Definition
CGST, SGST, IGST and UTGST
These are the four components of GST: CGST and SGST apply to sales within a state, IGST to inter-state sales, and UTGST to sales within union territories.
GST is a dual tax. On a sale within a state, the central government levies CGST and the state levies SGST on the same value, splitting the rate between them. On an inter-state sale, the Centre levies a single IGST, which it later apportions with the destination state. For union territories without a legislature, UTGST replaces SGST.
This structure preserves both Centre and state taxing powers while keeping the tax destination-based. IGST is the linchpin that lets input tax credit flow seamlessly across state borders, since credit of IGST can be used against CGST, SGST and IGST liabilities in a defined order.
Related terms
- Input Tax Credit (ITC)Input Tax Credit lets a GST-registered business offset the tax it has already paid on purchases against the GST it collects on sales, so tax is levied only on value added.
- Place of SupplyPlace of supply is the rule under GST that determines the location where a transaction is deemed to occur, deciding whether CGST plus SGST or IGST applies.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.