The government of India recorded Goods and Services Tax (GST) collections of ₹33,645 crore under CGST, ₹41,836 crore under SGST, and ₹1,01,883 crore under IGST. These are the different components of GST that are levied at different stages of supply for a balanced distribution.
This classification directly impacts businesses by streamlining taxation and improving compliance efficiency. In this blog, we will understand the four main components of GST, CGST, SGST, IGST and UTGST.
The tax businesses that are liable to pay under GST are based on the nature of the supply, whether it is inter-state or intra-state. The key objective is to divide GST into different components for the fair distribution of GST.
The GST system in India is based on a dual taxation system. This ensures that tax revenue is fairly distributed between the central, state governments and Union Territories. To achieve this, GST has been split into four parts: CGST, SGST, IGST, and UTGST.
The GST split explained above assures revenue fairness, transparency, and unified tax administration with the help of CGST, SGST, IGST, and UTGST.
SGST is an indirect tax levied by the state government on intrastate (within the same state) supplies of goods and services. It is levied by the state government where the product is sold or consumed. SGST ensures that the state government gets its tax revenue share from intrastate transactions. SGST has replaced earlier state-level taxes like purchase tax, luxury tax, VAT, and more.
CGST, on the other hand, is imposed by the central government on intrastate (within the same state) supplies of goods and services. An equal value of CGST and SGST is levied on the same intrastate supply. If GST of 18% is levied for an interstate transaction, 9% will be the CGST rate, and 9% will be the SGST rate.
| CGST | SGST |
| Imposed by the central government | Imposed by the state government |
| The state government collects the tax | The state government cannot share the revenue with the central government |
| Applies to intrastate transactions | Applies to intrastate transactions |
| The central government can share the revenue with the state governments | The central government can share the revenue with the state governments |
IGST stands for Integrated Goods and Services Tax. IGST is a tax imposed on all interstate supplies of goods and services between two or more states/Union Territories. It is governed by the IGST Act 2017.
Under intrastate transactions, CGST and SGST are both applied. At the same time, IGST combines these into a single tax for goods and services moving between states or union territories. The tax is then shared between the central and state governments.
Here are the key differences between CGST vs IGST:
| CGST | IGST |
| Applied to imports and interstate transactions | Imposed by the central government |
| The central government shares revenue with the destination state | Imposed by the central government |
| Revenue is shared only with the central government | The central government shares revenue with the destination state |
UTGST is a tax imposed on the supply of goods and services within Union territories whose governments don’t have their own legislature. It is governed as per the UTGST Act 2017. It applies to the following Union territories:
Union territories of Delhi, Jammu & Kashmir, and Puducherry have their own legislation. Hence, SGST taxation law is applicable here and not UTGST.
Now, let’s understand all four components of GST with examples.
CGST and SGST Example
Suppose that Mr Rajesh has a saree store in Gujarat. He sold a saree worth ₹10,000 to Ms Ragini in Gujarat itself. We assume that the GST charged is 18%. It will comprise CGST of 9% and SGST of 9%. Mr Rajesh will collect GST of ₹1800 and remit it through the GST portal. Out of this, ₹900 will go to the Central Government, and ₹900 will go to the Gujarat Government.
IGST Example
Suppose that a businessman, Mr Vinay from Maharashtra, sold his goods to Mr Karan from Uttar Pradesh worth ₹20,000. Now, let’s assume that the GST rate applicable is 18%. In such a case, the businessman Karanveer will charge ₹3600 as IGST. This IGST will go to the Central Government. Later on, it will be split between the Central Government and Uttar Pradesh (Consuming state).
UTGST Example
UTGST is similar to how the state government levies SGST. Suppose there is a business owner named Kuldeep Singh in Chandigarh. He sells goods worth ₹10,000 to a local customer. As it is an intra-union territory transaction, the tax will be divided between the central government and the Union Territory administration.
Now, assume that the GST rate applicable is 18%. Hence, customers will pay ₹1800 as GST. Out of this, ₹900 will be considered as CGST, which will go to the central government. Whereas ₹900 will be considered as UTGST and will go to the Chandigarh government.
GST combines multiple indirect taxes into a single unified tax system for seamless taxation and compliance. The four major GST components in India are CGST, SGST, IGST, and UTGST. These components encourage ease of doing business and a transparent tax process. Accurate filing is important for a business as it serves as income proof when you apply for a business loan.
1. What is the full form of GST?
The full form of GST is Goods and Services Tax. It is an indirect tax that is levied on the supply or sale of certain goods/products and services.
2. How does GST get applied to E-Commerce transactions?
If e-commerce sales take place within the state, then CGST and SGST will be applied. Whereas if the sales take place in a different state, then IGST will be applicable.
3. Why was GST split into different components?
GST was split into components so that the central and state governments can get a fair tax share.
4. What is the current GST rate structure in India?
The current GST rate structure in India has four different tax slabs, including 0%, 5%, 18% and 40%.
5. Is GST the same across all the states?
One of the major benefits of GST is its uniformity. GST has the same tax rates and structure applicable across India.
6. How does GST prevent double taxation?
With the help of input tax credit and split components, GST ensures that tax is paid only on value addition at each stage.
7. What is the destination-based principle in GST?
GST is based on a destination-based tax model. Money is collected in the state where the goods or services are used rather than where they are made.
8. Is GST applicable to exports?
Under GST, exports are regarded as “zero-rated supplies,” meaning that no tax is collected on exported goods or services, and exporters are eligible to get a refund or input tax credit.
9. What happens if goods are sold in Chandigarh?
Since Chandigarh is a Union Territory without a legislature, CGST and UTGST are applied to intra-UT transactions there. The Chandigarh government collects the UTGST part/
10. What is the role of the GST council?
The GST Council recommends tax rates, exemptions, and administrative procedures. It assures that a Uniform GST structure is applicable.
