Goods and Services Tax is one of the major tax reforms introduced in India whose main aim was to simplify the complex system of indirect tax structure. Since its inception, GST has replaced varied indirect taxes while bringing uniformity and transparency to the taxation system. However, GST is not a one-size-fits-all tax; it comes in different forms to cater to the diverse needs of the economy.
So, keeping this in mind, let’s explore the varied types of GST in the form of how many types of GST in India, what is GST, etc.
What is a GST?
GST or Goods and Services Tax which is a value-added tax imposed by the government of India on the supply of products or services consumed domestically. In simple words, GST is one and all single indirect tax law for the whole nation.
However, it is added to the final price of the product. That means when an individual buys some product, its final price includes GST. After taking GST from the product consumer, the business or the seller pays GST to the government.
Moreover, it is levied by the Central Government of India, and in case the transaction is interstate, GST is distributed between the central and the state governments under the law of CGST and SGST.
What are the Features of Goods And Services Tax?
There are a number of features of GST which we are going to discuss below: –
- GST has replaced around 17 various types of indirect taxes like import tariffs, sales tax, excise tax, etc, and state and central governments impose them all.
- This tax is operational as it is levied on all types of goods and services.
- GST tax imposed on products and services wholly depends upon the destination of the consumption of goods.
- On top of that, it also allows the smooth transfer of input credit all over the supply chain and the country.
- The consumption-based tax is collected at every level of the supply chain.
What are the Main Objectives of GST?
- To decrease the prices
- Elimination of multiple tax systems
- Helps in boosting the nation’s overall revenue
- Increase compliance with companies
- For higher productivity and efficiency
Different Types of GST in India
In India, types of GST are categorized into four main types. So, let’s discuss how many types of GST in detail: –
1. Central Goods and Services Tax (CGST)
CGST is the first type of tax reform that has truly replaced all taxes imposed by the Central Government of India. Some notable examples of such types of taxes are central excise duty, central surcharge, and many more.
However, the government has levied this tax on the movement of services and commodities inside the Indian states. That means CGST only deals in intra-state transactions, but the revenue from this tax is distributed between the Central and State governments.
2. State Goods and Services Tax (SGST)
Another type of types of gst in India that deals with intrastate transactions is SGST. However, it works within the geographical boundaries of India and has replaced many taxes like State Sales tax, entertainment tax, VAT, and many more.
The state government of India charges this SGST tax on intra-state supplies of products and services except liquor. Just remember, the features of SGST tax vary from one state to another, but its valuation and classification remain the same.
3. Integrated Goods and Services Tax (IGST)
This is another type of GST types in India that comes under the GST regime and is applied between the two states or interstate. However, it is levied on the supply of products or services, imports, and exports.
However, this IGST is governed by the act called IGST, which is a central government body that takes care of collecting all the taxes. Once all the taxes are collected, they further divide the taxes between the states.
Let’s understand this tax with the help of an example. If any of the business people from Haryana has sold their products or services to a customer of Punjab for Rupees 5,000, then IGST is applicable. This is because the transaction is interstate. Moreover, if the rate of GST for goods is 18%, the business people will charge Rupees 5,900.
That means the IGST, which is collected, is Rupees 900, which will directly go to the Central Government.
4. Union Territory Goods and Services (UTGST)
According to experts, it is the counterpart of SGST that is imposed on the supply of goods and services in all the Union Territories of India. That means it is applicable in Chandigarh, Daman Diu, Dadra and, Nagar Haveli, Lakshadweep, etc.
Moreover, it is governed by the UTGST Act, and the Union Territory government collects the revenue earned.
What are the Rates of CGST, SGST, and IGST on the number of Common Commodities?
The overall rates of CGST, IGST, and SGST change with time. Let’s learn the rates of some common commodities below: –
| Commodities | CGST | SGST | IGST |
| Household essentials like coffee (except for instant coffee), tea, edible oil, spices, sugar, etc.; Legal and life-saving drugs, Indian sweets, coal, etc. | 2.5% | 2.5% | 5% |
| Computers and processed food | 6% | 6% | 12% |
| Toothpaste, soap, and Hair oil; capital goods and industrial intermediaries | 9% | 9% | 18% |
| Luxury items like premium cars and lavish consumer durables such as air conditioners and refrigerators, aerated drinks, cigarettes, and high-end motorcycles | 14% | 14% | 28% |
Difference Between CGST, SGST, and IGST
| Aspect | CGST (Central GST) | SGST (State GST) | IGST (Integrated GST) |
| Levying Authority | Central Government | State Government | Central Government |
| Applicability | Intra-state transactions within a state | Intra-state transactions within a state | Inter-state transactions between states |
| Tax Rate | Determined by the Central Government | Determined by the respective State Government | It is equal to the sum of CGST and SGST, determined by the Central Government |
| Revenue Sharing | Collected by the Central Government | Collected by the State Government | Collected by the Central Government and then shared between the states |
| Utilization | Used to set off CGST liability | Used to set off SGST liability | Used to set off both CGST and SGST liabilities |
| Intra-state Transactions | Applicable | Applicable | Not applicable, as it applies to inter-state transactions |
| Inter-state Transactions | Not applicable | Not applicable | Applicable, used for transactions between different states |
| Taxpayer Compliance | Filed with the Central Government | Filed with the State Government | Filed with the Central Government and then distributed to respective states |
| Input Tax Credit | Allowed against CGST liability | Allowed against SGST liability | Allowed against both CGST and SGST liabilities |
Who is Liable to Pay GST?
The following persons are required to pay GST as per Government of India Law: –
- Persons who are registered under the GST law and are making taxable supplies.
- Every e-commerce operator who is registered under GST.
- Individuals who are supplying products and services on behalf of agents.
- E-commerce operators registered under GST are needed to collect tax at TCS or source.
- GST-registered individuals are also required to pay GST under the reverse charge mechanism.
What are the Various Types of Goods Exempted from GST Payments?
Unlike all other taxes not paid to the government, GST exempts some products and services. They are: –
- Fruits and vegetables, fish, meat, cereals.
- Agricultural tools and many tools meant for differently abled people.
- Vaccines, maps, books, articles of paper pulp, and newspapers.
- Handloom fabrics, raw silk, raw jute fiber, cotton for khadi yarn, unprocessed wool.
Taxes Replaced by GST
After the implementation of the Goods and Services Tax, many types of taxes of both state and central government were replaced. They are: –
- Sales Tax or Value Added Tax
- Entertainment Tax
- Octroi
- Luxury Tax
- Service Tax
- Purchase Tax
- Central Excise Duty
- Additional Excise Duty, and many more.
The Bottom Line
GST is one of the important service tax reforms that has changed all aspects of the taxation system of India. Since its inception, GST has been regulating taxation freely. However, the main motive for introducing the GST law is to differentiate central tax and state tax.
Frequently Asked Questions
1. What are the varied types of GST that are applicable right now in the nation?
There are four main types of GST applicable under the law: Central Goods and Services Tax, Integrated Goods and Services Tax, State Products and Services Tax, and Union Territory Goods and Services Tax.
2. Who are the taxable individuals under the GST law?
Under GST, any person or business supplying products and services has to pay GST.
3. Which are products that are not levied under GST?
Many of the goods and services like fruits, alcohol, fresh vegetables, petrol, crude oil, etc are exempted from GST.