Complete Guide to GST Types in India: CGST, SGST, IGST & UTGST Explained

The Goods and Services Tax (GST) is a unified tax system introduced to replace the maze of indirect taxes once levied by both central and state governments.

In India, GST has brought simplicity, reduced tax evasion, and helped build a single national market.

But GST isn't just one tax—it’s classified in different ways depending on what’s being sold, who’s selling it, and where the transaction is happening.

How GST Is Classified in India

Based on Where the Supply Happens:

• Intra-State Supply: When goods or services are sold within the same state, both Central GST (CGST) and State GST (SGST) are charged. If it’s a union territory, UTGST is applied instead of SGST.
• Inter-State Supply: When goods or services move across state lines, Integrated GST (IGST) comes into play.

Based on What’s Being Supplied:

• Goods: Physical products like furniture, mobile phones, clothing, etc.
• Services: Intangible offerings like marketing, legal advice, or consultancy.

Based on Who’s Supplying:

• Regular Taxpayers: Businesses registered under GST who charge and pay GST on a regular basis.
• Composition Scheme Taxpayers: Small businesses with limited turnover who opt to pay tax at a fixed, lower rate to avoid complex compliance.
• Non-Resident Taxpayers: Foreign entities doing business in India that need to comply with GST laws for their Indian operations.

Based on the Nature of the Transaction:

• B2B (Business to Business): Transactions where one business supplies goods or services to another.
• B2C (Business to Consumer): Direct sales from businesses to end-users or consumers.

Based on How Tax is Paid:

• Cash Basis: Some small businesses pay GST only when they actually receive payment.
• Accrual Basis: GST is paid based on the date of sale or invoice, even if the payment hasn’t been received yet.

Based on the Tax Rate:

• Standard Rate GST: Varies depending on the product or service—common rates are 5%, 12%, 18%, and 28%.
• Zero-Rated GST: Some goods and services are taxed at 0%, but the supplier can still claim input tax credit.
• Exempt Supplies: Certain essential items or services (like education and healthcare) are completely exempt from GST.

How GST Is Classified in India

Based on Where the Supply Happens:

• Intra-State Supply: When goods or services are sold within the same state, both Central GST (CGST) and State GST (SGST) are charged. If it’s a union territory, UTGST is applied instead of SGST.
• Inter-State Supply: When goods or services move across state lines, Integrated GST (IGST) comes into play.

Based on What’s Being Supplied:

• Goods: Physical products like furniture, mobile phones, clothing, etc.
• Services: Intangible offerings like marketing, legal advice, or consultancy.

Based on Who’s Supplying:

• Regular Taxpayers: Businesses registered under GST who charge and pay GST on a regular basis.
• Composition Scheme Taxpayers: Small businesses with limited turnover who opt to pay tax at a fixed, lower rate to avoid complex compliance.
• Non-Resident Taxpayers: Foreign entities doing business in India that need to comply with GST laws for their Indian operations.

Based on the Nature of the Transaction:

• B2B (Business to Business): Transactions where one business supplies goods or services to another.
• B2C (Business to Consumer): Direct sales from businesses to end-users or consumers.

Based on How Tax is Paid:

• Cash Basis: Some small businesses pay GST only when they actually receive payment.
• Accrual Basis: GST is paid based on the date of sale or invoice, even if the payment hasn’t been received yet.

Based on the Tax Rate:

• Standard Rate GST: Varies depending on the product or service—common rates are 5%, 12%, 18%, and 28%.
• Zero-Rated GST: Some goods and services are taxed at 0%, but the supplier can still claim input tax credit.
• Exempt Supplies: Certain essential items or services (like education and healthcare) are completely exempt from GST.

Objectives of GST

The objectives of the Goods and Services Tax (GST) are aimed at simplifying the tax system, promoting economic growth, and ensuring greater compliance. Here are the key objectives of GST:

1. Simplification of the Tax Structure: One of the primary goals of GST was to replace the complex system of multiple indirect taxes (like VAT, excise duty, service tax, etc.) with a single, unified tax structure, making it easier for businesses and individuals to comply.
2. Uniform Tax Rates and Laws: GST aims to create a uniform tax rate and tax laws across the entire country, eliminating state-wise variations and reducing the cascading effect of taxes (tax on tax).
3. Increase in Tax Base: By bringing more goods and services under the tax net, GST helps increase the overall tax base, thus improving revenue collection for the government.
4. Reduction in Tax Evasion: The implementation of GST with features like input tax credit (ITC) helps in reducing tax evasion by making the tax system more transparent and ensuring that businesses only claim credits for taxes they have paid on inputs.
5. Promoting 'Make in India': By lowering the tax burden on businesses, especially manufacturers, GST seeks to promote manufacturing within India and make Indian goods more competitive in global markets.
6. Encouraging Digitalization: The GST system relies heavily on digital platforms for filing returns, payment, and compliance, thus encouraging businesses to adopt technology and ensuring greater efficiency in the tax process.
7. Boosting Economic Growth: GST aims to increase overall economic growth by reducing inefficiencies and enhancing the ease of doing business, thereby attracting both domestic and foreign investment.
8. Improvement in Logistics and Supply Chain: With the reduction of barriers like state borders and checkpoints, GST aims to improve the efficiency of the logistics and supply chain sectors, making it easier and cheaper to move goods across states.
9. Ensuring Equal Tax Burden: GST aims to ensure that there is a fair tax burden on both goods and services, with a goal of reducing distortions between the taxation of goods and services.

