What is CGST & SGST? Key Differences Between Them

What are the State Goods and the Service Tax (SGST)?

The full form of SGST 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.

What is the difference between CGST and 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:

Also Read: What is GST (Goods & Services Tax)? Meaning & Types of GST Returns

Benefits of SGST for Businesses

Business owners can benefit from SGST in various ways:

• Contributes significantly to the start-up and entrepreneurial opportunities within the state.

• Eases the process of doing business while supplying products or services within the state borders.

• Improves the taxation system while minimising corruption and providing greater transparency.

• Makes the logistics more efficient.

• Reduces the costs involved in doing business inside the state.

• Makes it easier than ever to set up a start-up.

• Provides better opportunities for business expansion and scalability.

• Makes the taxation system more business-friendly.

• Gives tax credit on purchases.

Things to Keep in Mind as a Business Owner

Here are a few key considerations you must keep in mind as a business owner in India:

• GST Registration: GST registration is compulsory for all businesses, whether you supply goods or services. You must apply for GST registration to avoid penalties if your annual turnover exceeds a certain limit. Although some business owners are exempt from registration, they can still register for GST voluntarily.

• Different GST Slabs: You will mainly find four tax slabs of GST based on different product types. They are categorised under 5, 12, 18, and 28% tax slabs.

• GST Return Filing: As a business owner, you must file your GST returns using the official portal.

• Easier Taxation: The uniform taxation system that GST has brought in India has made it easier to pay your taxes.

• Compliance Rating: GST compliance rating is important, as it identifies companies that regularly follow GST guidelines.

• CGST and SGST Rates: 2.5% SGST and CGST are applicable on household necessities like sugar, spices, edible oil, coffee, tea, sweets, drugs, coal, etc. 6% rates are applicable to computers and processed food. For toothpaste, soap, capital goods, industrial intermediaries, and hair oil, 9% CGST and SGST rates are applicable. For luxury items like premium cards, air conditioners, refrigerators, high-end motorcycles, aerated drinks, and cigarettes, 14% CGST and SGST rates are applicable.

Conclusion:

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.

FAQ

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.

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.

CBEC, the Central Board of Excise and Customs, determines and administers CGST and other indirect taxes in India.