Prior to the implementation of GST, there were various types of active invoices in the system such as tax invoice, asset invoice, sales invoice, etc. However, after the implementation of the GST, all those different invoices were replaced by the GST invoice. In order to claim the input tax liability, issuing a GST invoice is mandatory. Therefore, each registered GST taxpayer is required to issue a GST invoice to his or her customers in order to claim the input tax liability.
IGST, CGST, and SGST are GST sectors that are levied on Central and State Governments on the basis of supply and utilization. Property Tax (GST) is an indirect and differentiated tax levy, levied on the supply of goods and services. GST has many categories; therefore, it is charged at all levels of the production stage, and as it is based on the place of arrival, the tax is collected from the end of the purchase and not from any source.
Goods and service tax (GST) can be divided in two types based on the place of transaction, Intra State, which means within the same state. And Inter State, which means between two different states.
Intra State Includes CGST (Central GST) and SGST ( State GST). Whereas, Inter state Includes IGST (Integrated GST), which is the sum of CGST and SGST.
Example To Understand About CGST , SGST and IGST
Let’s take an example to understand that.
A manufacturer from Jharkhand (A) sold his goods to dealer (B) for Rs.10,000. GST rates are CGST @9% and SGST @9% , and because this transaction is in the same state, So, (A) will pay CGST 9% of Rs.10,000, out of which Rs.900 will go to the center. And 9% of Rs. 10,000 SGST will go to the State Government. After that, Dealer (B) sold the goods, which is from Jharkhand, to the trader (c) which is from Odisha, for Rs. 20,000. Because of the Inter State transaction, Dealer (B) will pay the IGST 18%, which is the sum of CGST and SGST, and Rs. goes to the central Government. Later on, Trader (C) from Odisha , sold the goods to (D), who also lives in Odisha for Rs. 30,000. Trader (C) sold the goods in the same State, So she will charge CGST 9% and SGST 9% of Rs.30,000 to the State Government.
Why is GST Divided in CGST, SGST and IGST?
India operates on the principles of federalism; therefore, all provinces are united under one organization. However, the state has its own defined powers. Therefore, both the Central Government and the Government are the owners of the tax collection. Both of these energy systems have their own responsibilities assigned to them, which require them to raise funds in the form of taxes.
Prior to GST, the provinces operated separately when it came to taxes, and there were also various indirect taxes levied on State and Institutional Governments. However, the GST included all taxes in one. The GST was introduced, keeping the idea of ’One Nation, One Tax,’ and therefore, included all existing State and Government taxes. However, in order to ensure the smooth and fair transparency of taxation, the GST was divided into IGST, CGST, and SGST. The division of the GST into these categories includes the formation of taxes in the country, without costing the State Government money at the same time.