastate activity, the other being SGST (or UTGST for union territories). All central taxes including service tax, central excise, customs Duty, SAD, etc are replaced by CGST(Central Goods & Service Tax). The CGST rate is normally equal to the SGST rate
e.g. – When Mithilesh sells a product to Mithun in the same state (Rajasthan), he has to pay two taxes. Firstly, CGST is for the Central Government and the next SGST is for State Government. The CGST rate is 18%, which is similar to SGST. After the utilization of CGST (18% of Rs 10,000), the finishing cost of the product will be Rs 13,600.
SGST stands for State Goods & Services Tax. SGST (State GST) is one of the two taxes assemble on each inter-state (within a state) transaction of goods and services. The other one is the CGST. SGST is imposed by the state where the goods are being sold/bought. It will replace all real state taxes including VAT, state sales tax, entertainment tax, luxury tax, entry tax, state cess and any type of tax associated with goods and services. The state government is the sole claimant of revenue earned under SGST.
e.g. – Mithilesh is a manufacturer in Bihar, who sold goods at price Rs 10,000 to Mithun in Bihar. As this is an interstate transaction, IGST will apply here. The GST rate for almost all items is to be considered 18%. So, the IGST amount charged by the central government would be Rs 1800 (18% of Rs 10,000), and the refined rate of the product would be Rs 11,800.
IGST stands for Integrated Goods & Services Tax. This tax will be collected by the central government and will be shared among the states concerned. when goods or service is transferred from one state to another then IGST is charged. IGST is to guarantee that a state has to deal only with the union government and not every state to order of the interstate tax amount separately. Improvement in trying to understand IGST by an example.
E.g.- Mithilesh is a manufacturer in Bihar who sold goods worth Rs 20,0000 to Mithun in Bihar. Since it is an interstate business so, IGST will be used here. So, the IGST amount charged will be Rs 18000 (18% of Rs 20,0000), and the final rate of the product will be Rs 2,36,000.
UTGST (or UGST)
The Goods and Services Tax of the Union Territory, usually known as UTGST, is the GST applicable to the transaction of goods and services in the five union territories of India, including the Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep and Daman and Diu.