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GST service tax

Types of GST in India – Explained in Detail

The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax levied on every value addition. It has replaced various indirect taxes in India and brought them under one unified tax regime.

There are four main types of GST:

    CGST – Central Goods and Services Tax

  • Levied by: Central Government
  • Applicable on: Intra-state supply of goods and services
  • Example: If a trader in Rewa, Madhya Pradesh, sells goods to a customer in Rewa itself, CGST is applicable.
  • Revenue sharing: Goes to the Central Government.

    SGST – State Goods and Services Tax

  • Levied by: State Government
  • Applicable on: Intra-state supply of goods and services (along with CGST)
  • Example: In the same transaction mentioned above, SGST is also applicable.
  • Revenue sharing: Goes to the State Government (e.g., Madhya Pradesh Government).

    • For intra-state sales, CGST and SGST are charged simultaneously, usually split 50-50. If GST is 18%, then CGST = 9% and SGST = 9%.

IGST – Integrated Goods and Services Tax

  • Levied by: Central Government
  • Applicable on: Inter-state supply of goods and services and imports/exports
  • Example: If a dealer in Rewa, MP sells to a buyer in Lucknow, UP, IGST is applicable.
  • Revenue sharing: Collected by the Central Government, then distributed between the center and the destination state.

UTGST – Union Territory Goods and Services Tax

  • Levied by: Union Territory Governments
  • Applicable on: Intra-UT supply of goods and services (when a Union Territory doesn’t have a legislature)
  • Example: Applicable in Andaman and Nicobar Islands, Lakshadweep, Chandigarh, etc.
  • Revenue sharing: Goes to the respective Union Territory administration.

Inter-State vs Intra-State Transactions Under GST

Understanding inter-state and intra-state transactions is crucial for correct GST application and compliance.

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Intra-State Transactions

Definition: When the supplier and buyer are in the same state or Union Territory.
Taxes applicable:
  • CGST (Central)
  • SGST/UTGST (State or Union Territory)
Example:
A cloth merchant in Rewa, MP, sells goods to a customer in Bhopal, MP. This is an intra-state sale.
Billing:

Invoice shows CGST + SGST.
If GST rate is 12%, then 6% CGST + 6% SGST.

Who collects:
  • CGST – Collected by Central Govt
  • SGST – Collected by State Govt
🌐

Inter-State Transactions

Definition: When the supplier and buyer are in different states or Union Territories, or in the case of import/export of goods or services.
Tax applicable:
  • IGST (Integrated GST)
Example:
A service provider in Rewa, MP, provides digital marketing services to a client in Delhi. This is an inter-state transaction.
Billing:

Invoice shows only IGST.
If GST rate is 18%, then full 18% as IGST.

Who collects:
  • IGST – Collected by Central Government
  • Then shared with the destination state




Benefits of Voluntary GST Registration
Claim Input Tax Credit (ITC)
Voluntary GST registration allows businesses to claim Input Tax Credit, reducing overall tax liability by offsetting taxes paid on inputs.
Enhance Business Credibility
Being GST-registered signals professionalism and reliability, boosting trust among customers and partners.
Deal with Interstate Suppliers & E-commerce
GST registration enables seamless transactions with interstate suppliers and access to e-commerce platforms, expanding business opportunities.

Statutory Audit Services

Under the Goods and Services Tax (GST) regime, the classification of types of supply plays a crucial role in determining tax applicability, rates, and compliance requirements. The Central Goods and Services Tax Act, 2017 defines different kinds of supplies based on nature, parties involved, and transaction types.

1. Taxable Supply

  • Includes: Standard-rated, reduced-rated, and zero-rated supplies.
  • Taxable persons are required to charge GST and file returns.

Example: Sale of a laptop by a registered dealer.

2. Exempt Supply

Exempt supplies are those goods or services that do not attract GST, either due to public interest or policy decisions.

  • No GST is charged on the invoice.
  • Input tax credit cannot be claimed on inputs used.

3. Zero-Rated Supply

Zero-rated supplies attract 0% GST but are not exempt. This distinction is key.

  • ITC can be claimed and refunded, making it favorable for exporters.
  • Exports of goods or services, Supplies to SEZ (Special Economic Zones)

Example: Export of software services to the USA.

4 . Non-Taxable Supply

A non-taxable supply is one on which GST is not applicable at all, as it is not covered under the GST law.

  • Typically, these include products covered under alcohol for human consumption, petroleum crude, etc.

    • A non-taxable supply is one on which GST is not applicable at all, as it is not covered under the GST law.

5. Composite Supply

As per Section 2(30) of the CGST Act, a composite supply involves two or more goods or services supplied together, which are naturally bundled and supplied in the ordinary course of business, where one is a principal supply.

  • Tax Rate: GST rate of the principal supply is applied.

Example: Sale of a mobile phone with a charger – the mobile is the principal supply, and the charger is ancillary.

This concept avoids multiple GST rates in a bundled offer.

6. Mixed Supply

Defined under Section 2(74) of the CGST Act, a mixed supply involves two or more individual supplies made together for a single price, but not naturally bundled.

  • Tax Rate: Highest rate applicable among all items in the bundle.

Example: A Diwali gift box containing chocolates (18%), soft drinks (28%), and cosmetics (18%) sold for a single price — GST will be charged at 28%, the highest applicable rate.

7. Inter-State Supply

Supply between different states or Union Territories.

  • IGST (Integrated GST) is applicable.
  • Requires registration under GST if making inter-state taxable supply.

Example: A business in Madhya Pradesh selling machinery to a customer in Gujarat.

8. Intra-State Supply

Supply within the same state or Union Territory.

  • CGST + SGST/UTGST are applicable.

Example: A coaching center in Rewa providing classes to students in Bhopal (both in Madhya Pradesh).