Components of GST & Application of SGST, CGST and IGST

Goods and Service Tax known as GST is a refined financial tax system for organizing all the business units to pay taxes in equivalent consideration. GST has eliminated many cascading tax schemes (Components of GST) which mean a tax on tax and have shaped an equal tax reform.

Components of GST

In this article, we are explaining some important Components of GST and Tax system. In GST there are major three components: CGST, SGST and IGST. These components play an important role in GST Bill. So what are CGST, SGST and IGST and how does it affects the taxation economy.

CGST:

CGST means Central Goods and Service Tax. Taxes collected under Central Goods and Services Tax will be the revenue for Central Government. It is covered under Central Goods and Services Tax Act 2016. Tax such as Central Excise Duty, Additional Excise Duty, Special Excise Duty, Central Sales Tax, Service Tax, etc. which are into Present Central Tax will be included into Central Goods and Service Tax. CGST will be levied for intra-state transactions of goods i.e. transfer within the state.

SGST:

SGST means State Goods and Service Tax. Taxes collected under State Goods and Service Tax will be the revenue for State Government. SGST is covered under State Goods and Service Tax Act 2016. All state taxes like Entertainment Tax, Value Added Tax (VAT), Luxury Tax, etc. will be unified into State Goods and Service Tax. SGST will be levied for intra-state transactions of goods i.e. transfer within the state.

IGST:

IGST means Integrated Goods and Service Tax.  Taxed collected under Integrated Goods and Services Tax will be divided revenue into State Government and Central Government. IGST is covered under Integrated Goods and Service Tax Act 2016.  IGST will be levied for inter-state transactions goods i.e. transfer from one state to another.

Application of SGST, CGST and IGST:

To understand when State Goods & Service Tax, Central Goods & Service Tax and Integrated Goods & Service Tax are applicable we must perceive the types of supply of goods.

  • Intra-State supply of goods- In this category, place of the supplier of goods and service and place of the buyer is in same or within the same state. For example, “A” person has supplied the goods from Maharashtra to “B” person who is also in Maharashtra then CGST and SGST tax will be levied. In Intra-State transactions, supplier would collect both CGST and SGST from the buyer.

  • Inter-State supply of goods- In this category, place of the supplier of goods and service and place of the buyer is in a different state. For example, “A” person who is in Maharashtra has supplied goods to “B” person who is located in Gujarat then IGST tax will be levied. In Inter-State transactions, supplier collects IGST from the buyer.

Here is a diagram to understand the tax structure under GST.

Components of GST

 

Bookmark For More Updates

 

Related posts

Leave a Comment