CGST, SGST, IGST, and UTGST: Understanding the Four Types of GST with Examples

Indias Goods and Services Tax (GST) regime revolutionized indirect taxation by unifying a fragmented tax structure into a single, transparent system. However, GST itself is divided into four componentsCGST, SGST, IGST, and UTGSTeach with distinct application based on the nature and location of a transaction. Understanding these types of GST is crucial for every business, whether retailer or service provider, to ensure accurate compliance and pricing.

1. Central Goods and Services Tax (CGST)

CGST is the tax levied by the Central Government on intra-state supplies of goods and services. It applies when a transaction takes place within the same state.

Example:
A clothing retailer in Delhi sells garments worth ?10,000 to a customer in Delhi. Suppose the GST rate is 18%. It will be split as:

• CGST @ 9% = ?900

• SGST @ 9% = ?900
  Thus, the total tax collected is ?1,800, shared equally between the Centre and the State.

The CGST collected is credited to the central governments account and used for national programs and schemes.

2. State Goods and Services Tax (SGST)

SGST is imposed by the State Government on the same intra-state supply where CGST is applicable. It is levied along with CGST, but the revenue goes to the state where the sale is made.

Continuing the example above, the Delhi Government receives the ?900 SGST while the Centre collects the ?900 CGST.

Businesses must file returns for both CGST and SGST while selling within the state.

3. Integrated Goods and Services Tax (IGST)

IGST is applicable on inter-state supplies of goods and services. This includes sales between two different states and also imports and exports. The Central Government collects IGST, which is later apportioned between the Centre and the destination state.

Example:
A manufacturer in Maharashtra sells machinery worth ?1,00,000 to a dealer in Karnataka. If the GST rate is 18%, the entire 18% (?18,000) will be charged as IGST.

Here, no CGST or SGST is applied. The Centre collects the IGST and later transfers the appropriate share to the Karnataka state government.

This system ensures seamless tax flow and avoids the complications of double taxation in inter-state commerce.

4. Union Territory Goods and Services Tax (UTGST)

UTGST is levied in Union Territories (UTs) that do not have a legislature, like Chandigarh, Lakshadweep, Daman and Diu, Andaman and Nicobar Islands, etc. It is charged along with CGST for intra-UT transactions.

Example:
A shop in Chandigarh sells electronics worth ?20,000 within Chandigarh. The applicable GST (18%) is split as:

• CGST @ 9% = ?1,800

• UTGST @ 9% = ?1,800

Just like SGST, UTGST goes to the UTs administration for local development.

Why Understanding the Types of GST Matters

Understanding which GST type applies in a given transaction is essential for:

• Accurate invoicing

• Correct ITC (Input Tax Credit) claims

• Avoiding penalties for non-compliance

• Efficient accounting and filing

For example, claiming SGST credit for an inter-state transaction where IGST applies can result in disallowed claims and fines.

Conclusion

GST may appear complex at first glance, but breaking it down into its four typesCGST, SGST, IGST, and UTGSTmakes it manageable. Each type serves a clear purpose within the broader GST framework. As businesses continue to adapt and grow, staying GST-compliant is easier with the right knowledge and robust accounting solutions.

At BUSY Infotech Pvt. Ltd, we empower businesses with smart GST-ready accounting software to handle every type of GST with ease, ensuring complete compliance and efficiency.