The introduction of the Goods and Services Tax (GST) by the Government of India in 2017 significantly disrupted the countryâs taxation system, marking a major shift in the indirect tax regime. GST was launched to create a centralised, consumption-based tax structure.
The introduction of GST has led to new taxation authority categories, such as CGST, SGST, and IGST. Before exploring the differences between them, you must understand how GST works. By consolidating various national and state taxes, GST aims to simplify tax management, particularly for businesses.
An Overview of GST
Goods and Services Tax, popularly known as GST, is a value-added tax imposed by the government on the domestic supply of goods and services. Thus, it is a comprehensive, single tax law for the whole country.
This unified tax system has replaced all other indirect taxes, including VAT, Service Tax, Purchase Tax, Central Excise Law, and more. GST includes the final price of goods and services.
Components of GST: CGST, SGST, and IGST
If you run a business offline or through an e-commerce platform such as Flipkart Seller Hub, it is essential to have a GST number. Three taxes are applicable under the GST system: CGST, SGST, and IGST. Here are the main differences between them:
CGST and SGST
The full form of CGST is Central Goods and Services Tax, while SGST stands for State Goods and Services Tax. The central government charges CGST for the intrastate supply of goods and services. So, what is SGST? SGST is a similar tax levied on intrastate supplies but is administered by state authorities.
The central government introduced SGST to merge the former state-level taxes such as value-added tax, entry tax, entertainment tax, and so on. According to the Indian GST Act, the CGST and SGST on intrastate suppliers cannot exceed 14%.
IGST
Integrated Goods and Services Tax (IGST) applies to the interstate supply of goods and services, meaning IGST is levied on the supply of goods and services across two or more states and their international trade. The central government collects and distributes these taxes to the Centre and States.
Difference between CGST, SGST, and IGST
SGST, CGST, and IGST are GST levied by the Central and State governments based on the consumption and supply of goods and services.
|
Criteria |
CGST |
SGST |
IGST |
|
Meaning |
The Central government levy this to replace service tax and excise tax. |
The state uses it to replace the existing taxes, including sales tax and entry tax, among others. |
This tax, imposed by the Central government, combines CGST and SGST. |
|
Collecting Authority |
The Central Government collects CGST. |
The State Government collects SGST. |
The Central Government collects IGST. |
|
Applicability |
Intrastate supply of goods and services. |
Intrastate supply of goods and services. |
Interstate supply of goods and services. |
|
Input Tax Credit (ITC) |
You can use input tax credit either on IGST or CGST. |
You can use ITC either on IGST or SGST. |
You can use ITC either on IGST, CGST or SGST. |
|
Revenue Distribution |
Revenue is distributed to the Central Government. |
Revenue is distributed to State Governments. |
Revenue is distributed among Central and State Governments. |
GST Compliance for Online Sellers
Selling online requires a GST number unless exempted. Flipkart Seller Hub deducts up to 1% TDS on sales, which sellers can claim monthly. Along with GST registration, filing timely returns is also crucial. These contain sales, purchase, and tax information that must be submitted monthly or quarterly.
Fulfilling GST obligations benefits online sellers by saving them from multiple indirect taxes and legal issues. Knowing the GST registration and return filing process is important for sellers on top e-commerce sites like Flipkart Seller Hub.
GST  was introduced to make taxes easier for business people. To run a business through an e-commerce platform such as Flipkart Seller Hub, you must have a GST to register your business. Thus, it is important to understand how GST works and the differences between CGST, SGST, and IGST. It is crucial to know that all businesses with an income of over  ⹠20 lakhs are subject to GST.