What is GST
Goods and Services Tax is abbreviated as GST.
This tax is applicable on various goods and services provided in India.
Goods and Services Tax is applied on every level of production of goods, starting from getting raw material for processing to marketing and selling of goods.
However, this tax is collected by the consumer instead of collecting tax at various stages.
Tax is charged at 5 different rates and they are 0%, 12%, 5%, 18% and 28%.
After understanding about the GST Full Form and what it basically means, let’s now head towards learning about its various types. Goods and Services Tax is classified into three types of GST, namingly CGST, SGST and IGST.
The share of GST is given to the Central Government and State Government.
SGST Full Form
State Goods and Services Tax is abbreviated as SGST.
SGST is one of the most intrinsic constituents of Goods and Services Tax (GST Full Form).
A portion of total GST charged is provided to the State Government as State Tax and this is known as SGST as per laws of GST.
All taxes which were earlier included in state tax and were to be paid at different stages under separate names are summed up under SGST.
Now, all these taxes are paid only under SGST.
State taxes like state sales tax, entertainment tax, value added tax, tax on gambling and lottery, entry at octroi and purchase tax were merged in state goods and services tax.
It is applied on intrastate transfer of goods. If the place of selling goods is in the same state as of the place of receiving goods, then SGST is applicable.
Although, you don’t have to do a separate registration for SGST.
If your annual turnover is more than Rs. 20 lakhs in terms of services and greater than Rs. 40 lakhs in terms of goods, then you can register yourself under GST.
Features of SGST
- You can get relieved from paying tax at two levels.
- Tax is charged only at the defined rate throughout the state.
- SGST provides direct profit to the state instead of being dependent on the Central Government for revenue.
- Some goods are exempted from tax and no tax is applicable to them.
CGST Full Form
Central Goods and Services Tax is abbreviated as CGST.
This is an element of Goods and Services Tax (GST Full Form) which is governed by the Central Government.
Central Goods and Services Tax is charged on intrastate transfer of goods.
A part of total tax paid under GST is given to the central government as central tax under CGST.
Different central taxes like excise duty, additional excise duty, customs duty, additional customs duty are merged under Central Goods and Services Tax.
However, for paying CGST, you have to get registered under GST portal.
Additionally, people who have annual turnover of more than Rs. 20 lakhs in terms of services and greater than Rs. 40 lakhs in terms of goods can get registered.
CGST is applicable if the place of selling goods is in the same state or in the same union territory as of the place of receiving goods.
Features of CGST
- ITC will be applied to all the goods and services except a few which are exempted under the law.
- Mediators will not get profit and direct contact among Taxpayers and the Central Government is established.
- Defined amount of Central Tax is charged over goods and services.
- It helps officers in completing their audits. Return filed under CGST can be tallied with information collected by them during inspection.
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CGST and SGST Similarities
Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) are categorized in different sections under GST but they have a few things in common.
The following similarities will help you to understand CGST and SGST in a better way.
- They both are applicable when goods are transferred from one place to another within the same state.
- You are not eligible to pay CGST and SGST and you cannot register under GST if your annual turnover is below Rs.40 lakhs for goods and below Rs.20 lakhs for services.
- Same rate of tax is applicable for both SGST and CGST. Rate of tax is 0%, 2.5%, 6%, 9% and 14% for SGST and CGST.
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Difference Between CGST and SGST
Though, the rate of tax charged under CGST and SGST are the same but there are some points of differentiation between these two important components of GST Full Form – Goods and Services Tax.
You can differentiate between SGST and CGST with the following given points:
|Full Form||State Goods and Services Tax||Central Goods and Services Tax|
|Portion of GST goes to||Portion of GST charged under SGST is given to the State Government.||Portion of GST charged under CGST is given to the Central Government.|
|Taxes Included||State sales tax, entertainment tax, value added tax, tax on gambling and lottery, entry at octroi and purchase tax are subsumed||Excise duty, additional excise duty, excise duty on medicinal and toilet preparations, customs duty, additional customs duty are included.|
|Tax Credit Used||This is used by the State Government||This is used by the Central Government.|
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IGST Full Form
Integrated Goods and Services Tax is abbreviated as IGST.
Under IGST act, the integrated Goods and Services Tax is charged which is the sum of CGST and SGST.
It is charged on interstate supply of goods, where the state of supply of goods is different from state of receiver of goods.
This tax is also applicable to goods which are imported into any State or Union Territory of India.
Features Of IGST
- It will be easy to keep a check on various businesses which are somewhere related to one another.
All details of tax input and output can be tracked.
- Under interstate transactions, you don’t have to pay tax at different levels.
Your ITC chain can remain uninterrupted.
- This is a transparent tax scheme which can exempt you from paying extra taxation.
- You don’t have to take permission from different governments for transferring your goods to other states.
Only single permission under IGST is sufficient.
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Why is Goods and Services Tax Divided Into IGST, SGST and CGST?
According to the Constitution of India, power of taking tax is split between the Central and State Governments of the country.
These taxes charged at Central and State levels are beneficial for their respective governments.
Tax revenue is deposited to the Central Government if it is tax charged under central taxes which benefits the Central Government.
