India follows a dual GST model where both the Centre and States simultaneously levy tax on the same supply. The type of GST applicable depends on whether the supply is intra-state or inter-state. This structure preserves fiscal federalism while achieving a unified national market.
Legal Framework
| Provision | Content |
|---|---|
| CGST Act, 2017 | Central GST: levied by Centre on intra-state supplies |
| SGST Acts (respective states) | State GST: levied by State on intra-state supplies |
| IGST Act, 2017 | Integrated GST: levied by Centre on inter-state supplies |
| UTGST Act, 2017 | Union Territory GST: levied in UTs without legislature (in lieu of SGST) |
| S.9 CGST Act | Levy and collection of CGST |
| S.5 IGST Act | Levy and collection of IGST |
| Art.269A | IGST collected by Centre, apportioned between Centre and States |
Types of GST
| Type | Full Form | Levied by | Applicable on | Revenue to |
|---|---|---|---|---|
| CGST | Central Goods and Services Tax | Central Government | Intra-state supply | Centre |
| SGST | State Goods and Services Tax | State Government | Intra-state supply | Respective State |
| IGST | Integrated Goods and Services Tax | Central Government | Inter-state supply | Apportioned (Centre + destination State) |
| UTGST | Union Territory GST | Central Government | Intra-state supply in UTs without legislature | UT |
How GST Applies: Intra-State vs Inter-State
| Supply type | Example | Tax levied | Rate example (18%) |
|---|---|---|---|
| Intra-state (within same State) | Seller in Mumbai → Buyer in Pune | CGST + SGST | 9% CGST + 9% SGST = 18% |
| Inter-state (different States) | Seller in Mumbai → Buyer in Delhi | IGST | 18% IGST |
| Import into India | Foreign seller → Indian buyer | IGST (on assessable value + customs duty) | 18% IGST |
| Export from India | Indian seller → Foreign buyer | Zero-rated (0%) or refund | No tax / LUT |
| Supply to/from SEZ | Deemed inter-state | IGST | Zero-rated |
Why: The dual model (CGST + SGST) was adopted because States were unwilling to cede their entire taxing power to the Centre. The IGST mechanism for inter-state trade solves the problem of revenue allocation to the consuming State without requiring inter-state tax settlements between individual State governments.
IGST Settlement Mechanism
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A -->|"Pays IGST to Centre"| B["fa:fa-inr Central Government"]:::process
B -->|"Transfers SGST share"| C(["fa:fa-building Buyer State B"]):::success
B -->|"Retains CGST share"| D(("fa:fa-check Centre Revenue")):::document
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Input Tax Credit Utilisation (Cross-head)
| Credit of | Can be used against |
|---|---|
| IGST | IGST → CGST → SGST (in this order) |
| CGST | CGST → IGST (cannot use against SGST) |
| SGST | SGST → IGST (cannot use against CGST) |
Why: CGST credit cannot be used against SGST (and vice versa) because these are different sovereigns' revenues. Allowing cross-utilisation would effectively transfer one government's revenue to another without constitutional basis.
GST Rate Structure
| Slab | Examples |
|---|---|
| 0% (Exempt/Nil) | Essential food items (rice, wheat, milk), healthcare, education |
| 5% | Mass consumption items, transport, economy hotels |
| 12% | Processed food, business class air tickets, work contracts |
| 18% | Most goods and services (standard rate), IT services, financial services |
| 28% | Luxury goods, sin goods, motor vehicles, cement, ACs |
| 28% + Cess | Luxury cars, pan masala, tobacco, aerated beverages |
Recall Check
- What type of GST is levied on inter-state supply?
- What is the IGST settlement mechanism between Centre and States?
- Can CGST credit be used to pay SGST liability?
Key Cases
No major judicial pronouncements specifically on the classification into CGST/SGST/IGST types. Disputes primarily arise regarding "place of supply" determination (which determines whether CGST+SGST or IGST applies) and are resolved at appellate/advance ruling level.
Distinctions
| Feature | CGST | SGST | IGST |
|---|---|---|---|
| Levying authority | Central Government | State Government | Central Government |
| Applies to | Intra-state supply | Intra-state supply | Inter-state supply + imports |
| Revenue | Goes to Centre | Goes to respective State | Apportioned between Centre and destination State |
| Act | CGST Act, 2017 | Respective State SGST Act | IGST Act, 2017 |
| Rate | Half of total rate | Half of total rate | Full rate |
| ITC cross-utilisation | CGST → IGST (not SGST) | SGST → IGST (not CGST) | IGST → CGST → SGST |
| Example (18% rate) | 9% | 9% | 18% |
Flashcards
Q: What type of GST applies on intra-state supply? A: CGST (Central) + SGST (State), each at half the total rate.
Q: What type of GST applies on inter-state supply? A: IGST (Integrated GST) at the full rate.
Q: Can CGST credit be used against SGST liability? A: No. CGST credit can only be used against CGST or IGST. Cross-utilisation between CGST and SGST is not permitted.
Q: How is IGST revenue distributed? A: IGST is collected by Centre (Art.269A) and the SGST component is transferred to the destination/consuming State.
Q: What is UTGST? A: Union Territory GST: levied in UTs without legislature (Chandigarh, Dadra & Nagar Haveli, etc.) in place of SGST.
Q: If a trader in Karnataka sells goods to a buyer in Tamil Nadu at 18% GST, what tax is charged? A: 18% IGST (inter-state supply between Karnataka and Tamil Nadu).
Exam Scenario
M/s Alpha (Delhi) sells goods worth Rs.1,00,000 to M/s Beta (Delhi) and goods worth Rs.2,00,000 to M/s Gamma (Mumbai). GST rate is 18%. Determine the tax applicable on each transaction.
Approach: Transaction 1 (Alpha Delhi → Beta Delhi): Intra-state supply (both in Delhi). CGST 9% = Rs.9,000 + SGST 9% = Rs.9,000. Total tax = Rs.18,000. Transaction 2 (Alpha Delhi → Gamma Mumbai): Inter-state supply (Delhi to Maharashtra). IGST 18% = Rs.36,000. The IGST will be collected by the Centre; Maharashtra (consuming state) will receive the SGST component through settlement.