Understanding India's Dual GST Structure
India follows a dual GST model where both the Central Government and State Governments simultaneously levy tax on goods and services. This is implemented through three types of GST: CGST, SGST (or UTGST), and IGST.
What is CGST?
Central Goods and Services Tax (CGST) is the tax levied by the Central Government on intra-state supplies. It is governed by the CGST Act, 2017. The revenue from CGST goes entirely to the Central Government.
What is SGST?
State Goods and Services Tax (SGST) is the tax levied by the State Government on intra-state supplies. Each state has its own SGST Act. The revenue goes to the respective State Government. For Union Territories, this is replaced by UTGST.
What is IGST?
Integrated Goods and Services Tax (IGST) is levied by the Central Government on inter-state supplies and imports. It is governed by the IGST Act, 2017. IGST is essentially CGST + SGST combined, and the revenue is later apportioned between the Central and State Governments.
When Does Each Type Apply?
| Scenario | Tax Applicable | Example |
|---|---|---|
| Sale within the same state | CGST + SGST | Delhi seller to Delhi buyer |
| Sale to another state | IGST | Delhi seller to Mumbai buyer |
| Import of goods | IGST + Customs Duty | Import from China to India |
| Sale to/from SEZ | IGST | Supply to SEZ unit in Karnataka |
| Sale within a Union Territory | CGST + UTGST | Seller and buyer in Chandigarh |
Practical Examples
Example 1: Intra-State Supply
A business in Karnataka sells goods worth ₹1,00,000 to a buyer in Karnataka. GST rate is 18%.
- CGST: 9% = ₹9,000 (goes to Central Government)
- SGST: 9% = ₹9,000 (goes to Karnataka Government)
- Total tax: ₹18,000
- Invoice total: ₹1,18,000
Example 2: Inter-State Supply
The same business sells goods worth ₹1,00,000 to a buyer in Tamil Nadu. GST rate is 18%.
- IGST: 18% = ₹18,000 (collected by Centre, shared with Tamil Nadu later)
- Total tax: ₹18,000
- Invoice total: ₹1,18,000
Notice that the total tax amount is the same in both cases — only the breakup and collection mechanism differs.
How Place of Supply Determines CGST/SGST or IGST
The critical factor is the Place of Supply compared to the location of the supplier:
- If Place of Supply = Supplier's State → CGST + SGST
- If Place of Supply ≠ Supplier's State → IGST
Place of Supply Rules (Summary)
- Goods: Location where goods are delivered
- Services (general): Location of the recipient
- Immovable property services: Location of the property
- Events and exhibitions: Location where the event is held
ITC Cross-Utilization Rules
Input Tax Credit utilization follows specific rules:
| ITC Type | Can Be Used For |
|---|---|
| IGST Credit | IGST → CGST → SGST (in this order) |
| CGST Credit | CGST → IGST only (not SGST) |
| SGST Credit | SGST → IGST only (not CGST) |
Key rule: CGST credit cannot be used for SGST and vice versa. Only IGST credit can be used across all three.
Impact on Invoicing
Your invoice format changes based on the type of supply:
- Intra-state: Show CGST and SGST separately with rates and amounts
- Inter-state: Show only IGST with rate and amount
Automatic Tax Determination with FileWithUs.ai
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This article is for general information based on tax law current at the time of review and is not a substitute for professional advice. Verify figures against the official Income Tax and GST portals, and consult a qualified professional for your specific situation.