Different Types of GST

What are the Different Types of GST?

In India, there are 4 components of GST. The following table explains the 4 types of GST and compares them on various parameters:

	Central GST – CGST	State GST – SGST	Union territory GST – UTGST	Integrated GST - IGST
Tax Levied By	Central Government	State Government	Union territory Government	Combined levy, collected by Central Government
Taxes that it will replace	Service tax, excise duty, countervailing duty (CVD), special additional duty (SAD), Additional duties of excise(ADE), and any other indirect central levy	VAT, sales tax, luxury tax, entry tax, entertainment tax, purchase tax, Octroi, taxes on lottery	VAT, sales tax, luxury tax, entry tax , entertainment tax, purchase tax, Octroi, taxes on lottery	Central sales tax (CST)
Applicability	Supplies within a state	Supplies within a state	Supplies within a union territory	Interstate supplies and import
Input Tax Credit	Against CGST and IGST	Against SGST and IGST	Against UTGST and IGST	Against CGST, SGST and IGST
Tax Revenue Sharing	Central government	State government	Union territory government	Shared between state and central governments
Exemption Limit	Rs 20 lakh annual turnover	Rs 20 lakh annual turnover	Rs 20 lakh annual turnover	Exemption limit not defined
Composition Scheme	The dealer may use the benefit of turnover of Rs 50 lakh	The dealer may use the benefit of turnover of Rs 50 lakh	The dealer may use the benefit of turnover of Rs 50 lakh	Composition Scheme is not available in this regard
Free Supplies	CGST is applicable on free supplies	SGST is applicable on free supplies	UTGST is applicable on free supplies	IGST is applicable on free supplies
Registration	Not applicable till the turnover exceeds Rs 20 lakh	Not applicable till the turnover exceeds Rs 20 lakh	Not applicable till the turnover exceeds Rs 20 lakh	Registration is necessarily mandatory if supply is made outside the states

Difference between Different Types of GST Taxes

Difference between Different Types of GST Taxes

Types of Differences	CGST	SGST	IGST	UGST/UTGST
Applicable transactions (Goods & Services)	Intrastate (Within one state)	Intrastate (Within one state)	Inter-state (between two states or one state and one UT) and imports	Within one Union Territory (UT)
Collected by	Central Govt.	State Govt.	Central Govt.	UT Govt.
Benefitting Authority	Central Govt.	State Govt.	Central Govt. & State Govt.	UT Govt.
Tax Credit Use Priority	CGST IGST	SGST IGST	IGST CGST SGST	UTGST IGST

Similar to every other type of tax, GST also has provisions to give the benefits of tax credits. The credits will be applicable to the subsequent taxes on the same product or service. All three IGST, SGST and CGST credits are usable against each other. Any IGST credit will be first used to deal with IGST tax, then CGST, and then to set off SGST.

You must also by now have understood the need for 3 different taxes; IGST is to ensure a smooth flow of tax credit between states; Dual taxes (CGST & SGCT) are there to ensure that both Centre and states get their deserving revenue.

TYPES OF GST

Types of GST

Since GST subsumed indirect taxes of both central government (excise duty, service tax, custom duty, etc.) and state governments (VAT, Luxury tax, etc.), both the governments now depend on GST for their indirect tax revenue. Therefore, the GST rate is composed of two rates.  Intra-state transactions will carry one of CGST and one of SGST (in case of state) or CGST and UTGST (in case of union territory). Therefore, while making an intra-state sale (i.e., sale within the same state), the CGST collected will go to the central government and the SGST collected will go the respective state government in which sale is made. Similarly, SGST or UTGST are replaced with IGST when intra-state transactions are involved.

Hence, you can say that there are four types of GST:

§  Central Goods and Services Tax

§  State Goods and Services Tax

§  Integrated Goods and Services Tax

§  Union Territory Goods and Services Tax

What is CGST?

CGST full form is Central Goods and Services Tax.

CGST refers to the Central GST tax that is levied by the Central Government of India on any transaction of goods and services tax taking place within a state. It is one of the two taxes charged on every intrastate (within one state) transaction, the other one being SGST (or UTGST for Union Territories). CGST replaces all the existing Central taxes including Service Tax, Central Excise Duty, CST, Customs Duty, SAD, etc. The rate of CGST is usually equal to the SGST rate. Both taxes are charged on the base price of the product. See the example below to understand it better.

e.g. – In the example above, when Suresh sales a product to Pradeep in the same state (Rajasthan), he has to pay two taxes. CGST is for the central government while SGST is for the state. The rate of CGST is 9%, same as SGST. After the application of CGST (9% of Rs 10,000), the final cost of the product will become Rs 11,800.

