The GST regime in India, on 1 July 2017, marked a new beginning in the Indian taxation system. GST or the Goods and Services Tax replaced and unified numeral indirect taxes collected at the state and union level (e.g., VAT, service tax, and excise duties) for a single tax regime. Under the GST system, there are different types of GST – CGST and SGST, IGST and UTGST levied depending on the nature of the transaction and its location. We’ll take a loser look at the different GST types and where and how it is levied, and tax collected.

What are the different types of GST in India?

GST is a unified tax system implemented in India to streamline the taxation process. For businesses, it is imperative to understand the different types of GST to keep business compliant, pay taxes in time, and operate smoothly. GST is collected by the state where the goods are sold/consumed and not where it is being manufactured.

There are primarily four types of GST in India:

• CGST (Central Goods and Services Tax): As can be understood, this us collected by the Central Government on intra-state supplies of goods and services
• SGST (State Goods and Services Tax): This is at the state level and is collected by the State Government on intra-state supplies of goods and services
• IGST (Integrated Goods and Services Tax): This is collected by the Central Government for inter-state transactions of goods and services
• UTGST (Union Territory Goods and Services Tax): This is applicable to Union Territories without legislatures, where tax is collected by the UTs for supplies of goods and services within the UT (similar to SGST)

This means that if there’s sale of goods and services within a state (e.g., within Maharashtra), CGST and SGST will be levied. However, if there’s sale of goods within states (e.g., between Maharashtra and Karnataka) then only IGST will be collected. If the sale is in a Union Territory, UTGST is going to be collected.

Also read: GST Calculator with formula

IGST full form – Application, example and calculation

IGST full form is Integrated Goods and Services Tax.

Since this tax is levied on interstate state sale of goods (i.e., between two or more states or union territories), it is collected by the central government, and is governed by the IGST Act, 2017.

IGST is applicable for import and export of goods and services, and will be shared between state and central governments. (Also read: How to start an import export business).

How to calculate IGST?

In our example for GST calculation, let’s assume the GST on steel bars is 18%.

Now if you are a steel seller in Pune, Maharashtra selling to a construction company in Kolkata, West Bengal steel worth ₹10 lakhs, the IGST would be charged at 18%. This means that ₹1.8 lakhs will be charged as IGST which will be collected by the centre and the state of consumption, i.e., Kolkata.

IGST = IGST % x Value of goods/services sold = 18% x 10,00,000 = ₹1,80,000

Total invoice amount = ₹10,00,000 + ₹1,80,000 (GST) = ₹11,80,000

CGST full form – Application and example

CGST full form is Central Goods and Services Tax.

This tax is collected by the central government for the sale of intrastate sale of goods and services. It is governed by the CGST Act, 2017.

Unlike IGST, when a sale takes place, both CGST and SGST (equal amount) is levied. That is, when there’s a sale within the state, the revenue share is divided between the centre and state. The share is usually of equal weightage. So, for 18% GST on steel, for an intra-state sale, CGST and SGST will both be at 9% respectively.

In the next section, we will elaborate an example of CGST through GST on transport. That is, if a logistics company in Tamil Nadu provides road transport service to a client within Tamil Nadu, how much CGST will be applicable.

SGST full form – Calculation and application

SGST full form is State Goods and Services Tax.

Since this tax is collected at the state level where the goods or services are consumed, it is the state’s SGST Act, 2017 that governs it.

For intra-state sale, there is CGST and SGST applicable. For example, your restaurant bill comes with separate CGST % and SGST % collected.

How to calculate CGST and SGST?

Let’s continue our example on CGST and SGST calculations for a logistics company. As mentioned, this company is based out of Tamil Nadu state and offers road transport services to a client in the same state. The invoice value for transportation services is ₹10,000. Applicable GST for road transport service is 5%.

CGST = (GST rate/2) x Value of services = (5% / 2) x 10,000 = 2.5% x 10,000 = ₹250

SGST = (GST rate/2) x Value of services = (5% / 2) x 10,000 = 2.5% x 10,000 = ₹250

Total invoice amount = ₹10,000 + ₹500 (GST) = ₹10,500

In this example, the transport company has to submit a total GST of 5% that equals ₹500 on the GST portal. But in terms of revenue sharing, the amount is shared equally (i.e., ₹250) by the centre and state.

