Goods and Service Tax is an Indirect Tax i.e. it is paid by the consumers but it is transferred to the government by businesses selling goods and services in India. Businesses charge this GST over the price of the product and forward it to the Government.
The Goods and Service Tax Act came into effect on 1st July 2017, which replaced many indirect taxes such as Value Added Tax, Service Tax , Excise Duty, Octroi etc.
1. State/UT Goods and Service Tax (SGST/UGST)
2. Central Goods and Service Tax (CGST)
3. Integrated Goods and Service Tax (IGST)
To determine whether Central Goods & Services Tax (CGST), State Goods & Services Tax (SGST) or Integrated Goods & Services Tax (IGST) are going to be applicable during a taxable transaction, it s important to first know if the transaction is an Intra State or an Inter-State supply.
• Intra-State supply of products or services is when the supplier of goods and services and customer are located in the same state. In Intra-State transactions, a seller has got to collect both CGST and SGST from the customer. The CGST gets deposited with the Central Government and SGST gets deposited with the government.
• Inter-State supply of products or services is when the supplier and consumer are located in different states. Also, in cases of export or import of products or services or when the availability of products or services is formed to or by a SEZ unit, the transaction is assumed to be Inter-State. In an Inter-State transaction, a seller has got to collect IGST from the customer.
Central Goods and Services Tax (CGST)
• Under GST, CGST is a tax levied by Central Government on Intra State supplies of both goods and services and can be governed by the CGST Act. SGST also will be levied on an equivalent Intra State supply but are going to be governed by the concerned State government .
•By introduction of GST, Central and State governments agree on combining their levies with an appropriate proportion for distribution between them. Moreover, the rate of tax for intra state supplies should not exceed 14%
State Goods and Services Tax (SGST)
• Under GST, SGST is a tax levied by the State Government on Intra State supplies of both goods and services and can be governed by the SGST Act. As explained above, CGST also will be levied on an equivalent Intra State supply but is going to be governed by the Central Government.
Integrated Goods and Services Tax (IGST)
Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will be governed by the IGST Act. IGST will be applicable on any supply of goods and/or services in both cases of import into India and export from India.
Note: Under IGST,
• Exports would be zero-rated.
• Tax will be shared between the Central and State Government.