What are CGST, SGST & IGST?

What is CGST? 

Central Goods and Services Tax (CGST) is important for intrastate sales, where the seller and customer service are from the same country.

The CGST is used for goods and services to enable tax collection in the Central Government.

Unlike IGST, in the event of a transaction, CGST is compiled as a separate tax to be imposed on the Central Government. CGST is levied on all things ranging from household needs to luxury, as well as production services to technical services. 

What is SGST? 

Definition of SGST or State Goods and Services Tax (SGST) tax collected in a transaction in which the use and production conditions are the same.

State GST, as the name implies, is a way of collecting taxes from the State Government.

It is collected as a separate tax in the case of an internal transaction. Similar to CGST, it is charged on all sales and purchases and other transactions that are not exempt under GST law. 

Example of CGST and SGST? 

Ramesh from Punjab sells goods to Manoj living in the same state worth ₹ 1,00,000. If the applicable intrastate GST on this transaction is 12%, then 6% is directly charged as CGST and another 6% as SGST. Thus, instead of an integrated tax, the tax is collected separately for the two hierarchical authorities, and there is a direct-distribution of tax, instead of indirect taxation. 

What is IGST? 

Definition of IGST or Integrated Property Tax (IGST) is a tax collected on transactions between countries where the seller and the buyer are located in different regions. In addition, IGST is also charged for the import and export of goods and services, and for the provision of services related to SEZs or Special Economic Zones.

In the case of international tax collection, instead of taxing it separately from the Institution and the State, the Government collects the IGST, which is later divided equally. However, this does not add any extra burden to the consumer’s pocket because IGST is equal to SGST and CGST together. It is collected by the State to ensure that taxes are evenly distributed between the Institute and the State Government. The IGST simplifies the tax process and organizes tax collectors where there are two affected areas instead of one. 

Example of IGST 

Asim from Haryana sold goods in Pankaj from Rajasthan, amounting to ₹ 1,00,000. If the charged GST is 12%, then this 12% is IGST. Instead of two, only one tax is levied on the Central Government, of which 6% is put into practice. Therefore, IGST is levying both the CGST tax to the central and the SGST tax to the state. GST is different because instead of direct tax distribution to the institution and claims, taxes are collected in a ‘consolidated’ way and then distributed over time.