What is CGST and SGST?

  • Blog|GST & Customs|
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  • By Taxmann
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  • Last Updated on 5 May, 2021
Goods and Service Tax, popularly known as GST was implemented with an aim to achieve a common unified market with a single indirect tax for the entire nation. This means various indirect taxes that the State and Central Governments impose such as Central Sales Tax/VAT, Central Excise Duty, Luxury Tax, Service Tax, Entertainment Tax, Customs Duty, Electricity Duty, Entry Tax and Octroi are subsumed under GST.

What are the Components of GST?

1. CGST

Central Goods and Service Tax i.e. CGST will be payable to the Central Government for supplies of goods or services within the state.

2. SGST

State Goods and Service Tax i.e. SGST will be payable to the State Government for supplies of goods or services within the state.

3. UTGST

Union Territory Goods and Service Tax i.e. UTGST will be payable to Union Territory for supplies of goods or services within the Union Territory.

4. IGST

The Integrated Goods and Service Tax or IGST  will be payable to Central Government for supplies of goods or services to other State or Union Territory i.e. inter-state supplies.

Tax Structure under GST: 

An important aspect of GST is that both the CGST and SGST get levied simultaneously on every intra-state taxable supply of services and goods, except those that are exempted under GST and outside the purview of GST. Unlike VAT, both the taxes will be of the same amount. Let us take an example to understand the taxation model of CGST and SGST in a better way: Assuming GST rate is 5% i.e CGST Rate is 2.5% and SGST rate is 2.5%. A wholesale dealer in Pune supplies steel rods and bars to a company located in Mumbai for Rs 1,000, then the dealer would charge CGST of Rs. 25(Rs.1000*2.5%) and SGST of Rs. 25(Rs.1000*2.5%). Here, the revenue of CGST component will go to the Central Government, while the revenue of SGST will go to the Maharashtra State Government.  For paying the CGST, the supplier can either use the input tax credit acquired from CGST or from IGST, on the other hand for paying the SGST, the supplier can either use the input tax credits acquired from SGST or from IGST. So, the input tax credit of SGST cannot be used for payment of CGST or vice-versa.

How to calculate CGST and SGST on goods/Services? 

For calculating GST, you need to consider the “Taxable Price” and the applicable “GST Rate” (according to the type of transaction it can be either CGST rate and SGST rate or IGST rate). To perform the calculation, the formula is:

GST Amount = (Taxable Price X GST Rate) / 100 

The invoice price is equivalent to the sum of the Taxable Price and the GST amount charged.

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