Taxes Replaced with GST

The Goods and Services Tax (GST) replaced several indirect taxes that were previously levied by both the central and state governments in India. Here’s a list of the main taxes that were subsumed by GST:

Central Taxes Replaced by GST:

• Central Excise Duty: This was levied on the manufacture of goods in India.
• Service Tax: Tax levied on services provided.
• Customs Duty: Although customs duty on imports remains, many taxes like countervailing duty and special additional duty on imports were replaced by GST.
• Central Sales Tax (CST): This tax was levied on inter-state sales of goods.

State Taxes Replaced by GST:

• State VAT (Value Added Tax): Tax levied by states on the sale of goods within the state.
• Sales Tax: A tax on the sale of goods within a state (usually state-specific).
• Octroi and Entry Tax: Taxes imposed on goods entering a city or state.
• Luxury Tax: Tax on luxury goods and services.
• Entertainment Tax: Tax levied on the business of entertainment (e.g., movie tickets, events).
• Purchase Tax: Tax levied on the purchase of goods within a state.
• State Cesses and Surcharges: Certain state-specific cesses and surcharges were also subsumed under GST.

Other Taxes Replaced by GST:

• Central Sales Tax (CST): Levied on inter-state sale of goods, which was also replaced by GST.
• Tax on Works Contract: Previously, works contracts were subject to different state-level taxation; now they are governed by GST.

Inter-State vs Intra-State Transactions

The fundamental difference between inter-state and intra-state transactions lies in the location of the buyer and seller and the way Goods and Services Tax (GST) is applied. Here’s a comparison of the two:

Intra-State Transaction

• Definition: An intra-state transaction refers to a situation where both the buyer and seller are located within the same state.
• GST Levied: Both State GST (SGST) and Central GST (CGST) are applied.
  • SGST is collected by the state government in which the transaction occurs.
  • CGST is collected by the central government.
• Example: If a businessman in Rajasthan sells goods to a consumer in Rajasthan, the GST will be split between SGST and CGST.
• Formula: Total GST = SGST + CGST

Inter-State Transaction

• Definition: An inter-state transaction occurs when the buyer and seller are in different states.
• GST Levied: Integrated GST (IGST) is applied, which combines CGST and SGST and is collected by the central government.
• Example: If a businessman in Delhi sells goods to a businessman in Rajasthan, the applicable GST will be IGST.
• Formula: Total GST = IGST

Key Differences:

Comparison: Intra-State vs Inter-State Transactions

Feature	Intra-State Transaction	Inter-State Transaction
Location	Both buyer and seller are in the same state.	Buyer and seller are in different states.
GST Applied	CGST + SGST	IGST
Collection by	The Central Goods and Services Tax (CGST) is administered by the central government, while the State Goods and Services Tax (SGST) is managed by the state governments.	For interstate transactions, the Integrated Goods and Services Tax (IGST) is handled by the central government.
Example	A seller in Mumbai selling goods to a buyer in Mumbai.	A seller in Delhi selling goods to a buyer in Bangalore.

Types of GST

SGST (State Goods and Services Tax)

SGST is a tax applied by the state government on the sale of goods and services within the same state (intra-state transactions). The rate of SGST matches that of CGST. The revenue generated goes to the state government for local development.

CGST (Central Goods and Services Tax)

CGST is a levy imposed by the central government on the supply of goods and services that takes place within the boundaries of a single state. This means both the buyer and the seller are located in the same state. The money collected through CGST goes to the central government and is used to support the country’s overall development and public services.

IGST (Integrated Goods and Services Tax)

IGST is applied in inter-state transactions, where the buyer and seller are located in different states. IGST combines both CGST and SGST components and is administered by the central government for inter-state transactions. It helps maintain a smooth flow of tax credits between states.

UTGST (Union Territory Goods and Services Tax)

UTGST is applied for intra-state transactions that occur within Union Territories (UTs) like Delhi or Chandigarh. It is similar to SGST but applies specifically in Union Territories, where there is no separate state GST.

