- Basic understanding about CGST, SGST and IGST
- Authority of the State/Centre over these taxes which defines these taxes
- Consumption determines the type of levy – CGST/ SGST and IGST
- Difference between CGST and SGST in tabular form
- Can SGST Credit Be Used to Pay IGST?
Basic understanding about CGST, SGST and IGST
In simple words, these are different names for same tax. Only difference is that tax levying authority and place of sale is different on the basis of which are the names. Which could be easily understood from the table below :
Authority of the State/Centre over these taxes which defines these taxes
A federal country such as India, where both the Centre and the States have been assigned the powers to levy and collect taxes. Both centre and state government have distinct responsibilities to perform, as per the Constitution, for which they need to raise resources.
The GST to be levied by the Centre on intra state supply of goods and / or services is Central GST (CGST) and that by the States is State GST (SGST). On supply of goods and services outside the state, Integrated GST (IGST) will be collected by Centre. IGST also applies on imports as well.
|
Transaction |
Erstwhile taxation laws - levies |
GST - levies |
Analysis |
|
Sale within the state |
Value Added Tax (VAT) & Excise / Service Tax |
CGST & SGST |
Under GST, a transaction of sale within the state shall have two taxes, SGST which share is taken by the state and Central GST which goes to the centre. |
|
Sale outside the state |
Central Sales Tax (CST) & Excise / Service Tax |
IGST |
A transaction of sale outside the state shall have only one type of tax, IGST which goes to the centre. |
Consumption determines the type of levy – CGST/ SGST and IGST
GST is a consumption based tax i.e. proceeds of taxes should be received by the state in which the goods or services are consumed and not by the state in which such goods are manufactured. Integrated GST is designed to ensure seamless flow of input tax credit from one state to another.
One state has to deal only with the Centre government to settle the tax amounts and not with every other state, thus making the process easier.
Difference between CGST and SGST in tabular form
Central GST & State GST are components of GST, Goods and Service Tax.
|
Parameter |
CGST |
SGST |
|
Expansion |
CGST expands as Central Goods and Service Tax. |
The expansion of SGST is State Goods and Service Tax. |
|
What are the taxes that are subsumed |
Different indirect taxes of Central Excise Duty, Central Sales Tax CST, Service Tax, Additional excise duties, excise duty, CVD (Additional Customs duty – Countervailing Duty), SAD (Special Additional Duty of customs) surcharges and cesses are merged with CGST. |
In SGST, the taxes like State Sales Tax, VAT, Luxury Tax, Entertainment tax (unless it is levied by the local bodies), Taxes on lottery, betting and gambling, Entry tax, State Cesses and Surcharges in so far as they relate to supply of goods and services etc. are subsumed. |
|
Share of tax revenues |
The share of tax revenue under CGST is meant for central government. |
The share of tax revenue under SGST is meant for state government. |
|
Mechanism for usage of credits |
A dealer can use input tax credit of CGST against CGST or IGST. The credit of CGST cannot be used against SGST |
A dealer can use input tax credit of SGST against SGST or IGST. The credit of SGST cannot be used against CGST |
Can SGST Credit Be Used to Pay IGST?
The SGST act provides that the cross sectional usage of tax credits of SGST with CGST or CGST with SGST is not permissible under the Act. But the usage of SGST credit against IGST liability is possible under the Act.
The rule is simple the tax credit of SGST be first used to settle SGST liability and balance if any be used to settle IGST liability but SGST credit shall not be used to settle IGST liability.
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