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What Is SGST And IGST?

Central and state Governments levy and collect taxes in India as it’s a federal country. Both the governments need revenue to fulfill their responsibilities. That’s why GST is charged at Central and state levels.

Goods and Service Tax (GST) is divided into three types :

1. SGST – State Goods and Service Tax

It is applicable to intra-state sales (within the same state)
It is collected by state Government.
It replaces earlier taxes such as VAT, Luxury tax, Entertainment Tax etc.

2. CGST – Central Goods and Service Tax

It is applicable to intra-state sales (within the same state)
It is collected by the Central Government.
It replaces earlier taxes such as Central excise and Service Tax

3. IGST – Integrated Goods and Service Tax

It is applicable to inter-state sales (between different states)
It is collected by the Central Government on the inter-state sales.
It replaces earlier taxes such as Central Sales Tax

As the names suggest, SGST is imposed by State Government and the amount goes to the state revenue. CGST is imposed by the Central Government and become a part of central revenue. SGST and CGST are imposed on goods sold within the same state or intra-state. Suppose if a trader sells goods worth Rs 10,000 to another trade in the same state. If the tax on the specific goods is 12%, It is shared by CGST (6%) and SGST(6%).

IGST is levied by Central Government on Goods sold from one state to another i.e. Inter-state. IGST is collected by the Central Government. Since, GST is a consumption-based tax, the state from which the goods are sold or manufactured doesn’t get a share in the IGST. The state where the goods are purchased or consumed gets the share from IGST. Suppose, if a trader from Punjab sells Rs 1,00,000 worth goods to a trader in Rajasthan. IGST is charged at 18%. The tax amount Rs 18,000 is collected as IGST by the Central Government. It would be divided by the Centre and the state where the goods are sold or consumed. So, Centre and Rajasthan would share Rs 18,000 and get Rs 9,000 each.

IGST removes the trouble of settling the tax inputs between the states. The selling and purchasing state would deal only with the Central Government.

Registration is not compulsory for SGST and CGST as long as the turn-over is below Rs 20 lakh or 10 lakh in the case of northeastern states. Whereas, registration is mandatory for IGST i.e. Interstate trade.



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What Is SGST And IGST?

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