India’s “One Nation, One Tax” reform dismantled a convoluted web of cascading indirect taxes—including Central Excise, Service Tax, State VAT, Entry Tax, and Octroi—subsuming them under the unified Goods and Services Tax (GST) framework in July 2017.
However, because India operates as a federal constitutional democracy, taxing powers are shared equally between the Union Government and the States. To facilitate this dual federal structure, GST was bifurcated into four distinct tax components: CGST, SGST, IGST, and UTGST.
In this guide, we break down what each component means, when to levy which tax, how revenue is apportioned, and the strict rules governing Input Tax Credit (ITC) utilization.
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Quick Comparison: The 4 GST Types
| Component | Full Form | Governing Act | Levied By | Applied When? |
|---|---|---|---|---|
| CGST | Central Goods and Services Tax | CGST Act, 2017 | Central Government | Intra-State Supply (Within same State) |
| SGST | State Goods and Services Tax | Respective State GST Acts | State Government | Intra-State Supply (Within same State) |
| UTGST | Union Territory GST | UTGST Act, 2017 | Central / UT Administration | Intra-UT Supply (UT without legislature) |
| IGST | Integrated GST | IGST Act, 2017 | Central Government (Shared with Destination State) | Inter-State Supply, Imports & Exports |
1. Intra-State Supply: CGST + SGST (or UTGST)
An Intra-State Supply occurs whenever the Location of the Supplier and the Place of Supply (POS) are in the same State or Union Territory.
The 50:50 Statutory Split:
Whenever an intra-state supply takes place, the total applicable GST rate is split equally:
- 50% goes to the Central Government as CGST.
- 50% goes to the State Government as SGST (or UTGST if in a Union Territory without legislature).
Example:
A consumer in Pune (Maharashtra) buys a television costing ₹50,000 (taxed at 18% GST) from a retail showroom in Mumbai (Maharashtra):
- Location of Supplier: Maharashtra
- Place of Supply: Maharashtra
- Tax Classification: Intra-State Supply
- CGST (9%): ₹4,500 (Remitted to Central Treasury)
- SGST (9%): ₹4,500 (Remitted to Maharashtra State Treasury)
- Total Invoice Price: ₹59,000
2. Inter-State Supply: IGST (Integrated GST)
An Inter-State Supply occurs whenever:
- The Location of the Supplier and the Place of Supply are in different States.
- The supplier and place of supply are in two different Union Territories, or in a State and a Union Territory.
- Import of Goods or Services into India (deemed inter-state under Section 7(2) of IGST Act).
- Export of Goods or Services out of India (deemed inter-state under Section 7(5) of IGST Act).
- Supplies made to or by a Special Economic Zone (SEZ) unit or developer.
The Single Tax Mechanism:
In an inter-state supply, the taxpayer does not split the tax. A single combined tax called Integrated GST (IGST) is charged at the full statutory rate.
Example:
A textile mill in Surat (Gujarat) sells cotton yarn worth ₹1,00,000 (taxed at 5%) to a garment manufacturer in Tiruppur (Tamil Nadu):
- Location of Supplier: Gujarat
- Place of Supply: Tamil Nadu
- Tax Classification: Inter-State Supply
- IGST (5%): ₹1,00,000 × 5% = ₹5,000
- Revenue Sharing: The central government collects the ₹5,000 IGST and later transfers Tamil Nadu’s 50% share (₹2,500) to the destination state under Section 17 of the IGST Act.
3. What is UTGST & Which Territories Use It?
India has eight Union Territories, but they are not all treated identically under GST law:
Union Territories WITH Legislature (Treated as “States”):
- Delhi, Puducherry, and Jammu & Kashmir have their own elected legislative assemblies.
- For the purpose of GST, they are legally classified as States. Therefore, intra-state transactions within Delhi attract CGST + SGST (Delhi GST), not UTGST.
Union Territories WITHOUT Legislature (Use UTGST):
- Chandigarh, Lakshadweep, Daman & Diu and Dadra & Nagar Haveli, Andaman & Nicobar Islands, and Ladakh.
- Intra-territory transactions within these regions attract CGST + UTGST (Union Territory Goods and Services Tax).
The Rule of Order: ITC Cross-Utilization (Section 49)
Understanding how you can offset input credits against output liabilities is vital for error-free return filing in GSTR-3B:
Available ITC Priority Utilization Order:
1. IGST Credit Must be Exhausted First:
• Offset IGST Output Liability first
• Any remaining IGST ITC can offset CGST or SGST/UTGST in any proportion
2. CGST Credit:
• Offset CGST Output Liability first
• Offset IGST Output Liability second
• NEVER allowed to offset SGST/UTGST!
3. SGST / UTGST Credit:
• Offset SGST/UTGST Output Liability first
• Offset IGST Output Liability second
• NEVER allowed to offset CGST!The Golden Rule: CGST credit can never cross over to pay SGST, and SGST credit can never pay CGST.
Frequently Asked Questions (FAQs)
What happens if I accidentally charge IGST instead of CGST + SGST?
Under Section 77 of the CGST Act, if a taxpayer inadvertently pays IGST on a transaction that is subsequently held to be an intra-state supply (CGST+SGST):
- You must deposit the correct CGST + SGST liability.
- You can file an application for 100% refund of the wrongly paid IGST.
- Crucially, under Section 77(1), no interest is charged on the belated payment of CGST/SGST in such bona fide cases.
Can an unregistered end-consumer claim back SGST?
No. An unregistered retail consumer cannot claim Input Tax Credit; GST forms part of their final out-of-pocket consumption cost.