Different Types of Goods and Services Tax (GST): Based on Return

GST Types: What are the types of GST in India?

Updated on 19 Mar, 2024

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Goods and Services Tax, as its name suggests, is a tax on the sale and purchase of goods and services in India. Introduced on July 1, 2017, different types of GST encompass numerous other indirect taxes like VAT (Value Added Tax), central excise, and customs duties that existed in the past. The tax structure of the different GST types was designed to add simplicity and efficiency to the Indian indirect tax structure.

Here is a brief description of different GST types and their nitty gritties.

How many types of GST taxes exist?

The structure of GST is such that the rates and applicability of GST types differ based on transaction type and goods or services type.

The transaction can be between companies of two states (inter-state) or between two companies within a state (intra-state). Let us understand how these transactions are collected and divided between different states with an example.

For example, a paper-producing factory in Maharashtra buys wood pulp from Tamil Nadu. Here, the GST collected is divided between the state of consumption (Maharashtra) and Tamil Nadu.

GST tax is majorly based on consumption. This means that the higher a state consumes a particular good or service, the higher the GST collection.

Different GST types can be collected by the consuming states.

So, how many types of GST exist in India? There are four types of GST that form its components in India.

These are CGST, SGST, IGST and UTGST. Let us understand these GST types individually:

Also Read: Documents Required for GST Registration

What is CGST?

Central Goods and Services Tax (CGST) was introduced in 2017 to replace all existing central government taxes in India like cess, central excise tax and more. CGST can be levied on the movement of goods or the availment of services within a state.

For example, if a banking company registered in Maharashtra purchases security services from a company registered in Maharashtra. Here, both CGST and SGST would be levied on the purchase invoice.

The CGST amount from the invoice would go to the central government, and the SGST amount would go to the Maharashtra state government.

What is SGST?

The State Goods and Services Tax (SGST) encompasses taxes collected for goods and services purchased in a particular state. SGST has effectively simplified the state tax collection structure that was earlier in the form of VAT, entertainment tax and more.

It is a single tax levied on the availability of services and purchase of goods intra-state. However, the supply of alcohol is exempted from SGST.

The features of SGST can differ from one state to another. However, the rates, taxability and exemptions are uniform across states.

CGST and SGST taxes are charged based on the product or service’s transactional value.

What is IGST?

The Integrated Goods and Services Tax or IGST applies to interstate transactions for purchasing goods and availing services. IGST can also apply to the import and export of goods (IGST + customs).

For example, if a Bakery in Maharashtra buys wheat from a wheat manufacturer in Punjab. IGST would apply to the invoice raised by the Punjab manufacturer to the Maharashtra bakery. However, the IGST tax liability would be on the Maharashtra Bakery (state of consumption).

The central government would collect the sum of IGST and distribute it between the state of consumption (Maharashtra) and the central government.

What is UTGST?

UTGST is the Union Territory Goods and Services Tax. UTGST is only applicable to Indian Union Territories that do not have a legislature. Therefore, SGST is liable to Delhi, Jammu and Kashmir and Puducherry.

Also Read: GST in India

Conclusion

Different types of GST returns were introduced to make the central and the state governments independent of each other in terms of tax through a unified tax structure. These GST types have increased tax application efficiency, collection and sharing between states and centres.

Frequently Asked Questions

What are the types of GST rates in India in 2024?

GST rates differ for different GST types and goods or service types under their purview.
CGST rates range from 2.5% to 14% for different goods and services in India. Similarly, SGST too follows the same range as CGST.
IGST, on the other hand, can range from 5% to 28% for various types of goods and services.

What is the difference between CGST and SGST?

For an intra-state transaction, CGST is the amount of tax that goes to the Central Government, and SGST is the amount of tax that goes to the State Government.