We discuss the various types of levies under the Goods and Services Tax (GST) regime
With the introduction of the Goods and Services Tax (GST) regime in 2017, Indians were promised a uniform tax system, under a regime that subsumed over a dozen central and state taxes.
However, since India is primarily a federal state and the tax revenue from the supply of goods and services has to be proportionately shared between the centre and states, a three-tier tax system was introduced under the GST. Under this system, tax liabilities arise, based on the movement of the goods or services within or outside a state.
Intra-state and inter-state GST
It is important to first understand the concepts of intra-state and inter-state supply of goods, to have clarity on the three types of GST and how they are levied.
Intra-state supply of goods or services: When the supply of goods or services takes place within a state, it is known as an intra-state transaction. In other words, when the supplier and the buyer are from the same state, it would be known as intra-state supply. In such cases, the sellers collect and deposit two types of GST from the buyer, the central GST and the state GST.
Inter-state supply of goods or services: When the supply of goods or services takes place from one state to another, it is known as an inter-state transaction. In other words, when the supplier and the buyer are not from the same state, it would be known as inter-state supply. In such cases, sellers collect and deposit a type of GST from the buyer, known as the integrated GST.
Types of GST in India
There are three types of taxes under the GST against which taxpayers can take credit.
Central Goods and Services Tax (CGST)
The centre levies the CGST on the intra-state supply of goods and services under the CGST Act. Note here that the state goods and services tax (SGST) will also be levied on the same supply but it will be governed by the state
State Goods and Services Tax (SGST) and Union Territory Goods and Services Tax (UGST)
States also levy the SGST on the intra-state supply of goods and services under the SGST Act. In the case of union territories, this levy is known as UGST. On the same supply, the centre will also levy CGST, governed by the CGST Act.
Integrated Goods and Services Tax (IGST)
Levied by the centre on inter-state supply and import of goods and services, the IGST is governed by the IGST Act. It is applicable on export, as well as the import of goods and services.