Goods and Services Tax, abbreviated as GST, is an indirect tax reform implemented by the Shri Narendra Modi Government in the year 2017. It serves the objective of unifying the previous multi-stage, destination-based tax system under a singular PAN India taxation system. In other words, it is a substitute for the wide range of indirect taxes that were levied on every value addition across the supply chain. This meant that the same indirect taxes were calculated once at every point of sale. Value Added Tax (VAT), Central Excise Law, Entry Tax and Octroi are some of the indirect taxes that have been replaced by this single unified taxation system on the supply of goods and services. The GST system was suggested for the first time by the Atal Bihari Vajpayee Government in the year 2000.
There are 3 taxes applicable as per the GST taxation system – Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST) and Integrated Goods and Services Tax (IGST).
Central Goods and Services Tax or CGST is collected by the Central Government of India and is applicable on all intra-state supplies of goods and services. This is governed by the CGST Act that mentions that CGST cannot exceed 14%.
This implies that both the Central and the State governments will agree on combining their levies in an appropriate proportion for revenue-sharing between them.
State Goods and Services or SGST is implemented on all the intra-state supplies of goods and services that attract the CGST. This means that both CGST and SGST are applicable on all intra-state supply of goods and services. However, both the governments collect an equal proportion from the total tax rate levied on the intra-state supplies of goods and services. Tax liabilities recorded under SGST can be set off against SGST or IGST input credit.
For instance, when Mr. A in Uttar Pradesh sells goods worth Rs. 10 lakh that attract an applicable GST rate of 12% to Mr. B in Rajasthan, the CGST and SGST will be divided in equal proportions and fixed at 6% each.
IGST is levied on the sale of all inter-state goods and services and collected by the Central Government of India. It is governed by the IGST Act. These include both imported as well as exported goods.
As per IGST, exported goods and services are zero-rated and the taxes are shared between the Central Government and the concerned State Government.
For example, when Mr. B sells goods to Mr. C worth Rs. 20 lakh that attract an IGST of 18%, the tax amount is collected by the Central Government of India.
Let’s take a look at how CGST, SGST and IGST are calculated under the GST tax system.
| Particulars | Amount |
|---|---|
| Total value of inter-state sales | Rs. 20 lakh |
| Total value of intra-state sales | Rs. 10 lakh |
| Advance Received – interstate | Rs. 15 lakh |
| IGST | Rs. 20 lakh * 18% = Rs. 3.60 lakh Rs. 15 lakh * 18% = Rs. 2.70 lakh Total = Rs. 6.30 lakh |
| CGST | Rs. 10 lakh * 6% = Rs. 60,000 |
| SGST | Rs. 10 lakh * 6% = Rs. 60,000 |
What are the indirect taxes that GST has replaced?
The following are indirect taxes that have been replaced by the implementation of Goods and Services Tax:
What are the goods that do not come under the purview of GST taxation?
The following are the non-GST products:
What is GST?
Goods and Services Tax or GST is an indirect taxation system that is introduced to unify the earlier multi-stage, destination-based tax system under a single tax system. It has been implemented to remove the innumerable indirect taxes levied on every value addition across the supply chain. This implies that the same indirect taxes were calculated several times - once at every point of sale. Single unified taxation system is applicable on the supply of all goods and services throughout the state.
What are the types of GST?
Goods and Services Tax is classified under three categories – Central Goods and Services Tax, State Goods and Services Tax and Integrated Goods and Services Tax.
What is CGST?
Central Goods and Services Tax or CGST is levied by the Central Government and is applicable on all intra-state supplies of goods and services, governed by the CGST Act, the tax rate for which cannot be more than 14%.
What is SGST?
State Goods and Services or SGST is enforced on all intra-state supplies of goods and services on which CGST is also applicable. This implies that both CGST and SGST are levied on all intra-state supply of goods and services. The Central and the relevant State Government collect an equal proportion from the total interest rate levied on the concerned goods or services. For example, if the GST rate on the supply of a certain goods is 12%, the SGST and IGST is 6% each.
What is IGST?
IGST, governed by the IGST Act, is applicable on the supply of all inter-state goods and services and collected by the Central Government. These include both imported as well as exported goods. As per IGST, exported goods and services are zero-rated and the taxes are shared between the Central Government and the concerned State Government.
What is the maximum CGST rate that can be levied on goods and services?
As per the Central Goods and Services Tax (CGST) Act, the maximum GST rate that can be levied on the supply of goods and services cannot be more than 14%.
Who collects the Integrated GST – Central or the State Government?
The Integrated Goods and Services Tax (IGST) for inter-state supply of goods and services is shared by both the governments – Central Government as well as the concerned State Government.
Who collects State GST?
The intra-state State Goods and Services Tax is proportionately divided between the Central Government and State Government. For instance, if the applicable GST rate on the inter-state supply of a certain goods or service is 12%, the Central and the State Government will collect a GST of 6% each.