Tax charged under state taxes is deposited to the State Government which duly benefits it.
Goods and Services Tax (GST Full Form) was split into these taxes to reduce dependence of the State Government on the Central Government for their tax revenues.
Earlier, both State and Central Governments decided their own tax rates and taxes were paid at different portals.
As a result, the taxpayers used to get confused between all of this.
However, now a single tax system is adopted all over the country with a fixed rate of central tax under CGST and fixed state tax under SGST.
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How to Decide Which Tax Is Applicable Among SGST, IGST and CGST?
To know which tax is applicable among three components of GST, you plainly need to follow just a simple rule.
This rule is to focus on details of the place from where the goods are supplied and the place to which goods are being supplied.
When goods are supplied within the same state
It is called an Intra State Supply when goods are supplied to different places in the same state.
CGST and SGST are payable in intra-state supplies.
For example, if goods are transferred within the Maharashtra State but to different places in Maharashtra, then only CGST and SGST are needed to be paid.
When goods are supplied to different states
When goods are supplied to different states, it is called Inter State Supply.
In inter-state supplies only IGST is payable.
IGST is also applicable on goods that are imported into States and Union Territories of India and on goods that are exported.
For example, if goods are transferred from Delhi to Chandigarh, then only IGST will be applied.
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Examples of Application for SGST, CGST and IGST
Calculating the tax payable under GST is not very tough.
You are required to pay special attention to the place of supply of goods and the place of receiving the goods.
You will get to understand which component of tax is to be applied on the goods with help of the illustrations cited below.
GST Example Number 1
If you are a supplier ‘A’ from Uttar pradesh and you want to supply your monitor of Rs. 10,000/- to a customer ‘B’ who lives in another district of Uttar pradesh. Then, the amount of GST will be calculated as under –
As transfer of goods is taking place only between different locations of same state, hence only CGST and SGST will be applicable.
GST applied on monitor at rate of = 18%
This rate of GST tax is split between Central and State Government
So, CGST is applicable at rate of = 9%
And SGST is applicable at rate of = 9%
Tax to be paid = 18% of amount of goods supplied = 9% of amount of goods (CGST) + 9% of amount of goods (SGST)
= 9/100 × 10000 (CGST) + 9/100 × 10000 (SGST)
= 900 (CGST) + 900 (SGST)
Total tax to be paid = Rs.900 under CGST + Rs.900 under SGST = Rs.1800
Cost of monitor for customer ‘B’ = original cost + tax
= Rs.10000 + Rs.1800 = Rs.11800
Therefore, customer ‘B’ has to pay Rs.11800 for getting a monitor.
GST Explained by another Example
If that customer ‘B’ from Uttar Pradesh wants to supply a monitor purchased by him at Rs.11800 to another person ‘C’ who lives in Rajasthan. Then GST will be calculated as follows-
As transfer of goods is taking place between different states, hence, IGST will be applicable.
GST applied on monitor at rate of = 18%
GST applied on monitor = IGST applied on monitor in case of interstate transfer = SGST + CGST
Tax to be paid under IGST = 18% of original amount of goods that is supplied
= 18/100 × 10000 = 1800
Total tax to be paid = Rs.1800 under IGST
Cost of monitor for customer ‘C’ = original cost + tax = Rs.10000 + Rs.1800 = Rs.11800
Therefore, customer ‘B’ has to pay Rs.11800 for getting a monitor.
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GST Full Form FAQs
What are the 3 types of GST?
The three components of GST are IGST, SGST and CGST.
The expanded form of IGST is Integrated Goods and Services Tax.
Central Goods and Services Tax is called CGST and the full form of SGST is State Goods and Services Tax.
CGST and SGST are applicable on goods which are transferred within the same state.
IGST is applicable on those goods which are transferred to different states.
Tax collected under SGST portion of GST benefits the State Government and tax collected under CGST portion of GST benefits the Central Government.
What is GST in India?
GST Full Form is Goods and Services Tax is called GST in India.
It is developed to create one tax scheme all over the country. GST was enforced in India in 2017.
History of GST says that it was proposed near about sixteen years ago before it was actually enforced.
Under this, tax rates of nearly all the services and goods are fixed into five types.
This system of taxation is good for providing comfort to taxpayers as they have to pay all taxes through a single portal.
It also promotes clear taxation.
This is a non-profitable tax system and it saves you from humbuggery.
Difference between CGST and IGST?
CGST and IGST are parts of Goods and Services Tax. Differences between CGST and IGST are as follows:
1. CGST means Central Goods and Services Tax and IGST means Integrated Goods and Services Tax.
2. CGST is charged in intra-state transportation of goods and IGST is charged on inter state transportation of goods.
3. Central government receives the tax paid under CGST. IGST is split between the central and state government.
Difference between SGST and UTGST?
Expanded form of SGST is State Goods and Services Tax.
Whereas, the expanded form of UTGST is Union Territory Goods and Services Tax.
Only one tax out of SGST and UTGST is applicable at a time.
The major difference between SGST and UTGST is that the State Government receives the share of SGST while UTGST is charged in Union Territories which are under control of the Central Government which receives the share of UTGST.
Apart from this, SGST and UTGST are very similar in traits to each other.