Introduction to IGST, CGST and SGST
India has a federal structure of government – in other words, both entities i.e. the Centre as well as the State – hold certain powers in matters of administration. Taxation also, on similar lines, has been typically bifurcated between the two heads – while Excise Duty and Service Tax have been under the jurisdiction of the Centre, Sales Tax and later VAT has been under the jurisdiction of the States. The guiding principle in the previous regime largely was – that while the Centre had authority on the production of goods and services, States had the authority on the sales of those goods and services.
However, the introduction of GST brought about a major amendment – which gave powers to both Centre and State to levy taxes on the supply and consumption of goods and services. This was the prime basis on which all the indirect taxes were subsumed under one tax i.e. GST. However, in keeping with the federal nature of India, the government and the GST council decided to adopt the Dual GST model, which has been successfully implemented in Canada.
Under this dual GST model, GST will have the following 3 components –
- CGST – Central GST
- SGST / UTGST – State GST / Union Territory GST
- IGST – Integrated GST
- Intra-State supply of goods or services is when the location of the supplier and the place of supply i.e., location of the buyer are in the same state. In Intra-State transactions, a seller has to collect both CGST and SGST from the buyer. The CGST gets deposited with Central Government and SGST gets deposited with State Government.
- Inter-State supply of goods or services is when the location of the supplier and the place of supply are in different states. Also, in cases of export or import of goods or services or when the supply of goods or services is made to or by a SEZ unit, the transaction is assumed to be Inter-State. In an Inter-State transaction, a seller has to collect IGST from the buyer.
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