Nearly 45 days have passed since the roll out of GST, the much awaited and historic move in India's Taxation history, the new tax structure and process still is tagged "complicated" by most of the traders, professionals and taxpayers. Now, since GST Returns for the first time will be filed till August 20th, it is extremely necessary that taxpayers understand the structure and procedure properly so as to file the GSTR in an accurate and hassle free manner.
Under the previous tax regime, there were various taxes imposed on a single taxable event e.g. VAT, Central excise, cess etc.; However, under the new GST Regime all these taxes have been incorporated into one.
Under GST, there are 3 main taxes i.e. CGST i.e. Central GST; SGST i.e. State GST, and IGST i.e. have been integrated into GST. In order to understand, which tax will be levied at which taxable event, you need to differentiate between an inter-state transaction and an intra-state transaction.
The location of the supplier and the place of the goods/services being supplied are key factors in determining whether the supply is inter-state or intra-state.
If the location of the supplier and the place where the goods and services are being supplied to, are both in different states or when the supplier is located in India but the place of supply is outside India (exports), then the supply will be an inter-state supply. In case of goods or services being supplied by or to an SEZ unit as imports along with any supply which is not covered under intra-state supply, also comes under the purview of an inter-state supply.
On the other hand, if the supplier is located in the same state as the place of supply of goods or services, then the supply will be termed as Intra-State Supply.
Even though on every taxable event both the Central and the State Government charge tax, however on an inter-state supply, IGST i.e. Integrated GST is charged by the Central Government which implies that the Central Govt. has the power to tax whereas on an intra-state supply GST is charged by both and the power to levy CGST is with the Central Government and SGST is with the State Government. Even though the revenue will go to both Centre as well as State in both the cases.
Now let's understand these 3 terms – CGST, SGST and IGST one by one.
CGST
CGST stands for Central Goods and Services Tax. This tax will be levied on intra-state supply of goods or services by the Central Govt. and will be governed by the CGST Act. On the same intra-state supply of goods, SGST will also be levied but by the State Govt. This implies that both the Central and State Governments will agree on an appropriate proportion for revenue sharing and on imposition of the tax, the proceeds will be divided between in the State and the Centre in the proportion agreed upon. However, according to Section 8, in no case the rate of tax will exceed 14% each.
SGST
SGST stands for State Goods and Services Tax. This tax will be levied on intra state supply of goods or services by the respective State Govt. and the proceeds will go to the exchequer of the State Govt. SGST is governed by the SGST Act. On the same intra state supply, CGST will also be levied as explained above under CGST. Also any tax liability incurring under SGST can be set off against only SGST or IGST input tax credit.
IGST
IGST stands for Integrated Goods and Services Tax and is governed by the provisions of the IGST Act. IGST has replaced the previously levied Central Sales Tax and is levied on all inter-state supply of goods or services within India along with export and import of goods or services. In case of inter-state supply, only IGST will be charged by the Central Government, unlike the levy of CGST and SGST on intra-state supply, however the proceeds will anyway be shared between the 2 Governments.
Given below is the methodology for the imposition of CGST along with SGST on intra-state supply and IGST on inter-state supply.
Intra-state supply - CGST and SGST
For example – a cloth trader from Ludhiana, Punjab supplies Rs 50,000 worth cloth to a clothing store in Jalandhar, Punjab. The rate of CGST and SGST is fixed at 6% each (12% GST). So the trader will have to pay Rs 3000 CGST into the Central Govt. account and ₹3,000 SGST into the State Government account.
Inter-state supply - IGST
For example – a cloth trader from Chennai, Tamil Nadu supplies cloth worth Rs 50,000 to a cloth store in Delhi. The rate of IGST is fixed at 12% which comes to a total IGST of Rs 6,000 which the trader will deposit in the Central Government account.
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