TYPES OF GST

GST is one indirect tax for the entire nation, which makes India a common unified market. GST subsumes most indirect taxes under a single taxation regime. Right from the manufacturer to the consumer, GST is a single tax on the supply of goods and services. The value of GST is of great importance as both the governments (central and state) are now relying on the GST for their indirect tax revenue.

There are four major types of GST that include:

1.The State Goods and Services Tax (SGST)

SGST is one of the two taxes that is imposed on every state’s transaction of goods and services. It is levied by the state where the goods are being sold or obtained. It thus replaces all kinds of existing state taxes including the VAT, the Entertainment Tax, Luxury, Sales Tax, Entry Tax etc. and the Surcharges on any kind of transactions that are being made with the involvement of goods and services. The main claimer of the revenue which is earned under the SGST is the State Government.

Let us take an example:
Raman is a dealer in Maharashtra who sold goods to Amar in Maharashtra worth Rs. 20,000. The GST rate is 18% that includes 9% of CGST and 9% of SGST. In such a case, the dealer collects Rs. 20,000 + 3,600 (GST) of which Rs. 1800 will go to the Central Government and Rs. 1,800 will go to the Maharashtra Government.

2.The Central Goods and Services Tax (CGST)

CGST refers to the Central GST tax that is imposed by the Central Government of India on transactions of goods and services that take place within a state. CGST is one of the two taxes that is charged on every intrastate (within one state) transaction, the other one being SGST (or UTGST for Union Territories). CGST replaces all other existing Central taxes including Service Tax, Central Excise Duty, CST, SAD etc. The rate of CGST is same as of SGST where both taxes are charged on the base price of the product.

Let us take an example:
In the above-stated example, when Raman sold goods to Amar in the same state (Maharashtra), Amar paid two taxes where CGST was for the central government and SGST was for the state government and the rate of both are same i.e. 9%. After the application of CGST (9% of Rs 20,000), the final cost of the product becomes Rs 23,600.

Here, all the taxes in all the situations above are borne by the end consumer in the final cost and not by the manufacturer or the dealer of the product or service. Since GST is levied where consumption is involved, the state where the product is originally manufactured is not entitled to the tax collected. If the manufacturing state imposes a tax, the Central government will transfer the same to the consuming state.

3.The Integrated Goods and Services Tax (IGST)

IGST or The Integrated Goods and Services Tax is applicable when the interstate transactions of goods and services take place. IGST is also imposed on the goods that are imported which gets distributed amongst the respective states. The IGST is charged when the movement of any product or service takes place from one state to another.

Let us take an example:
Raman who is a manufacturer in Maharashtra is selling his goods of 20,000 worth to Amar who resides in Delhi. As this is an interstate transaction, IGST will be applicable here. As GST rate is 18%, the IGST amount chargeable will be Rs 3,600 (18% of Rs 20,000) and the refined rate of the product itself will be Rs 23,600. GST is fundamentally a consumption tax which means that only the state where the goods are actually consumed will be getting the due benefits, setting aside the manufacturing state.

4. The Union Territory Goods and Services Tax (UTGST)

The Union Territory Goods and Services Tax commonly known as UTGST is applied on the supply of goods and services in any of the five Indian Union Territories including Chandigarh, Andaman and Nicobar Islands, Dadra and Nagar Haveli, Lakshadweep and Daman and Diu. UTGST is being charged additionally with Central GST (CGST). For any of the goods or services transaction within a Union Territory, the sum of CGST and UGST is considered.

Territory, the sum of CGST and UGST is considered. The reason behind separate implementation of GST for the Union Territories is that the common State GST (SGST) cannot be applied in a Union territory without any legal authority. SGST is applicable to Delhi and Pondicherry as they already have their own legal authorities.

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