As you can probably guess, all the taxes in all the conditions above are borne by the end consumer in the final cost, not by the manufacturer or the dealer of the product or service. Since GST is levied on consumption, the state where the product is originally manufactured is not entitled to the tax collected. If the manufacturing state levies a tax, the same will be transferred to the consuming state through the Central government.

What is SGST?

SGST full form is State Goods and Services Tax.

SGST (State GST) is one of the two taxes levied on every intrastate (within one state) transaction of goods and services. The other one is CGST.  SGST is levied by the state where the goods are being sold/purchased. It will replace all the existing state taxes including VAT, State Sales Tax, Entertainment Tax, Luxury Tax, Entry Tax, State Cesses and Surcharges on any kind of transaction involving goods and services. The State Government is the sole claimer of the revenue earned under SGST. Let’s understand this with an example.

e.g. – Suresh from Rajasthan wants to sell some goods to Pradeep in Rajasthan. The product, originally priced at Rs 10,000, will attract GST at 18% rate comprising of 9% CGST rate and 9% SGST rate. The SGST tax amount here is Rs 900 (9% of Rs 10,000) which is fully claimed by the Rajasthan State Government. The rate of the product after SGST will be Rs 10,900.

What is IGST?

IGST full form is Integrated Goods and Services Tax.

Integrated GST (IGST) is applicable on interstate (between two states) transactions of goods and services, as well as on imports. This tax will be collected by the Central government and will further be distributed among the respective states. IGST is charged when a product or service is moved from one state to another. IGST is in place to ensure that a state has to deal only with the Union government and not with every state separately to settle the interstate tax amounts. Let’s try to understand IGST with an example.

e.g., – Ramesh is a manufacturer in Rajasthan who sold goods worth Rs 10,000 to Suresh in Rajasthan. Since it is an interstate transaction, IGST will be applicable here. Let’s assume the GST rate is 18% for the particular item. So, the IGST amount charged by the Central Government will be Rs 1800 (18% of Rs 10,000), and the refined rate of the product will be Rs 11,800.

Now, GST is a consumption tax that means only the state where the goods are actually consumed will get the tax benefits, irrespective of the manufacturing state.

What is UTGST (or UGST)?

UTGST full form is Union Territory Goods and Services Tax.

The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the GST applicable on the goods and services supply that takes place in any of the five Union Territories of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep and Daman and Diu. This UTGST will be charged in addition to the Central GST (CGST) explained above. For any transaction of goods/services within a Union Territory: CGST + UTGST

The reason why a separate GST was implemented for the Union Territories is that the common State GST (SGST) cannot be applied in a Union Territory without legislature. Delhi and Puducherry UTs already have their own legislatures, so SGST is applicable to them.

GST

What is GST?

GST (Goods and Services Tax) is the biggest indirect tax reform of India. GST is a single tax on the supply of goods and services. It is a destination based tax. GST has subsumed taxes like Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc. GST is one of the biggest indirect tax reforms in the country. GST is expected to bring together state economies and improve overall economic growth of the nation.

GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by states and Central. Businesses are required to obtain a GST Identification Number in every state they are registered.

There are around 160 countries in the world that have GST in place. GST is a destination based taxed where the tax is collected by the State where goods are consumed. GST has been implemented in India from July 1, 2017 and it has adopted the Dual GST model in which both States and Central levies tax on Goods or Services or both.

§  SGST – State GST, collected by the State Govt.

§  CGST – Central GST, collected by the Central Govt.

§  IGST – Integrated GST, collected by the Central Govt.

§  UTGST – Union territory GST, collected by union territory government

Impact of GST on Indian Economy

GST offers several benefits to our economy. Here are some key advantages:

§  Create unified common national market for India, giving a boost to Foreign investment and “Make in India” campaign

§  Boost export and manufacturing activity and leading to substantive economic growth

§  Help in poverty eradication by generating more employment

§  Uniform SGST and IGST rates to reduce the incentive for tax evasion

 Impact of GST on Consumers

GST is also beneficial for consumers. Here is how it impacts the Indian consumers:

§  Simpler Tax system

§  Reduction in prices of goods & services due to elimination of cascading

§  Uniform prices throughout the country

§  Transparency in taxation system

§  Increase in employment opportunities

Impact of GST on Traders

GST is also has some positive impact on traders. Let’s see how it affects the traders:

§  Reduction in multiplicity of taxes

§  Mitigation of cascading/ double taxation through input tax credit

§  More efficient neutralisation of taxes especially for exports

§  Development of common national market

§  Simpler tax regime

§  Fewer rates and exemptions

§  Distinction between Goods & Services no longer required

GST Meaning

GST

GST Full Form is Goods and Services Tax.

