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GST

Types of GST in India

The Goods and Services Tax (GST) was implemented on 1 July 2017 to replace several indirect taxes, such as state government VAT, customs charges, central excise taxes, and entertainment tax. 

GST is a tax on the value-added to products and services at every stage of the supply chain. 

The fundamental motivation for creating this unified tax system is to establish independence between the federal and state governments. Furthermore, the government has set various tax rates for each and applied them to tax payments for goods and services delivered. Follow this article to learn about how many types of GST in India are there.

4 Types of GST explained

There are four primary forms of GST under the newly adopted tax system in India: 

  1. Central Goods and Services Tax (CGST)
  2. State Goods and Services Tax (SGST)
  3. Union Territory Goods and Services Tax (UTGST)
  4. Integrated Goods and Services Tax (IGST)

1. Central Goods and Services Tax (CGST) 

The Central Goods and Services Tax is a GST-based tax that applies to intrastate (inside the same state) transactions of goods and services. The CGST Act regulates the CGST. The central government collects the CGST. It substituted all previous federal taxes levied. The revenue is distributed between the state and the central government.

Such taxes include central surcharges and cess and central excise duty. The maximum rate of CGST is 14%. For example, if a Banglore dealer sells items worth Rs.7,000 to a West Bengal consumer, the GST charged on the transaction will be split between CGST and SGST. If the GST rate is 18%, it will be split into 9% each. In this situation, the total sum charged by the trader will be Rs.7,900. The GST revenue under the heading of CGST shall be sent to the Central Government in the form of CGST.

Applicable CGST on different goods

  • Daily household items & stuff such as milk, sugar, spices or medicines, sweets: 2.5%
  • Processed foods and computer products: 6%
  • Soaps, hair oils, toothpaste, capital products, and industrial supplies: 9%
  • Luxury items such as ACs, refrigerators, and vehicles: 14%

2. State Goods and Services Tax (SGST) 

The State Government’s GST is known as SGST, and it applies to transactions that take place inside its geographical bounds. Previous state taxes such as entertainment, VAT, and state sales tax were obsolete under the new tax structure. It might be based merely on the transactional value of a product — the amount the buyer must pay. Both State GST and Central GST are charged when intrastate supplies of goods and services are done. 

Because each state has its legislation, the SGST elements may differ from state to state. Specific characteristics such as taxable events, valuation, classification of goods and services, and measures, on the other hand, are consistent across the country. The income generated by the SGST is claimed only by the state government. 

Let’s understand this tax with an example. Suppose a dealer from Gurgaon has agreed to sell goods to his client in Banglore worth Rs. 20,000. In this case, the GST percentage would be 18%, combining the CGST rate, 9%, and the SGST percentage rate, 9% itself. This way, the dealer would have Rs.3600, from which the Central Government and Rs will hold Rs. 1800. The Haryana Govt will collect 1800.

The latest rates of SGST were revised in the GST Council Meeting conducted on 14 March 2020.

Applicable SGST on different goods:

  • Daily household items & stuff such as milk, sugar, spices or medicines, sweets: 2.5%
  • Processed foods and computer products: 6%
  • Soaps, hair oils, toothpaste, capital products, and industrial supplies: 9%
  • Luxurious items such as ACs, refrigerators, and vehicles: 14%

3. Union Territory Goods and Services Tax (UTGST) 

The Union Territory Products and Services Tax, or UTGST, is the equivalent of the State Goods and Services Tax (SGST) imposed on the delivery of goods and services in India’s Union Territories (UTs). It is imposed on products supplied in the Andaman and Nicobar Islands, Lakshadweep, Daman Diu, Chandigarh, Dadra and Nagar Haveli. It should be noted that the UTGST only applies to Union Territories that lack a legislature. As a result, the UTGST percentage is comparable to the SGST percentages of 2.5 %, 6%, 9%, and 14%.

4. Integrated Goods and Services Tax (IGST)

The Integrated Goods and Services Tax, or IGST, is a tax that applies to goods and services transported interstate. It is most commonly used in interstate transactions, which are transactions between two states. GST is imposed on the supply of goods and services between two states and on exports and imports (IGST + customs). According to the IGST Act, the central government is in charge of collecting it. The Central Government divides the collected taxes among the states when they are collected.

An excellent example of this tax would be: Suppose a manufacturer from Banglore exports some goods to his client in West Bengal. IGST will be applied to the transaction value in this situation. The federal government will collect this money. This money will then be split between the consumer state — West Bengal in this case – and the central government.

Advantages of GST in India

Before the GST, the state and federal governments imposed various taxes. As a result, regulating these levies was rather tricky. 

  • GST is a simple tax system.
  • It made the taxes system more uniform.
  • It reduces the likelihood of tax confusion between the federal and state governments.
  • Increases production and development of various industries.
  • Improving the exports and investments of the country.

Frequently Asked Questions

What is a GSTIN?

The GSTIN is a unique identification number of 15 digits assigned to every business. It has long been known to indicate the state's PAN and the total number of state-registered enterprises.

To whom is GST applicable?

Businesses registered with GST anywhere in India are liable to pay taxes under the GST regime.

What does the GST calculator do?

GST calculator calculates the GST costs to be implied on a specific product. It is available on many websites online.

What are the 3 types of GST?

Currently, four types of GST are applicable in India: UTGST, CGST, IGST, and SGST.

What are the types of GST percentages?

There are 4 tax slabs provided by the GST council, and more than 500 services plus 1300 products fit under them. The different types of GST percentages include 28, 18, 12 and 5%, respectively.

What are the five types of GST slabs?

Apart from the 4 GST slabs imposed on products and services, the 5th one is imposed on Gold items which is 3%. However, the precious and semi-precious stones do add an additional 0.25% GST.