In this basics of GST series article, we are going to discuss in depth about various types of GST taxes and how there implementation would be playing a role. IN GST tax, the tax base will change from origin to place of consumption. Now the imports or end use will have to pay the tax and exports as well as production will be free from any tax. Under current situation, a taxable event could be multiple tax liabilities like case of manufacturing, central excise, State VAT and service tax in case of sales of service. GST will mark the shift from different taxes to single tax. Thus, it is very important to get your GST registration.
Intra State vs Inter State
For understanding the concept of IGST, CGST, and SGCT which are the different types of GST, it is important to know difference between intra state vs inter-state supply of service and goods under the GST. It is important to differentiate every transaction between intra state vs inter-state for determining IGST, CGST, and SGCT would be applicable or not.
For determining if there will be intra state or inter-state, location of supplier and place of supply should be figured out.
Inter State Supply
Inter State Supply for services and goods is one in which the location of the supplier and place of supply are located in different state. Along with this the services or goods are done by or to an SEZ unit or SEZ developer. Supply when supplier is located in India and the location of supply is outside of India. Supply is in the course of imports of services or goods and any supply is not covered in the intra state is considered as an inter-state supply. This will mark the end of indirect tax changes.
Intra State Supply
If the place of sale is in the same state as that of manufacturer then the intra-state will be applicable. Intra-state supply will not include supply of services or goods to SEZ developers, units, exports or imports.
How GST will be levied?
GST will get levied by State government and Central government on supply of services and goods. Power of tax on supply of services and goods would come in the pocket of both Central as well as State Government. But if the tax is inter-state then the power of tax is with the central government and revenue of final sale will be provided to State, just like intra state transaction. For deeper understanding how filing and registration would be you can out other posts in basics of GST section.
What is Central GST or CGST?
Central GST for business would get levied under Central GST Act on the intra-state supply of service and goods. In the case of intra-state supplies of service and goods both State as well as Central government would both get the proper revenues sharing arrangement. This power of leveling SGST or CGST tax is present in the Section 8 of GST Act, in which it is mentioned that:
Below taxes will be applied on every intra-state supply of services or goods, as this kind of rate is specified inside the schedule of the said Act on inputs of council, which will not exceed 14%. SGST and CGST will be paid by taxable person.
Focus points of CGST
- It will be levied on goods and services
- It will be applicable by Central Government with a different stature on transactions of services and goods.
- Taxes will be shared in between State and Central Government.
What is State GST or SGST?
State GST is a tax which will be applicable under State GST Act on intra supplies of services and goods. This tax is applicable by respective State Government. State GST will be set off directly against IGST or SGST input tax only.
Focus points of State GST
- State GST will be applicable by the State Government for all the transactions which will be carried out by services and goods.
- State GST would get paid directly in the accounts of respective State Government.
What is Integrated GST or IGST?
IGST or Integrated GST is a type of tax which will be placed under IGST Act. The tax will be applicable for supply of services and goods for the inter-state trace conducted all over India. IGST will be applicable on all the transactions for the sale of services and goods which will be applicable on imports inside India and also for exports of services and goods from all over India. Integrated GST will also replace the current Central State Tax which will also be applicable in the inter-state transactions of goods and services. IGST will also be applicable on the inter-state transactions, exports and imports of services and goods.
Focus Points of IGST
- Central Government will apply and collect integrated GST in place of State GST or Central GST.
- It will be applicable on inter-state supply of services and goods.
- IGST will also be levied on imports of services and goods.
- Exports will also be zero rated.
- Integrated GST will be shared between State and Central Government.
How IGST, SGST and CGST will calculate taxes?
For the purpose of calculating State GST tax and Central GST tax or intra state supply following illustrations will show you:
For the purpose of understanding the State GST and Central GST tax here is a fictional example. Let us assume that there is an Almond trader belonging to the Mumbai, Maharashtra who sells Almonds of Rs. 1 lakh to a show trader who is located inside the Pune, Maharashtra.
Now, State GST and Central GST is of 6% each. This means tax of Rs. 6000 will be applicable for Central GST and State GST considering the value of the products. Trader will then have to deposit the CGST inside the Central Government account. On the other hand the trader will have to pay SGST in the State Government account.
Following example will show you what methods are used for calculation the IGST for inter-state supply:
Consider that the same almond trader who is located in the Mumbai, Maharashtra sells almonds of Rs. 1 Lakh to a trader who has his shop in Chennai, Tamil Nadu. In such cases the rate of Integrated GST tax is 12%. Almond trader will be charged for IGST of Rs. 12,000 based on the value of the product. Trader will have to do GST filing for Integrated GST tax in account of Central Government.