The Goods and Services Tax (GST) is unified taxation on the supply of all goods and services. The GST is intended to be revenue-neutral and it replaces most of the taxes that were previously applied at the state level as well as subsuming various surcharges and cesses.
The GST was introduced in India on 1 July 2017 by the Indian government led by Prime Minister Narendra Modi. It is applicable to each and every citizen of India, regardless of their age, gender or profession.
There are three types of GST:
1. Integrated Goods and Services Tax (IGST)
Integrated Goods and Services Tax (IGST) is a type of GST that is applied to the interstate movement of goods. The IGST tax rate is decided by the state government. In case of an interstate supply of goods, the tax will be levied by the Centre at a fixed rate. This means that all states will have to charge this uniform rate for any kind of interstate transaction.
It is important for businesses to keep track of their interstate transactions so that they can calculate their taxes accordingly.
2. Central Goods and Services Tax (CGST)
It is levied on all taxable supplies of goods or services in the course of inter-state trade or commerce within India. The CGST rate varies from state to state depending on the tax bracket under which it falls under. It includes both CGST leviable under the State List as well as Integrated GST leviable under the Union List. It is collected by the government at each stage of sale, i.e., when an entity sells a product to another entity or to an unregistered person, he has to collect the CGST at the rate of 1% and pass it on to the government.
The CGST rate is calculated on the total value excluding VAT or Sales Tax, which means that if your product has VAT or Sales Tax charged on it, then you will have to calculate GST on the net price after deducting VAT/Sales Tax from it.
If you are registered under GST and sell goods worth Rs 1 crore per annum then, CGST will be charged at 1% of Rs 1 crore which comes up to Rs 10 lakhs per annum.
3. State Goods and Services Tax (SGST)
The SGST is applicable to all transactions within a state. It is levied on the value of goods or services being supplied from one state to another. For example, if a business in Maharashtra procures goods from Gujarat or Karnataka, it has to pay SGST as per the rates applicable in Maharashtra. The SGST is levied by the state government and collected by the central government. It is levied by states on all taxable supply of goods or services in relation to transactions made within their respective territories (both intra-state as well as inter-state). The SGST rate varies from state to state depending on the tax bracket
4. Union Territory Goods and Services Tax (UTGST)
UTGST will be levied at a uniform rate of 2% on all taxable goods and services. This will be in addition to the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) levied on all goods and services in India. The UTGST will be collected by Union Territories through their own tax authorities.
While a lot of the things like the gst bill format stay uniform across various types of GST, this article has tried to explain the variations between these different types of GST and hopefully you can use this information for your benefit. You can visit Khatabook to learn in detail about billing under GST.