In July 2017, the Goods & Services Tax (GST) was implemented in
India in a bid to create a uniform taxation system that can be used
countrywide, aka ‘one nation, one tax’. One major change witnessed
with GST is that unlike its predecessor VAT (Value Added Tax), GST is
collected at the point of consumption rather than the point of
origin.
This simplification of the taxation system in India has
played a key role in consolidating indirect taxes at the central and
state levels, i.e., CGST and SGST. Let us learn more about GST, CGST
& SGST, their meanings, and their differences.
What is the Goods & Services Tax?
The Goods and Services Tax (GST) is a comprehensive tax that is
levied on the supply of goods and services. It is a dual-level tax
system, comprising the Central GST (CGST) and State GST (SGST). It has
replaced the multiple taxes previously levied by the Central and State
Governments of India.
Some of the biggest benefits of GST for all
kinds of industries and businesses have been:
Uniformity in Taxes
- As previously stated, the GST reform has allowed the Central and State government to create a uniform taxation system.
Composition Scheme for SMEs/MSMEs
- Under the Composition scheme, any small business owner with a turnover of less than ?1.5 Crore can pay the GST at a set rate of turnover.
Simple Registration Procedure
- The process for GST registration is quite simple and straightforward for businesses.
What is CGST? – Meaning & Definition
The full form of CGST stands for Central Goods and Services Tax.
It is a type of tax imposed by the Central Government on the supply
of goods and services within a state. It is levied on the value of
the goods and services supplied.
The CGST is collected by the
Central Government and the revenue is used to finance various activities.
What is SGST? – Meaning & Definition
The full form of SGST stands for State Goods and Services Tax. Just like CGST, it is imposed by the State Government on the intrastate supply of goods and services. It is levied on the value of the goods and services supplied for end consumption.
What are the Differences Between CGST and SGST?
While both CGST and SGST are quite similar since they are part of the Goods and Services Tax, there are some basic differences. Let’s take a look:
- Tax Collection - The primary difference between CGST and SGST is that CGST is imposed by the Central Government and SGST is imposed by the State Government. The Central Government collects the CGST, and the State Government collects the SGST. Both taxes are collected on the same value of goods or services supplied.
- Revenue - Another difference between CGST and SGST is that the Central Government can share the revenue collected from CGST with the State Governments. The Central Government distributes the revenue among the States according to the recommendations of the GST Council. The State Governments, however, cannot share the revenue collected from SGST with the Central Government.
- Taxes
incorporated - The indirect taxes incorporated or subsumed within
CGST and SGST are as follows:
- CGST: Central surcharges & CESS, Central excise duty, other Central indirect taxes
- SGST: Value Added Tax (VAT), State surcharge & CESS, other State taxes
Things to Keep in Mind as a Business Owner
Here are some key considerations that business owners in India should keep in mind:
- Registration for GST - GST registration is mandatory for both goods-based and services-based businesses if their annual turnover exceeds the set limit. However, those who are exempt from mandatory registration can still choose to voluntarily register for GST.
- Different Slabs of GST - There are mainly four GST tax slabs for different goods and services. These can be categorized under the tax slabs of 5%, 12%, 18%, and 28%.
- Easy Process - With a uniform taxation system in place, it will be easier for entrepreneurs to pay their taxes.
- Filing GST Returns - All businesses and entrepreneurs are required to file their GST returns on the GST portal.
- Compliance Rating - GST compliance ratings help identify businesses that regularly adhere to the rules and guidelines of GST.
Conclusion
To summarize, the CGST and SGST are two different types of taxes imposed by the Central and State Governments, respectively. They are both levied on the value of goods and services supplied within a state. The Central Government collects the CGST, and the State Government collects the SGST. The Central Government has the power to make laws and regulations related to CGST, while the State Governments have the power to make laws and regulations related to SGST. Businesses should know all aspects of GST and adhere to the rules when filing GST returns.
Frequently Asked Questions
Q.1: What is the full form of SGST?
• The full form of SGST is State Goods & Services Tax. It
is imposed by the State Government in India on the intrastate supply
of goods and services.
Q.2: What is the full form of
CGST?
• The full form of CGST is Central Goods
& Services Tax. It is imposed by the Central Government in India
on the supply of goods and services.
Q.3: Who collects
the CGST amount?
• The CGST amount is collected
by the Central Government on the value of goods and services
supplied to a buyer.
Q.4: Who collects the SGST
amount?
• The SGST amount is collected by the State
Government on the value of goods and services supplied to a
buyer.
Q.5: How is GST calculated?
•
The Goods & Services Tax (GST) can be calculated as per the
different tax slabs as specified by the Government. The basic
formula for calculating GST is as follows:
o GST Amount = (The
original cost x % of GST)/100.
o To calculate the net price,
add the GST amount to the original cost.
