Before the Goods and Service Tax, goods in India would be taxed at different levels such as state tax, Value Added Tax (VAT), Import Tax, Service Charge etc. That was very tedious and involved a lot of paperwork. Not to mention, the mental memory of remembering all the difference taxes involved for a particular good or product.
On July 1, 2017, the goods and service tax was implemented in all of India under the pretext of ‘One Nation, One Tax’. The Goods and Service Tax, aka GST, has been a game-changer in the field for accounting purposes in business. It has cut down on all the overhead various taxes and made everything as one single tax payment under an umbrella known as Goods and Service Tax (GST).
Post its implementation, all businesses must file for their taxes under this new Act. Under the new GST Act, taxes were now divided into these 3 categories:
- Central Goods and Service Tax: Taxes at this level are charged by the central government. This includes everything from central excise duty, cess, central surcharge. In short, all the taxes that need to be paid at the central level are included in CGST.
- State Goods and Service Tax: The state GST are taxes that are charged at the state level, usually the state where the registration of the business is done. This includes State VAT, cess, and any other indirect taxes that needs to be paid to the state.
- Integrated Goods and Service Tax: The IGST or Integrated Goods and Service Tax is charged on all goods and services that move between states or across borders.
What is Central Goods and Service Tax?
All the taxes on goods and services that are collected under the central level comes under the head of CGST. Taxes under this head are usually divided between the state GST and the central GST.
One should ensure that there is a stark difference between interstate and intrastate.
But if the goods and services are supplied within the same state, to different cities and districts, then it comes under the purview of CGST and SGST.
Nick and Jess clothing supply clothes only in the state of Maharashtra in districts such as Mumbai, Thane, Nagpur etc. For this reason, here Nick and Jess clothing would be required to pay taxes under CGST and SGST.
If goods and services cross borders, between one state to another, it comes under the jurisdiction of interstate and hence IGST would be levied.
For example, Nick and Jess clothing supply clothes to the states of Maharashtra, Jharkhand and Karnataka. Since multiple states are involved, Nick and Jess would pay taxes under IGST.
IGST which is integrated gst is also governed by the central GST body but is charged on goods and services that travel between different state borders.
How are the taxes divided in the 3 categories?
Suppose the GST on a television set of upto 32 inches is 18% and is billed in a single state then it comes under CGST and SGST. Hence,
9% would be paid to CGST and
9% would be paid to SGST.
If the television set is supplied to one state and billed in another state, then it comes under IGST. Here the entire 18% would go to IGST.
Frequently Asked Questions about GST that you need to know
- What is GST and why is it needed?
Goods and Service Tax, aka GST, is the one indirect tax for the whole nation conducting business through goods/services. This tax covers most of the heads of business right from manufacture to consumer eliminating quite a few tax heads before this. It is born by all stages of production with credit of taxes paid at the previous stage. GST was implemented on 1st June 2017 and has thus been successful nationwide.
The adoption for GST was ‘One Nation, One Tax’ and to reduce the different categories of taxes and make it all under one head of GST. This makes the tax filing process easier for the businesses and the tax checking process easier for the government.
- What taxes have been eliminated after the introduction of GST?
Before the implementation of GST goods and services were taxed at different levels by different governing bodies. Due to this, paperwork was tedious and it was difficult to keep track of all the taxes that need to be paid. Following are some of the taxes that have been eliminated after the implementation of GST since 2017:
|Sr. No||Central Level Taxes||State Level Taxes|
|1||Central Excise Duty||Value Added Tax/Sales Tax|
|2||Central Sales Tax||Entertainment Tax and Taxes on Advertisments|
|3||Service Tax||Central Sales Tax|
|4||Additional Customs Duty is commonly known as Countervailing Duty||Octroi and Entry tax|
|5||Special Additional Duty of Customs||Surcharge and CESS|
|6||Excise duty levied under textile and textile products||Luxury tax|
|7||Taxes on lottery, betting and gambling|
- Who are the governing bodies for GST?
There are two major bodies governing and overlooking the functions and collection of GSTIGST which is integrated gst is also governed by the central GST body but is charged on goods and services that travel between different state borders.
a. A central level body for CGST
b. A state level body depending on the state your business entity is registered in for SGST
Respectively, the taxes under the central head will be collected by the central governing body only and the taxes under the state head will be collected by the state governing body.
IGST – Integrated Goods and Services Tax will be monitored and collected by the Central GST governing body.
- What are the slab rates under GST?
There are different slab rates right from 0% to 28% slabs under GST depending upon the goods/services provided and how essential their purposes are. Most essential goods have the least tax rate and lesser goods such as luxury goods have higher slab rates.
The slab rates keep changing and the goods and services also under each slab rate could possibly change. Ensure you’re always on top of these changes.
The goods are divided into essential goods, fast moving consumer goods and luxury goods along with goods that have additional cess. The table below mentions the slab rate against the types of goods/services.
|Sr. No||Type of Goods/Services||GST Rate||Example|
|1||Essential Goods||0%||All kinds of Salt, Fresh Fruits and Vegetables Eggs, Milk, Meat, Newspaper|
|2||Basic Goods||5%||Skimmed Milk, Branded Paneer, Fish, Tea, Coffee, Railway - Air Transport|
|3||Fast Moving Consumer Goods||12%||Tooth Powder, Umbrella, Cell phones, Board Games, Table and Kitchenware|
|4||Fast Moving Consumer Goods||18%||Pasta, Biscuits, Speaker, Monitors, Sugar, Cakes, CCTV, Tractor Parts|
|5||Luxury Goods and Goods with additional cess||28%||Paan Masala, Tobacco, Vacuum Cleaner, Sunscreen, Shampoo, Vacuum Cleaner, Automobiles, Shavin Cream|
- Can you register your business on the CGST portal?
Yes. In case you haven’t registered your business yet, the CGST portal is very friendly and easy to use. Follow this link to register your business on the portal. The process takes about a few hours to complete and requires basic information like business PAN Card number, aadhar card, proof of bank account etc. Additionally, one can also register their business on their state GST website, like the MahaGST portal.