The Goods and Services Tax (“GST”) revolutionized India's tax landscape, replacing a complex web of indirect taxes with a unified taxation system. Implemented on July 1, 2017, GST follows a destination-based taxation model, ensuring tax is levied at the point of consumption. GST streamlined tax collection, reduced cascading tax effects, and created a more transparent economic environment.
The Indian GST system is divided into four types: Central GST (“CGST”), State GST (“SGST”), Integrated GST (“IGST”), and Union Territory GST (“UTGST”). Each category serves a distinct purpose in the taxation framework.
1. Central Goods and Services Tax (“CGST”)
- CGST is levied by the Central Government on intra-state supplies of goods and/or services. Intra-State supply of goods and/or services where the location of the supplier and the place of supply are in the same state.
- This tax replaced Central Excise Duty, Service Tax, and other central indirect taxes.
- The revenue collected under CGST is deposited into the Central Government’s account.
- CGST rates are uniform across India, working in tandem with SGST to create a comprehensive tax collection mechanism.
- CGST is governed by “Central Goods and Services Tax Act, 2017 including Central Goods and Services Tax (Extension to Jammu and Kashmir) Act, 2017”.
2. State Goods and Services Tax (“SGST”)
- SGST is levied by the State Government on intra-state supplies of goods and services.
- It replaced Value Added Tax (“VAT”), Entry Tax, and Luxury Tax.
- The revenue from SGST goes to the respective State Government.
- Each state has the authority to levy SGST, which complements CGST in creating a dual GST model. Each state enacts its own SGST Act, which aligns with the central framework but may include minor adaptations to address local requirements. This ensures uniformity while allowing flexibility to cater to state-specific needs.
- SGST is governed by “State Goods and Services Tax Act, 2017 as notified by respective States”.
3. Integrated Goods and Services Tax (“IGST”)
- IGST is applicable on inter-state sales and imports/exports of goods and service. Inter-State supply of goods and/or services where the location of the supplier and the place of supply are in different states.
- IGST is the sum total of CGST and SGST/UTGST and is levied by Centre on all inter-State supplier. The Central Government collects IGST which is subsequently apportioned 50:50 between the center and the destination state to maintain revenue balance.
- This mechanism ensures seamless credit transfer and provides a uniform approach to taxing interstate commerce, resolving previous complexities in inter-state trade taxation.
- IGST is governed by “Integrated Goods and Services Tax Act, 2017 including Integrated Goods and Services Tax (Extension to Jammu and Kashmir Act, 2017)”.
4. Union Territory Goods and Services Tax (“UTGST”)
- Union Territory GST (“UTGST”) applies to supply of goods and services within union territories without legislatures. It is levied alongside CGST on intra-UT supplies.
- This specialized GST type mirrors SGST but is designed specifically for union territories like Ladakh, Andaman and Nicobar Islands, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, and Lakshadweep.
- However, it is to be noted here that SGST is applicable to the union territories of Delhi and Puducherry since they have their own legislature and government.
- UTGST ensures these regions have a tailored tax collection mechanism aligned with the broader GST framework.
- UTGST is governed by “Union Territory Goods and Services Tax Act, 2017”
You may be interested in : What is the History Of GST In India? GST Evolution.
In summary, GST is a destination-based tax, meaning:
- Tax is collected where goods/services are consumed
- Exports are zero-rated, meaning no GST is charged on exports
- Imports attract IGST, making them taxable like domestic products
Businesses must comply with GST deadlines to avoid penalties. We offer GST filing services to simplify the process for businesses of all sizes.
Below image provides a bird’s eye view of the GST design in India:
Screenshot
B. Below are test-your-knowledge case studies to help determine which GST type applies in different scenarios:
Scenario 1: Intra-State supply (CGST + SGST)
A clothing retailer in Delhi purchases shirts from a manufacturer in Delhi for ₹50,000. The applicable GST rate is 12%.
- Question: Which GST type applies, and how is it split?
- Answer: Since both the supplier and buyer are in Delhi (same state), CGST + SGST applies.
