SGST or state goods and services tax is one of the categories of goods and services tax (GST) levied by individual states in India. GST is considered to be one of the biggest tax reforms in India and came into existence on July 1, 2017. It replaced all the complex state and central government tax procedures, and brought a uniform tax regime in all the states across India. Prior to that, every state had its own independent taxing system.
It caused a lot of panic and confusion in the initial stages of implementation. But the benefits it offered have made it increasingly popular among business owners.
Here we explain everything you need to know about GST and its off-shoots – SGST, CGST and IGST
Goods and services tax (GST) – Till July 2017, a multiple tax system existed in India where goods and services were taxed at various stages, right from supply till the end user sale. The tax structure was such that it had cascading effects on everyone included in the supply chain. The raw material supplier, manufacturer, warehouse packaging department, retailer paid tax on tax. There were 17 different types of state and central taxes which existed in pre-GST India. Some of them were sales tax, central excise duty, state excise duty, VAT (value addition tax), cess, surcharges, luxury tax, entertainment tax, etc.
But three years back, all these indirect taxes were merged into one known as GST. Though those in the supply chain still have to pay the taxes like earlier, the process is now broken down to – SGST (state goods and services tax), CGST (central goods and services tax) and IGST (integrated goods and services tax).
1) SGST – Those in the supply chain of goods pay SGST to the government of that state, for goods and services produced and consumed in the same state. For instance, a pen manufacturer in Mumbai pays SGST to the Maharashtra government for the pen made, sold and used in the state.
2) CGST – Moreover, the manufacturer also has to pay the central government CGST along with SGST. Suppose, the GST in India is 18 %, then the state and the center gets 9% of SGST and CGST respectively. This is again levied on the production, supply and consumption of goods within the same state.
3) IGST – IGST is paid on goods which are produced in one state but consumed in another. The IGST goes to the central government which further shares it with the state where the product is consumed. Thus, if a product is made in Maharashtra but sold to Gujarat, then the seller has to pay an IGST of 18% to the center. The central government then shares the IGST with the Gujarat government.
Benefits of SGST for businesses
The number of benefits GST brings to the table encourages more and more businesses to comply with GST norms. Being GST compliant, in turn, has its own set of advantages, including increased chances of availing a business loan to help with the growth/expansion of your business. You can avail a business loan on Finserv MARKETS; what’s more, with perks like flexible repayment tenures, zero collateral and minimal paperwork, getting a business loan has never been simpler.
In addition to this, here are some more benefits of GST:
1) Easy tax structure – Rather than paying 17 types of taxes, the manufacturers and users just have to comply with the above GST led taxes.
2) Simple online procedure for filing tax returns – The procedure for filing the returns is very easy and can be done easily by any computer literate businessmen.
3) Transparency and ease of doing business – Since the tax structure is clearly spelled out, everything is transparent. This reduces red-tapism and scope for corruption. This also encourages start-ups to pay their taxes honestly.
How is SGST charged?
Suppose a trader from Mumbai sells a desktop computer for Rs 30,000 to another trader in Pune. The SGST is 14 % in Maharashtra and the CGST is 14%. As such the trader has to pay Rs 4,200 as SGST and Rs 4,200 as CGST.
In case, the trader from Pune sells the desktop for Rs 50,000 to a trader in Bihar, he charges 28% of IGST to the latter. This is because it is an inter-state transaction. He charges, 28% of IGST on the actual price at which he bought the desktop. That is Rs 8,400 on Rs 30,000, which is paid to the central government as IGST.
Thus, GST implementation has brought about really transformative changes in India. Being GST compliant can make a whole lot of difference for a business and can even help in the growth of the business. Being GST compliant can help you get access to business loans such as those available on Finserv MARKETS. With loans available for both MSMEs and Start-Ups, flexibility and personalisation is the name of the game.
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