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GST, or Goods and Services Tax, is a taxation system in India that applies to the sale of goods and services. Every business enterprise must register to GST to run smoothly. Any business running without GST is illegal and must pay penalties.
Under the GST guidelines, the Central Government collects different types of GST depending on the type of transaction. If the sale is taking place within a state, it is called an intrastate transaction, and both CGST and SGST are applicable. In the following sections, you will find the full form of SGST and CGST, learn what they are, and how they are different from each other.
The CGST full form is Central Goods and Service Tax. The Indian Government levies it on all transactions of goods and services within a state. The CGST rate is equal to SGST, and both are applicable based on products. It replaces all prior central taxes, including service tax, customs duty, and central excise duty. So, as a business owner, if you want to sell a product to a buyer within your state, you must pay both taxes.
To understand how Central Goods and Services Tax (CGST) works, here’s an example: As a business owner, you sell a product for ₹12,000. The GST rate for the product is 18%, so the total GST is ₹2,160 (18% of ₹12,000). For sales within the state, CGST and SGST (State GST) each make up half of the total GST. So, CGST is ₹1,080 (9% of ₹12,000), which is half of ₹2,160.
GST = Value of Goods x GST rate / 100
= ₹12,000 x 18% / 100
= ₹2,160
CGST = Total GST amount / 2 (assuming equal CGST and SGST rates)
= ₹2,160 / 2
= ₹1,080
CGST is collected by the Central Government. It is levied on the sale of goods and services across the country. The CGST rate is 6.5% for most goods and services. For example, if you buy a product worth ₹100, you would pay ₹6.50 as CGST.
The SGST full form is State Goods and Service Tax. The Indian Government levies it for all goods sale and purchase within the state. It replaces all prior state taxes, including the VAT, luxury tax, sales tax, entertainment tax, state cess, entry tax, and surcharge. The state government is the beneficiary of the revenue earned through SGST. So, if you are a business owner selling products within a state, you must pay both taxes in equal distributions.
Let's look at an example to understand how State Goods and Services Tax (SGST) works. Imagine you own a bakery store in Delhi and sell a cake for ₹10,000 to a customer in the same state. The GST rate for cake is 5%, which includes both Central GST (CGST) and SGST.
In this case, the SGST rate would be 2.5% (half of the total 5% GST rate). To calculate the SGST amount:
SGST = (SGST rate/100) × Sale value
= 10,000 × (2.5/100)
= ₹250
So, in this sale, you would charge the customer ₹250 as SGST, which the state government would collect.
SGST is collected by the State Governments. It is also levied on the sale of goods and services within a state. The SGST rate varies from state to state. For example, in Maharashtra, the SGST rate is 2.5% for most goods and services. If you buy a product worth ₹100 in Maharashtra, you would pay ₹2.50 as SGST.
In India, both state and central governments can impose taxes on the products or services produced in the country. Based on the tax-imposing and collecting authority, GST laws are applicable under two categories within a state:
CGST: The Central Government levies the CGST on all intra-state movement of goods and services
SGST: The State Government levies the SGST on all intra-state movement of goods and services.
The following table highlights the key difference between CGST and SGST:
Parameter | CGST | SGST |
Full Form | CGST full form is Central Goods and Service Tax | SGST full form is State Goods and Service Tax |
Applicability | Applicable to the supply of goods and services within a state | Applicable to the supply of goods and services within a state |
Imposing Authority | Central Government imposes the CGST | State Government imposes the SGST |
Collecting Authority | Central Government collects the CGST | State Government imposes the SGST |
Extent | CGST replaces taxes like excise tax, service tax, etc. | SGST replaces taxes like sales tax, luxury tax, entry tax, etc. |
Collection Method | The supplier collects CGST from the buyer and deposits it to the Central Government. | The supplier collects SGST from the buyer and deposits it to the State Government. |
Revenue Sharing | The Central Government may share the collected revenue from CGST with the State Governments. It distributes the income among the states as per the GST Council recommendations. | The State Governments cannot share the collected revenue from SGST with the Central Government. |
Also Read: What is GST (Goods & Services Tax)? Meaning & Types of GST Returns
Business owners can benefit from SGST in various ways:
Here are a few key considerations you must keep in mind as a business owner in India:
The following entities are liable to pay CGST and SGST:
Key Points
CGST and SGST are two different types of GST taxes the Central and State Governments impose, respectively. They are applicable based on the value of products and services moving within a state. The SGST goes to the State Government, and the CGST goes to the Central Government. Businesses should understand the difference between CGST and SGST and comply with the regulations when filing returns.
Business owners must pay CGST and SGST in equal percentages. For instance, if 18% GST is applicable, it consists of 9% CGST and 9% SGST.
2. Who will pay CGST and SGST?In intrastate transactions, the seller collects CGST and SGST from the buyers. Then they deposit CGST to the Central Government and SGST to the State Government.
3. Who controls CGST?CBEC, the Central Board of Excise and Customs, determines and administers CGST and other indirect taxes in India.
4. What is the CGST and SGST full form?
The CGST full form is Central Goods and Services Tax, while the SGST full form is State Goods and Services Tax.
5. What is the basic difference between SGST and CGST?
SGST (State Goods and Services Tax) is collected by the state government, while CGST (Central Goods and Services Tax) is collected by the central government.
6. What is the difference between gstr 2a and 2b?
GSTR-2A is an auto-populated statement of inward supplies, while GSTR-2B is a newly introduced consolidated statement. The main difference between GSTR-2A and GSTR-2B is that GSTR-2B provides a more comprehensive view of the taxpayer's inward supplies.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.
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