Difference Between CGST, SGST, and IGST: Cracking Down India’s Tax Trio!
Perceiving India’s tax ecosystem feels irresistible- especially while dealing with terms like CGST, SGST, and IGST. But, for business owners, financial advisors, or even a person who generates invoices- decoding the difference between CGST, SGST, and IGST becomes crucial.
India’s rollout of the Goods and Services Tax (GST) brought in a single, streamlined tax structure, replacing the complicated layers of earlier indirect taxes. This unified approach, known as “One Nation, One Tax,” splits tax revenue into CGST, SGST, and IGST to fairly share funds between the central and state governments.
This blog will break down how CGST, SGST, and IGST work, apply, and their importance. Before we explore the differences, let’s understand what is IGST, CGST, and SGST.
Check out more on the GST Collection in April 2025 and what it means for SMEs.
What is CGST and SGST- a Snap Shot and Clear Comparison!
Central Goods and Services Tax (CGST) is an indirect tax imposed by the central government on sales and services conducted within the boundaries of one state. In other words, when a transaction takes place within the same state, both CGST and SGST are charged together. The revenue from CGST is directly transferred to the central government.
The full form of SGST is State Goods and Services Tax! It is imposed by the state government on transactions that take place entirely within the same state, involving both buyer and seller located in that state. It facilitates the Indian states to generate their revenue from the Tax collected under the unified regime.
CGST vs SGST: The Perfect Spit!
Though CGST and SGST are levied on intra-state supply, they are governed by two different authorities. Together, they facilitate balanced tax distribution between both state and central governments, but the key difference between CGST and SGST is significant.
CGST Vs SGST: How Do They Differ?
CGST and SGST are nothing but the two sides of the GST coin that ensure uniformity in the tax regimes. Let’s quickly check out the difference between SGST and CGST.
| Factors | CGST | SGST |
|---|---|---|
| Who Collects the Tax? | Central Government of India | State Government in which the trade took place |
| Scope | It substitutes various central indirect taxes such as service tax, excise duty, and others previously imposed by the central government. | It takes the place of state-level taxes such as VAT, entry tax, and similar levies. |
| Tax Collection Process | The seller includes SGST in the invoice and remits the collected tax to the respective state government. | The seller includes SGST on the invoice and remits the collected tax amount to the respective state government. |
| Revenue Sharing Module | The central government might distribute the collected tax amount to the states depending on the GST Council’s instructions. | The state government fully leverages its revenue and doesn’t share it with the central government. |
CGST and SGST are applied to trades within the state – but what about supplies crossing the boundaries of the states?
Read More: Difference between Regular and Composition GST
Who collects the Tax?
That’s how IGST takes over – the only tax structure to manage cross-border deals. Let’s break down how it seamlessly links the state taxes.
What is IGST: The Smart Bridge Connecting Interstate Trade!
Integrated Goods and Services Tax (IGST) facilitates a balanced taxation framework for interstate transactions. It is enforced and collected on the trade that travels from one state to another within the country. IGST merges the elements of CGST and SGST into one unified tax applied to interstate dealings.
Central Board of Indirect Taxes and Customs manages IGST and distributes the gathered tax share to the GST authorities of the states where the supply takes place. IGST is also applied to the import and export of goods and services across the country’s borders.
Let’s consider an example:
If a furniture owner in Karnataka sells a dining table worth ₹1,00,000 to a seller in Kerala and 18% IGST is applied.
IGST Applied on Amount: ₹18000
Total Invoicing Amount: ₹1,18,000
The Furniture owner collects ₹1,18,000 from the customer in Kerala. The entire amount which is the dining table cost + IGST is paid by the seller to the central government.
The central Government keeps 50% of its share i.e. ₹9000 and transfers 50% i.e.₹9000- the state share to Kerala, which is referred to the state consuming the goods or services.
Now that we have understood IGST, too, let’s quickly walk in to get the difference between CGST, SGST, and IGST. The differentiation will guide you to understand how each one of them plays a unique role depending on the nature of the supply.
Let’s break them down here!
Understanding the Difference Between CGST, SGST, and IGST: A Quick Guide to India’s GST Trio!
| Category | CGST | SGST | IGST |
|---|---|---|---|
| Full Form | Central Goods and Services tax | State Goods and Services Tax | Integrated Goods and Services Tax |
| The Regulatory Body | Central Government | Respective State Government | Central Government |
| Where Does it Apply? | Intra-state Supply | Intra-state Supply | Inter-state supply and imports/ exports |
| The Revenue Sharing Model | Goes to the Central government | Goes to respective state government | The collected revenue is distributed between the central and state governments. |
| Compliance Authority | CBIC | State GST Department | CBIC |
| GST Rate Split | Half of the total GST rate, representing 50% of the applied amount. | 50% of the total GST rate i.e. half of the amount applied | Full GST rate applied |
| Example Total GST = ₹180 | ₹90 goes to central government | ₹90 to the state government | ₹180 to the applied under IGST |
Wrap Up!
Getting a complete breakdown of the difference between CGST, SGST, and IGST isn’t just about the bookish knowledge. It’s about optimizing business finances and compliance processes and staying ahead of the competitive curve in the dynamically changing ecosystem.
Doesn’t matter if you are a business owner, freelancer, or a finance professional; mastering these three becomes crucial. Got more questions? Don’t hesitate to reach out to us!
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FAQs on the Difference Between CGST, SGST, and IGST!
1. What are the Four Types of GST?
- CGST – Central Goods and Services Tax
- SGST – State Goods and Services tax
- IGST – Integrated Goods and Services Tax
- UTGST – Union Territory Goods and services tax
- What is the difference between CGST, SGST, and IGST in terms of compliance?
While CGST and IGST are filed with the central government, SGST is filed with the state government.
2. What is UTGST?
UTGST are taxes levied on supply of goods and services specially in union territories without legislatures. Instead of CGST and SGST, trade under Union territory is charged as CGST and UTGST.
3. Who pays IGST?
For inter-state supplies, the seller adds the IGST bill to the invoice, and the buyer pays the amount.
4. How to calculate CGST and SGST?
The total Tax payable divided by two is how we can compute CGST and SGST.
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