Goods and services tax – IGST CGST and SGST
Goods and services tax IGST, SGST, CGST:
Tax structure in India in present regime has different scenarios when its coming to different states or central tax structure. With the roll out of Goods and Services Tax, taxes will be under one stream in present scenario Taxes collected by the Centre are Central Excise duty, Additional Duties of Customs (commonly known as CVD), Special Additional Duty of Customs (SAD), Service Tax. And Taxes collected by the State are State VAT, Central Sales Tax, Entertainment and Amusement Tax (except when levied by the local bodies), Taxes on lotteries etc. The responsibilities have been sorted now. Central and state tax is no different. Tax structure is modified by “One nation, One tax, One market”.
GST will bring in the most of advantages for nation and for the user. With this tax structure there are 3 major segregation of taxes and they are:
- SGST (State Goods and Service tax),
- CGST (Central Goods and Service tax),
- IGST (Integrated Goods and Service tax).
Now let us understand what these terms mean, The Goods and Services Tax to be collected by the Center on intra-State supply of goods and services is Central GST (CGST) and tax collected by the States is State GST (SGST). When dealing with inter-state supply of goods and services, Integrated GST (IGST) will be collected by Center. If a person is selling goods intra-state then the tax division between the SGST and CGST will be 50%-50% and where as if the person is selling inter-state IGST will be 100%.
The credit of IGST will be adjusted with IGST, CGST, SGST. The credit of CGST will be adjusted with CGST and IGST. The credit of SGST will be adjusted with SGST and IGST.
By the above chart the tax distribution is clearly understood. Now let us understand the roles of SGST CGST and IGST when it comes to the Union territories and import of goods and services.
Goods and Services Tax is only a consumption based tax. The state in which the goods have been consumed, tax is applied.
In the above example we can see that when there is the Intra state business from Company A and Company B both SGST and CGST is applicable with same ratio. IGST is applied when business is between Company B and Company C from different state.