In India, the business climate is on a churn. While it is easier to avail the best business loans than ever before, regulatory changes are causing ripples throughout industries.
The taxation mechanism in the country underwent a major shift in July 2017, when the entire system was brought under the Goods and Services Tax (GST). Though the government and associated bodies did aid the implementation of this new tax through various seminars and conferences and even through helplines businessmen could approach, a range of uncertainties persist.
The GST was aimed at building a unified system of taxes, which would be consumption-based. This means that the proceeds from these taxes would be paid to the state in which the goods or services were consumed, rather than where they originated from.
While CGST stands for Central Goods and Services Tax and SGST stands for State Goods and Services Tax, IGST refers to Integrated Goods and Services Tax. IGST was designed to enable the seamless flow of goods from one state to another, and thus ensuring that each state would have to deal only with the Centre and not another state to settle tax claims. The GST has been able to subsume 10 central and state taxes, and was intended to ease compliance with taxes, especially for businesses.
In recent times, several measures have been undertaken to ease operations for businesses. These include introduction of some of the best business loans and easier accessibility to these business loans as well. Nowadays, a businessman can easily compare business loans from the comfort of their home or office and buy one that suits their requirements. If you apply for a business loan on Finserv MARKETS, you can easily have access to business loans up to Rs. 30 lakh approved in less than 3 minutes.
The implementation of GST has given rise to a host of new terms for the taxation bodies , namely CGST, SGST and IGST. You can also get to know what are the components of GST before going with difference between them.
Understand difference between CGST, IGST and SGST with Examples
Central GST (CGST), State GST (SGST) and Integrated GST (IGST) all these taxes are different names for the same tax. The only difference is that tax levying authority and place of sale is different.
Let us consider that goods worth Rs. 12,000 are sold by manufacturer A from Maharashtra to Dealer B in Maharashtra.
Dealer B resells them to Trader C in Rajasthan for Rs. 19,500.
Trader C finally sells to end-user D in Rajasthan for Rs. 32,000.
Suppose the tax rates on the goods sold are CGST= 9%, SGST=9%, and IGST=9+9=18%
Since A is selling this to B, it is considered as an intra-state sale and so CGST@9% and SGST@9% will apply.
Dealer B is selling to Trader C. Hence, this is an interstate sale, with IGST@18%.
Trader C is selling to end-user D also in Rajasthan. This means it is an intra-state sale and hence, CGST@9% and SGST@9% will be applied.
Authority of the State and Centre Government Over GST
India is a federal country and this status empowers the Centre and the States to levy taxes. The two governments regulate and perform different functions and support development. Thus, the two bodies must regularly raise resources to fulfil developmental obligations.
The state governments levy and collect GST on the supply of goods and services in the form of State GST, or SGST. Meanwhile, the GST levied by the Centre is Central GST, or CGST. The Centre also levies Integrated GST (IGST) on the supply of goods and services outside the state as well as imports.
|Transaction||Erstwhile taxation laws – levies||GST – levies||Analysis|
|Sale within the state||Value Added Tax (VAT) & Excise / Service Tax||CGST & SGST||Under GST, a transaction of sale within the state shall have two taxes, SGST and CGST.
SGST: Levied and collected by the State government.
CGST: Levied and collected by the Central government.
|Sale outside the state||Central Sales Tax (CST) & Excise / Service Tax||IGST||IGST: A transaction or sale outside the state shall have only one type of tax. Share taken by the Centre.|
Difference Between CGST, SGST and IGST
|This is the portion of the GST that is levied by the Centre on the intra-state supply of goods and/or services.||SGST is the share of the GST that is levied by the state governments on intra-state supply of goods and/or services.||The Integrated GST comes into play when there is supply of goods and/or services to other states different from where these goods and/or services are originating.|
|The existing taxes subsumed within the CGST include Central Excise Duty, Central Sales Tax, Service Tax, and surcharges and excesses such as Additional Excise Duties, Additional Customs Duty – Countervailing Duty, and Special Additional Duty of Customs (SAD).||The SGST subsumed taxes including the State Sales Tax, VAT, Luxury Tax, Entertainment Tax as well as taxes levied on lottery, betting and gambling, and other Entry Taxes and State Cesses and Surcharges in so far as they related to the supply of goods and/or services.||The IGST is collected by the Centre and also applies to imports.|
|The tax revenue garnered under CGST is meant for the Central government.||The input tax credit of SGST can be used by dealers, against SGST or IGST.||While trade within the state results in the GST being split up into the CGST and the SGST, IGST goes directly to the Centre in case of transaction of sale conducted between different states.|
|The input tax credit of the CGST can be used against the CGST or IGST, but not under SGST.||The SGST credit cannot be used against CGST.||However, the input tax credit of IGST can be used against either the CGST, SGST or IGST.|
How is SGST, CGST & IGST Collected?
Goods and Services Tax (GST) is categorized into CGST, SGST and IGST depending on whether the transaction is Intrastate or Interstate.
- SGST: This tax is collected by the individual states and union territories when the supply occurs within the same state/union territory.
- CGST: CGST is collected by the Central government in case of an intra-state transaction CGST will be levied, in addition to SGST, by the Central government.
- IGST: This tax is levied by the Central government when the location of a good/service supplier and the place of consumption lies in different states. The IGST is subsequently divided between both the State and Centre.
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Can CGST and SGST be charged together?
When the location of the supplier and the place of supply is the same it is known as the Intra-State supply of goods or services. In Intra-State transactions, the seller will charge both CGST and SGST from the buyer. The CGST gets deposited with the Central Government and SGST gets deposited with the State Government. This implies that both the Central and the State governments will combine their levies with an appropriate proportion for revenue sharing between them.
The revenue collected by all three bodies has been seen to be significantly different as well. The higher revenue earned via IGST is a good sign for the economy, since it suggests that inter-state trade is growing.
Also read what is the impact of GST on personal loan only at Finserv MARKETS.
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