Also read: Money Bill and Finance Bill – Understand government Bills for taxation

UTGST full form – Example with calculation

UTGST full form is Union Territory Goods and Services Tax.

In our discussion on the different types of GST in India, we now look at USGT which is similar to SGST but for intra-state sale of goods and services within a particular Union Territory. It is governed by the UTGST Act, 2017 and levied along with CGST.

Note: Delhi, Jammu and Kashmir, and Puducherry have their own legislature and hence follow the SGST law.

How to calculate UTGST with example?

As explained previously, UTGST is calculated in the same way as SGST.

So, if you take the case of sale of steel in a UT like Chandigarh, UTGST rate would be half of the total, i.e., 9%. Now if the total invoice value is ₹1,00,000, then:

UTGST = (GST % / 2) x Value of goods = (18%/2) x 1,00,000 = 9% x 1,00,000 = ₹9,000

CGST = ₹9,000 (equal to UTGST)

Total invoice amount = ₹1,00,000 + ₹18,000 (GST) = ₹1,18,000

As such, based on the location of consumption of goods and services, UTGST will be ₹9,000 when place of supply is Chandigarh (UT).

Also read: Price of steel ingot at Mandi Gobindgarh and Daily steel price at Mandi Gobindgarh

How to determine what type of GST is applicable?

At this point it is understandable if you wonder what type of GST will be applicable in a particular transaction – i.e., CGST, SGST, IGST, or UTGST.

Here are some of the factors that will determine the GST type being applied:

• Nature of transaction: The entire premise of GST is based on whether its intra-state or inter-state transaction. So, if the transaction is within the same state, CGST and SGST will be applied. If the transaction is within different states, IGST will be applied. And if the sale takes place in a Union Territory without its own legislature, UTGST will be applied.
• Location of seller and buyer: The location of the seller (supplier) and buyer (recipient) also determines the type of GST applicable. For instance, if the buyer and seller is within the same state (e.g., Karnataka), both CGST and SGST will be applied. If the seller is in Karnataka and buyer in Maharashtra, IGST will be applied. For buyers and sellers within UTs such as Chandigarh, UTGST will be applicable.
• Place of supply: As mentioned previously, GST is collected at the place where the goods and services are consumed. So, if the place of supply is within the same state, CGST and SGST will be charged. If it is within different states, IGST will be applicable. Similarly, when the place of supply is a Union Territory, UTGST is applicable.

Also read: GST registration limit in India

Comparison of GST types

As can be understood, each type of GST collected serves a specific purpose and contributes to the country’s revenue system, whether at the central, state or UT level. As a business owner, it’s important to understand these differences, to ensure compliance with tax regulations and streamline business operations.

IGST vs CGST vs SGST vs UTGST

Here’s a comprehensive overview of each GST type:

How to calculate GST to during ITC claim

One of the many benefits of the GST system is claiming input tax credit or ITC. Which means that businesses do not have to pay taxes multiple times for the same item, but offset the tax they have paid on inputs or purchases (i.e., raw materials) against the tax they will pay on sales.

So, what happens, if a company in Karnataka, buys raw materials from a seller in Karnataka (pays CGST and SGST) and then sells the final output in Mumbai? Is GST paid and collected again? If so, how and what is the priority?

The priority of input tax for GST calculations follows a specific order that ensures utilisation of accurate tax credit. Let’s understand how:

Example: Utilisation of IGST credit for IGST liability

Company A in Maharashtra buys raw materials from Company B in Rajasthan for ₹1,00,000.

• IGST paid at 18% is ₹18,000

Company A now sells the finished product to a buyer (Company C) in Maharashtra, for ₹2,00,000.

• Company A will now have to pay CGST and SGST at 9% each
• That is, CGST and SGST of ₹18,000 each amounting to ₹36,000 in total

So, Company A will first utilise IGST credit of ₹18,000 to set off CGST and SGST liability. That is:

• ₹36,000 – ₹18,000 = ₹18,000 balance to be paid

Incorporating the priority in type of GST ensures accurate tax calculation and collection. It also ensures compliance with legal requirements, in turn building conducive environment for business growth and development.

Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.