CGST (6%) = ₹50,000*6% = ₹3,000
SGST (6%) = ₹50,000*6% = ₹3,000
Total GST Payable: ₹6,000
Scenario 2: Inter-State supply (IGST)
An electronics dealer in Mumbai (Maharashtra) sells laptops worth ₹1,00,000 to a wholesaler in Bangalore (Karnataka). The GST rate is 18%.
- Question: Which GST type applies, and how is it calculated?
- Answer: Since the supplier and buyer are in different states, IGST applies.
IGST (18%) = ₹1,00,000 *18% = ₹18,000
Total GST Payable: ₹18,000
Scenario 3: Union territory supply (CGST + UTGST)
A furniture store in Chandigarh (Union Territory) sells a sofa worth ₹20,000 to a resident of Chandigarh. The GST rate is 12%.
- Question: Which GST type applies, and how is it split?
- Answer: Since Chandigarh is a Union Territory without a legislature, CGST + UTGST applies.
CGST (6%) = ₹20,000*6% = ₹1,200
UTGST (6%) = ₹20,000*6% = ₹1,200
Total GST Payable: ₹2,400
Scenario 4: Import transaction (IGST on Imports)
A company in Chennai (Tamil Nadu) imports raw materials from Germany worth ₹5,00,000. The applicable GST rate is 28%.
- Question: Which GST type applies, and how is it calculated?
- Answer: IGST applies to all imports, regardless of the supplier’s location.
IGST (28%) = ₹5,00,000*28% = ₹1,40,000
Total GST Payable: ₹1,40,000
Scenario 5: SEZ Supply (IGST on Exports/SEZ Supplies)
A company in Gujarat supplies industrial machinery to an SEZ (Special Economic Zone) unit located in Andhra Pradesh for ₹3,00,000. The GST rate is 18%.
- Question: Which GST type applies, and how is it handled?
- Answer: Supplies to SEZs are treated as zero-rated under IGST.
GST Payable: Zero (supplier can claim an IGST refund or export without payment under Letter of Undertaking)
If your GST registration has been cancelled, you can restore it through our GST revocation services.
Did you know?
India’s gross GST collection for September 2025 stood at a massive ₹1,60,360 crore, as per GST council report released on this link.
Breakdown of GST revenue:
- CGST: ₹30,247 crores
- SGST: ₹37,553 crores
- IGST: ₹81,706 crores
- Cess: ₹10,853 crores
Here is a quick snapshot:
Interesting trends: GST grew by 5% on Year on Year Basis.
Alongside GST compliance, it’s important to manage your yearly tax obligations. Our ITR filing services assist both individuals and businesses in filing accurately.
Official government announcement on GST Reforms 2025 [Source: Government of India portal]
GST Rate Comparison 2025: Bar graph showing old GST rates vs post-reform rates, highlighting relief for consumers and support for businesses. Source: Press Information Bureau of India
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Frequently asked questions (“FAQs”)
1. Can CGST be adjusted against IGST?
Yes, CGST credit can be used to pay IGST, but not SGST.
This is because CGST and IGST are both central taxes, allowing for seamless input tax credit across different types of interstate and intrastate transactions.
2. How to calculate CGST and SGST with a formula?
GST Amount = (Transaction value × GST Rate) ÷ 100
CGST = (GST Amount ÷ 2)
SGST = (GST Amount ÷ 2)
For instance, on a ₹10,000 transaction with a 9% rate:
CGST: ₹900
SGST: ₹900
3. Where is IGST applicable?
IGST applies to inter-state transactions and imports/exports.
4. What is the need for GST against VAT?
GST eliminates cascading tax effects and ensures uniform taxation across India. This structured GST system simplifies tax collection, reduces tax evasion, and promotes economic transparency.
Conclusion:
Understanding the nuanced types of GST is essential for compliance and strategic financial planning. Each GST variant – CGST, SGST, IGST, and UTGST – plays a critical role in India's comprehensive tax ecosystem, promoting economic efficiency and transparency truly resulting in ―ONE NATION, ONE TAX, ONE MARKET.