The Goods and Services Tax (GST) is a unified tax system implemented in India in July 2017, which replaced various indirect taxes such as Value Added Tax (VAT), excise duty, service tax, and others. GST is levied on the consumption of goods and services, and it is an indirect tax, meaning that it is not charged directly by the government to the consumer but rather to the businesses that produce and sell goods and services.
The GST system in India comprises three types of taxes – Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), and Central Goods and Services Tax (CGST).
IGST:
IGST is a tax levied by the central government on inter-state supplies of goods and services. It is applicable when goods or services are supplied from one state to another state, or from one Union Territory to another Union Territory, or from a state to a Union Territory or vice versa. The revenue generated from IGST is divided between the central and state governments.
For example, suppose a manufacturer based in Tamil Nadu supplies goods to a dealer in Karnataka. In that case, the IGST will be levied by the central government, and the revenue generated from IGST will be divided between the central and Karnataka state governments.
SGST:
SGST is a tax levied by the state government on intra-state supplies of goods and services. It is applicable when goods or services are supplied within a state or Union Territory. The revenue generated from SGST is entirely retained by the respective state government.
For example, if a restaurant in Delhi supplies food to a customer in Delhi, SGST will be levied by the Delhi state government, and the revenue generated from SGST will be entirely retained by the Delhi state government.
CGST:
CGST is a tax levied by the central government on intra-state supplies of goods and services. It is applicable when goods or services are supplied within a state or Union Territory. The revenue generated from CGST is entirely retained by the central government.
For example, if a manufacturer in Maharashtra supplies goods to a dealer in Maharashtra, CGST will be levied by the central government, and the revenue generated from CGST will be entirely retained by the central government.
In conclusion, GST is a comprehensive tax system that subsumes various indirect taxes under one tax umbrella. The different types of taxes – IGST, SGST, and CGST – are designed to simplify the indirect tax structure in India and ensure that the revenue generated from GST is appropriately divided between the central and state governments.
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We thank author Anshul Karwa for this Post!