What is SGST?
In India, SGST is one of the taxation parts of GST. The SGST Act is amended to include State Goods and Service Tax.
SGST is a state-level indirect tax imposed and paid on intra-state supplies. These supplies exclude alcoholic beverages for human consumption. Additionally, this tax is regulated by the State Goods and Service Tax (SGST) Act, 2017.
According to section 15 of the SGST Act, This tax is levied on the amount of the transaction of the goods or services supplied. The price charged or payable for a certain supply of goods or services is the transaction value. CGST will also be charged along with SGST for the same intra-state supply of goods.
CGST Vs SGST:
|1. The CGST is also known as the Central Goods and Service Tax.||1. The SGST is also known as the State Goods and Service Tax.|
|2. The various indirect taxes of Central Excise Duty, Central Sales Tax, Service Tax, Excise duty, Additional excise duties, CVD (Countervailing Duty), SAD of Customs, surcharges, and Cess are incorporated into the CGST.||2. State Sales Tax, VAT, Entertainment Tax, Lottery, Gambling, and Betting Taxes, Entry Tax, State Govt. Cess and Surcharges, and other taxes relating to the supply of goods and services are all included in the SGST.|
|3. The central government receives a proportion of tax revenue under the CGST.||3. The state government receives a share of the tax revenue under the SGST.|
|4. A dealer can use a CGST input tax credit to cover CGST or IGST. The CGST credit does not apply to the SGST.||4. A dealer can apply for the SGST input tax credit against the SGST or IGST. SGST credit cannot be applied against CGST.|
Rule 42 of CGST/SGST Rules:
Rule 42 acts as a tax filter, allowing only certain “eligible taxes” on inputs or input services to be listed as an available credit.
Rule 42 of the CGST rules apply to claiming input tax credits for supplies made in part for business purposes and in part for other purposes. In such situations, the taxpayer must reverse the input tax credit claim if the input tax credit is zero.
The objectives of the business or of making taxable supplies shall be determined by the ITC with regards to inputs or input services in the following way:
1. The gross input tax on inputs and input services covered by the tax period is classified as ‘T.’
2. Attributable to inputs and input resources intended for use solely for non-business purposes classified as ‘T1’.
3. Assigned to input and input services intended solely for exempt supplies listed as ‘T2;’
4. In the case of inputs and input services that are not eligible for credit under section 17(5), they are marked as ‘T3’.
5. The amount of tax credit credited to a registered person’s electronic credit head shall be classified as ‘C1’ and computed as
C1 = T- (T1+T2+T3);
6. The input tax credit for inputs and input services intended solely to make provision other than excluded, but also for zero-rated supplies, is to be referred to as “T4;”
7. ‘T1’, ‘T2’, ‘T3’, and ‘T4’ shall be decided and declared by the registered individual in FORM GSTR-2 at the invoice level;
8. After attribution of input tax credits specified in clause (g), the remaining credit shall be referred to as common credit, denoted by the abbreviation ‘C2,’ and measured as
C2 = C1- T4;
9. The input tax credit attributed to excluded supplies shall be marked as ‘D1’
D1= (E÷F) × C2
Where ‘E’ denotes the aggregate amount of excluded supplies made during the tax period and ‘F’ denotes the registered person’s total turnover in the state during the tax period:
10. The credit for non-business purposes shall be represented as ‘D2’ if common inputs and input services are used partially for business and partly for non-business purposes; and
11. The remaining portion of the common credit shall be the eligible input tax credit attributable to business purposes other than exempted supplies but including zero-rated supplies, denoted by the abbreviation ‘C3’, where,-
C3 = C2 – (D1+D2);
12. ‘C3,’ ‘D1’ and ‘D2’ is calculated for central, State, Union Territory and integrated tax input tax credits separately and is declared in the FORM GSTR-3B or FORM GST DRC-03.
13. The registered individual shall reverse the amount equal to the sum of ‘D1′ and ‘D2′ on FORM GSTR-3B or FORM GST DRC-03.
Rule 37 of CGST/SGST Rules:
This rule states that,
1. If a registered individual who has claimed ITC is unable to pay the invoice sum to the supplier within 180 days, the ITC is reversed; if only a portion of the invoice is paid, the ITC is reversed proportionately.
There are two exceptions to Rule 37. They are as follows:
A. For the second proviso of section 16 (2), the value of supplies rendered without consideration as stated in Schedule I of the Act shall be considered to have been paid.
B. For the second proviso to section 16 (2), the value of supplies on account of any sum applied in compliance with the provisions of section 15(2)(b) shall be considered to have been paid.
2. The amount of input credit claimed shall be applied to the registered person’s output tax liability for the month where the details are recorded.
3. The registered individual shall be liable to pay interest at the rate of 18 percent per annum from the date of crediting such supplies before the balance is added to the output tax liability.
4. A claim for the re- avail of any credit which was earlier reversed shall not be subject to the period specified in Section 16(4).
Rule 39 of CGST/SGST Rules:
The ISD distributes the input tax credit in the context and under the following conditions: –
1. The input service credit shall only be distributed to the individual beneficiary to whom these input services are allocated.
2. Where more than one recipient is allocated the input service, the relevant ITC shall be distributed to these recipients in a State / Union Territory turnover ratio to the overall turnover of all recipients to which the input service is assigned to work during the current year.
3. The ITC for input services popular to all units shall be allocated to all recipients in the turnover ratio as mentioned above.
4. ITC is distributed separately for those who are ineligible and those who are eligible.
How to Create CGST and SGST in an Invoice using myBillBook
You must issue invoices to your customers when you sell goods or services in India. In India, every company needs to know the new rules on GST invoice.
Step 1: Create an Invoice
From the main menu, select the Branch where the GST billing is to be issued in the invoice.
Step 2: Choose Invoice and Due Date of Payment
Set the payment due date to be the same as the invoice date if payment is issued with the invoice.
Step 3: Choose a customer
Choose the customer from the customer menu. If the customer is not included in the drop-down list, choose Add Customer to create a new one.
Step 4: Confirm the source of supply
The type of tax that applies to invoices, CGST or SGST, is determined by the place of supply. The supply place is automatically integrated based on the customer delivery location.
Step 5: Choose the supplied goods/services
After selecting the customer and the location of supply, choose the products or services supplied from the list. The item can also be added to the Services and Goods menu.
Step 6: Make changes to the additional information
When a reverse charge applies, the recipient is liable to pay GST directly to the government. You must also include information on the shipping bill, the date of the shipping bill, and the port of export when purchasing export supplies.
Step 7: Generate a GST invoice
Once you’ve completed all of the fields on the tab, click Create Invoice to generate a GST invoice. After the GST bill has been created, you can download it or share it via email, Whatsapp etc.