Types of GST

By : Neha Dhyani

Updated : May 26, 2022, 13:17

The government announced on 1 July 2017 a new indirect tax system under Goods and Services Tax to replace many indirect taxes such as state VAT, customs duties, and entertainment tax. It can be challenging to understand the new tax system and its impact on businesses. We have created a guide to GST and the Types of GST. Let's begin.

GST, in simple terms, is a tax that applies to the value of goods and services at every stage of the supply chain.

Types of GST

There are four types of GST -

  • CGST
  • SGST
  • IGST

Each type has its tax rates that apply to the buyer.

The following sections will answer your questions about the different types of GST available in India.

GST in India Explained

First, understand the motive behind the introduction of the unified tax system. The main reason is to separate the State and Central Governments.

Continue reading to find out about the four types of GST available in India.

What is CGST?

CGST is the Central Goods and Services Tax. It replaces all previous taxes that the Central Government administered. These taxes include central surcharges & cess, central excise duty, and central surcharges. CGST is charged on goods that are moved within a state.

What is SGST?

The State Government collects GST, also known as SGST, applied to transactions within its geographic boundaries. The new tax system makes all previous state taxes obsolete, such as entertainment tax, VAT, and State sales tax.

The State Goods and Services Tax (SGST) is a tax levied only on intrastate supplies, and it does not include alcoholic liquor. The product's transactional price can be assessed, which is what the buyer must pay.

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What is IGST?

Integrated Goods and Services Tax is IGST. It's generally applicable to interstate transactions, and it can be levied on products and services supplied between two states and exports and imports (IGST+ customs). The IGST Act is collected by the Central Government, and an example illustrates this.

Let's say a West Bengal manufacturer sells goods to Maharashtra. In such a case, IGST would apply to the transaction amount. The Central Government will collect this sum, and this amount will later be split between the consumer state, Maharashtra, in this instance, and the Central Government.

What is UTGST?

UTGST is the Union Territory Goods and Services Tax, which applies to all goods and services traded in the Union Territories. It is charged on products supplied in Andaman and Nicobar Islands and Chandigarh, Lakshadweep and Daman Diu, and Nagar Haveli and Dadra.

Please note that UTGST only applies to Union Territories that do not have a legislature.

Delhi, Puducherry, and even newly formed UTs in Jammu & Kashmir are not liable to UTGST but SGST. It is essential to know the rates applicable.

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GST Benefits

  • Multiple taxes were levied before the GST era by the State and Central governments. Regulating these taxes was a major hassle.
  • GST is an easy-to-follow and convenient tax system.
  • This reduces the chance of tax mixing-up between the State and Central Governments.
  • It brought uniformity and consistency to the taxation system.

We hope this comprehensive guide to the types of GST will eliminate all of your confusion. To sum up, there are four types of GST: CGST, SGST, IGST, and UTGST. Each type has its tax rates that apply to the buyer.

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FAQs on Types of GST

Q1. What are GST and its Types?

GST, in simple terms, is a tax that applies to the value of goods and services at every stage of the supply chain.

There are four types of GST -

  • CGST
  • SGST
  • IGST

Q2. What is TDS?

TDS or Tax Deducted At Source, is a specific amount reduced after a payment such as a salary, commission, rent, and interest. The payment is made, and the payer makes the payment and deducts tax from the source. However, the recipient of the income/payment has to pay tax.

Q3. What are TDS and TCS in GST?

TDS and TCS in GST stand for Tax Deduction at Source and Tax Collection at Source. These terms are also found in the Income Tax law.

Q4. What is TAN?

Tax Collection Account Number is a 10-digit alpha-numeric code issued by the Income-tax Department. All persons responsible for tax deduction at source (TDS) or those who have to collect tax at source are required to obtain TAN.