The Government of any country needs money for its functioning and taxes are a major source of revenue for a Government. The taxes thus collected are spent by Govt. on the public.

These taxes are broadly classified into two types

1.      Direct Tax and

2.      Indirect Tax

1. Direct Tax – Direct Tax is imposed on the Income of an individual. The amount of Tax payable varies on the income earned by the individual from various sources such as salary, house rent income etc. So, the more you earn, the more tax you pay to the Government which essentially means the rich pay more tax in comparison to the poor.
2. Indirect Tax – Indirect tax is not imposed directly on income of individuals. Instead, it is imposed on goods and services which in turn increase the cost MRP) of Goods and Services. Unlike direct tax, indirect tax should be borne by the end customer, rich and poor alike., There are many indirect taxes. Some of these are levied by the Central Government whereas some are levied by the State Government making the indirect tax system an extremely complicated system.

GST has been introduced to replace multiple indirect taxes levied by State and Central Governments in order to simplify the indirect tax system.

GST has replaced almost 17 of the existing state and central indirect taxes (more to come in the future) such as central excise duty, additional customs duty, VAT, entertainment tax, service tax etc.

It is called as Goods and Services Tax because it is applicable on the supply of both Goods and Services.

Corporate Tax: Introduction

CORPORATE TAX

Indian taxation system is divided into two types

One is Direct Taxes and other is Indirect Taxes.

Direct taxes are levied on the income that different types of business entities earn in a financial year. There are different types of taxpayers registered with Income tax department and they pay taxes at different rates. For eg, An individual and a company being a taxpayer are not taxed at the same rate. Therefore, Direct Taxes are again subdivided as:

Income Tax: This tax is paid by the taxpayers other than companies registered under company law in India on the income earned by them. They are taxed on the basis of slabs at different rates.

Corporate Tax: This tax is paid by the companies registered under company law in India on the net profit that it makes from businesses. It is taxed at a specific rate as prescribed by the income tax act subject to the changes in the rates every year by the IT department.

Corporate Tax in India

Domestic as well as foreign companies are liable to pay corporate tax under the Income-tax Act. While a domestic company is taxed on its universal income, a foreign company is only taxed on the income earned within India i.e. is being accrued or received in India.

For the purpose of calculation of taxes under Income tax act, the types of companies can be defined as under

Domestic Company: Domestic Company is one which is registered under the Companies Act of India and also includes the company registered in the foreign countries having control and management wholly situated in India. A domestic company includes private as well as public companies.

Foreign Company: Foreign Company is one which is not registered under the companies act of India and has control & management located outside India.

What is meant as Income of a company?

Before understanding about the rate of taxes and how will the tax be calculated on income of the companies, we should learn about the types of income which a company earns. Here it is :

1. Profits earned from the business
2. Capital Gains
3. Income from renting property
4. Income from other sources like dividend, interest etc.

Tax rates applicable

Taxes on Income

The following rates are applicable to the domestic companies for AY 2019-20 based on their turnover

Particulars	Tax Rate
Gross Turnover upto Rs. 250 Crore in FY 2016-17	25%
Gross Turnover exceeding  Rs. 250 Crore	30%

The following rates are applicable to foreign companies for AY 2019-20 based on their turnover

Nature of Income	Tax Rate
Royalty received or fees for technical services from government or any indian concern under an agreement made before April 1, 1976 and  approved by central government	50%
Any other income	40%

In addition to above rates

Surcharge rate

Particulars	Tax Rate
If total income exceeds Rs. 1 crore but not Rs. 10 Crore	7% of tax calculated on domestic company/ 2 % of tax calculated on foreign company as per above rates
If total income exceeds Rs. 10 crore	12% of tax calculated on domestic company/ 5 % of tax calculated on foreign company as per above rates

Health & education Cess :

Further 4 % of income tax calculated and applicable surcharge will be added to the amount of total tax liability before this cess.

Minimum Alternate Tax (MAT)

Alternatively, all the companies (including foreign companies) are required to pay minimum alternate tax at the rate of 18.5 % on book profits if the tax calculated as per above rates are less than 18.5% of book profits.