Understanding the Different Types of GST
The Goods and Services Tax (GST) is a unified indirect tax that replaced multiple taxes levied by the central and state governments in India. It aims to create a single market by streamlining the tax structure. To manage the federal structure of the country, GST is divided into different kinds based on the nature of the transaction and the parties involved. The four main kinds of GST are: CGST (Central GST), SGST (State GST), UTGST (Union Territory GST), and IGST (Integrated GST). These ensure that both the central and state governments receive their share of the tax revenue without double taxation.
Legal Provisions Related to Kinds of GST
As per the Central Goods and Services Tax Act, 2017, and the Integrated Goods and Services Tax Act, 2017, the types of GST are defined as follows:
- CGST: Levied by the Central Government on intra-state supplies (within the same state), under Section 9 of the CGST Act.
- SGST: Levied by the State Government on intra-state supplies, under the State GST Act of the respective state.
- UTGST: Levied by the Union Territory on intra-UT transactions in places like Chandigarh, Lakshadweep, etc., under the UTGST Act, 2017.
- IGST: Levied by the Central Government on inter-state transactions or imports and exports, as per Section 5 of the IGST Act. This amount is later shared between the Centre and the state where the goods or services are consumed.
These provisions ensure a balanced revenue distribution and remove cascading tax effects, leading to a seamless national market.
Why Knowing the Types of GST Matters
Understanding the different types of GST is crucial for every business owner, tax professional, and even consumers. Each type of GST applies in a specific situation. For example, when a business sells goods within the same state, CGST and SGST are charged. But when goods are sold between two different states, IGST is applied. Misclassification can lead to wrong tax filings, penalties, or denial of input tax credit. Moreover, correct categorization is essential for proper compliance and audit processes under the GST regime. Knowing when and where each GST type applies can save time, money, and legal trouble.
Mnemonic :
Mnemonic to Remember Kinds of GST
“**C-S-I-U: Central, State, Inter, Union!”
- C – CGST: Central Government tax on intra-state supply
- S – SGST: State Government tax on intra-state supply
- I – IGST: Tax on inter-state supply
- U – UTGST: Tax in Union Territories
