SGST – State Goods and Service Tax

What is SGST?

SGST, or State Goods and Services Tax, is one of the categories of Goods and Services Tax (GST) levied by individual states in India. Considered to be one of the biggest tax reforms in India, GST replaced all the complex state and central government tax procedures and brought a uniform tax regime across India. Although it caused panic and confusion in the initial stages of implementation, the benefits it has since offered has made GST increasingly popular among business owners.

Benefits of SGST for Businesses

There are several benefits which can be availed by a GST-registered business. For starters, a firm that complies with GST norms will stand a better chance at securing a business loan to help with growth/expansion. One can also avail a business loan on Bajaj Markets to avail perks such as flexible repayment tenures, zero collateral, and minimal paperwork. Securing a business loan has never been simpler!

More specifically, the benefits of SGST for business include:

1) Easy Tax Structure: Rather than paying a total of 17 types of taxes, manufacturers and consumers alike simply have to comply with the GST tax laws which can be viewed by clicking on this link.

2) Simple Online Procedure for Filing Tax Returns: The procedure for filing GST returns is very easy and can be taken care of by any computer-savvy business owner.

3) Transparency and Ease of Doing Business: As the tax structure is clearly spelled out, everything is transparent. This reduces red-tapism and scope for corruption and also encourages businesses to pay their taxes honestly.

How is SGST Charged?

Let us assume that a trader from Mumbai sells a desktop computer for ₹30,000 to another trader in Pune. The SGST, in such a scenario, will be 14% while the CGST will be 14% (in Maharashtra). As such, the trader must pay ₹4,200 as SGST and ₹4,200 as CGST.

In case the trader from Pune sells the desktop for ₹50,000 to a trader in Bihar, he charges approximately 28% of the IGST to the latter. This is because it is an inter-state transaction. He charges 28% as IGST on the actual price at which he bought the desktop. That is ₹8,400 on ₹30,000, which is paid to the central government as IGST.

The GST regime has brought about transformative changes in India. Being GST-compliant can make a big difference for a business and can even boost its growth. Moreover, it can help an entrepreneur get access to business loans. With loans available for both MSMEs and start-ups, flexibility and personalisation is the name of the game.

Difference Between CGST, SGST, and IGST

Up until July 2017, a multiple indirect tax system existed in India wherein goods and services were taxed at various stages, right from supply to purchase. The tax structure in question was such that it had a cascading effect on everyone included in the supply chain. The likes of your raw material supplier, manufacturer, warehouse packaging department, and retailer paid tax on tax. There were 17 different types of state and central taxes which existed in pre-GST India. These included sales tax, central excise duty, state excise duty, VAT (value-added tax), cess, surcharges, luxury tax, and entertainment tax, among others.

In July 2017, all these indirect taxes were merged into one - GST. While those in the supply chain still have to pay the taxes like before, they are now broken down into 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 pay SGST to the government of that state as per the value of goods and services produced and consumed in the same state. For example, a pen manufacturer in Mumbai pays SGST to the Maharashtra government for the manufacture, sale, and use of the product in the state.

2) CGST: The manufacturer in question also has to pay CGST to the central government. For instance, say the GST on a product is 18%; here, the state and the Centre get a total of 9% of SGST and CGST, respectively. This is, once again, levied on the production, supply, and consumption of goods and services within a state.

3) IGST: IGST is paid on goods which are produced in one state but are 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 in Gujarat, then the seller has to pay an IGST of 18% to the Centre. The central government then shares the IGST with the Gujarat government.