GST can be divided into three categories;
- Integrated Goods and Services Tax (IGST)
- State Goods and Services Tax (SGST), and
- Central Goods and Services Tax (CGST) (CGST).
They all have various tax rates. The new indirect tax regime under the Goods and Services Tax produced much misunderstanding regarding how the new taxing system will affect businesses and tax payments.
GST Types and Explanations
According to the newly implemented tax system, there are three types of GST:
- The Integrated Goods and Services Tax
- Goods and Services Tax levied by the state
- Central Goods and Services Tax
The government has established different taxation rates under each, which will apply to the payment of tax for goods and services rendered.
Integrated Goods and Services Tax, abbreviated as IGST
The Integrated Goods and Services Tax (IGST) is levied under the GST regime on interstate supplies of goods and services and imports and exports. The IGST Act governs the IGST. The Central Government divides the proceeds of taxation among the various states after being collected. For example, if a trader from West Bengal sells goods worth Rs.5,000 to a customer in Karnataka, IGST will apply because the transaction is interstate. If the GST rate on the goods is 18%, the trader will charge Rs.5,900 for the goods. The IGST collected amounts to Rs.900, which will be paid to the Central Government.
State Goods and Services Tax, abbreviated as SGST
The State Goods and Services Tax (SGST) is levied under the GST regime on intrastate transactions. Both State GST and Central GST are levied on intrastate supplies of goods and services. The State GST is levied on goods and services purchased or sold within the state. It is governed by the Singapore Goods and Services Tax Act.
The state government solely claims the revenue generated by SGST. For example, if a West Bengal trader sells goods worth Rs.5,000 to a West Bengal customer, the GST applicable on the transaction will be a combination of CGST and SGST. If the GST rate charged is 18 percent, it will be split evenly into 9 percent CGST and 9 percent SGST. In this case, the total amount imposed by the trader will be Rs.5,900. The revenue generated by GST under the heading of SGST, i.e., Rs.450, will be distributed to the West Bengal state government in SGST.
Central Goods and Services Tax (CGST)
The CGST, like State GST, is a tax levied under the GST regime on intrastate transactions. The CGST Act governs the CGST. The Central Government is responsible for collecting the CGST revenue. If a trader from West Bengal sells goods worth Rs.5,000 to a customer in West Bengal, the GST applicable on the transaction will be a combination of CGST and SGST.
If the GST rate charged is 18 percent, it will be split evenly into 9 percent CGST and 9 percent SGST. In this case, the total amount paid by the trader will be Rs.5,900. The revenue generated by GST under the CGST heading, i.e., Rs.450, will be delivered to the Central Government in CGST. Visit here to know what is GST full form is.