Brian Canup

Brian Canup is a former Editorial & Research Assistant at Trade Finance Global (TFG). He graduated with an MA in International Political Economy from King’s College London, and a BA in Political Science from the University of Wisconsin-Madison.

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Contents

The Goods and Service Tax (GST) is a term signifying one tax, one nation policy. An end-user that consumes any good(s) or service(s) pays the GST. We get the concepts of IGST, SGST and CGST when we observe the ways in which GST removes the cascading effect of taxes.

These terms have the following meanings:

GST replaces which taxes?

Before the introduction of GST, there were multiple taxes, such as the service tax, central excise, and state value-added tax (VAT). However, GST is just one tax with three categories—IGST, SGST, and CGST—that depend on whether the performed transaction is intrastate or interstate.

What determines which category of GST is applicable?

We need to understand whether the transaction is an intrastate or an interstate supply of goods and services to determine which category of GST is applicable.

• Intrastate supply (SGST and CGST)

This arises when the place of supply (buyer), as well as the location of the supplier (seller), happen to be in the same state. In this case, a seller must collect both State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) from the buyer —here, the SGST gets deposited with the state government, and CGST gets deposited with the central government.

• Interstate supply (IGST)

This arises when the place of the supply (buyer), as well as the location of the supplier (seller), are in different states. Another scenario that counts as interstate supply is in cases of the import or export of goods and services, or when the goods and services are supplied to—or by—the SEZ unit. If the transaction is inter-state, then the seller collects Integrated Goods and Services Tax (IGST) from the buyer.

Now that we know where each category of GST is applicable, let’s explain them.

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