Differences Between Types of GST

Feature	CGST	SGST	IGST	UTGST
Levying Authority	Central Government	State Government	Central Government	Union Territory Government
Applicability	Intra-state transactions	Intra-state transactions	Inter-state transactions	Intra-state transactions in Union Territories
Revenue Allocation	Collected by the Central Government	Collected by the State Government	Collected by the Central Government and shared with the destination state	Collected by the Union Territory Government
Tax Rate	Same as SGST	Same as CGST	Combined rate of CGST + SGST	Same as CGST for transactions in Union Territories
Example	Sale within the same state (e.g., Maharashtra)	Sale within the same state (e.g., Maharashtra)	Sale from one state (e.g., Maharashtra) to another state (e.g., Karnataka)	Sale within Union Territories (e.g., Delhi, Chandigarh)

Entities Liable to Pay GST

The following individuals and organizations must pay GST in India:

• Registered Businesses/Traders: Any business or entity, whether individual, partnership, or company, that is registered under GST is responsible for collecting and paying GST on their sales or transactions. Businesses with a turnover above the prescribed threshold must register for GST.
• Service Providers: Service providers (except those providing exempt services) are required to pay GST based on the rate applicable to the services offered.
• Goods Suppliers: Suppliers of goods, including manufacturers, wholesalers, and retailers, must charge GST on taxable goods sold unless the goods are exempt from tax under GST laws.
• E-commerce Platforms: E-commerce operators like Amazon and Flipkart must collect and remit GST on behalf of the sellers using their platforms. These platforms facilitate the sale of goods and services and are responsible for collecting and paying GST.
• Importers: Individuals or businesses that import goods into India are required to pay IGST on the value of goods and customs duties when importing.
• Non-Registered Online Sellers: Even sellers who are not registered under GST may need to pay GST if their turnover exceeds the threshold or if they are involved in interstate trade.
• Casual Taxable Persons: Persons who engage in business activities occasionally (e.g., exhibitions or trade fairs) without a fixed place of business are also required to pay GST.
• Non-Residents: Non-resident individuals or businesses offering goods or services within India must register under GST and adhere to the required tax obligations.

Goods Free from GST

Certain goods are exempted from GST under Indian tax laws, meaning they are not subject to the Goods and Services Tax. These goods are either essential items, controlled substances, or goods that the government has chosen to exclude from the tax base to provide relief to consumers. Here’s a list of the goods exempted from GST:

1. Essential Food Items

• Unprocessed Food: Fresh fruits and vegetables, meat, fish, eggs, and other unprocessed or raw food items.
• Rice and Wheat
• Flour (Atta, Maida)
• Sugar, Salt, and Spices
• Milk and other dairy products
• Pulses (e.g., lentils, chickpeas)

2. Educational Materials and Services

• Textbooks for schools and colleges
• Printed materials for education and academic purposes
• Services provided by educational institutions (e.g., school education, higher education)

3. Healthcare Products and Services

• Medicines prescribed by a doctor
• Medical equipment for personal use
• Health and medical services provided by healthcare professionals
• Vaccines and other health-related products approved by the government
• Sanitary napkins, condoms, and diapers

4. Agricultural Goods

• Seeds for agriculture
• Manure (natural fertilizers) and pesticides for farming
• Animals (livestock) for breeding or consumption purposes
• Agricultural produce in its raw form (e.g., grains, fruits, vegetables)

5. Religious Items

• Books and publications related to religion (e.g., religious texts, prayer books)
• Prasads or offerings made in temples
• Yagnas (religious ceremonies) and related services

6. Personal Care Products

• Basic hygiene products such as toothpaste, soap, and shampoo (if under a certain price threshold)
• Diabetic testing kits

7. Transport Services

• Public transport services (e.g., buses, metro)
• Rail travel (for general and sleeper classes)
• Services of transport by air for passengers (economy class)
• Transport of goods by rail, road, or water

8. Government Services

• Government-initiated services such as municipal services, public welfare schemes, etc.
• Postage stamps, postal services, and other postal materials

9. Export Goods

• Goods that are exported from India are exempt from GST, provided they comply with the requirements of export laws and regulations.

10. Small Scale Business Exemption

• Small enterprises whose annual turnover falls below the specified limit—currently ₹40 lakhs for goods and ₹20 lakhs for services—are not required to register under GST or pay the tax.

11. Some Specific Goods

• Books (excluding those with advertisements)
• Chandeliers for religious or ceremonial purposes
• Bicycle parts specially designed for physically disabled persons
• Coconut oil, mustard oil, and other edible oils in certain conditions

12. Special Categories (Government Exemptions)

• Items for the differently-abled: Goods designed for the use of people with disabilities, such as specially designed wheelchairs, crutches, etc.
• Social Welfare Items: Goods related to government welfare programs (e.g., food provided by mid-day meal schemes)