The CGST stands for Central Goods and Services Tax. It is one of the three major classifications of the Goods and Services Tax (GST). GST is the most significant tax reform India has witnessed since 1947. The GST tax regime was introduced in the year 2017. Since its implementation, it has had a major impact on the Indian economy.
GST is considered as a revolutionary tax reform. After its implementation, seventeen Indirect Taxes that were previously levied by both the Central as well as the State Governments, has been subsumed. Some of those Indirect Taxes were purchase tax, central sales tax, entry tax, entertainment tax, local body tax, central excise duty, etc. GST has also reduced overall prices of goods and services as the GST is levied at the last stage of the supply chain.
Types of Goods and Services Tax (GST)
The introduction of GST has saved both time and effort in various aspects. It has also reduced the pre-existing complexities. GST can be classified into three major and one specialized type. They are:
1. CGST- Central Goods and Services Tax
2. SGST- State Goods and Services Tax
3. IGST- Integrated Goods and Services Tax
4. UTGST- Union Territories Goods and Services Tax
Let us briefly look at how these types of GST differ from one another.
1. Central Goods and Services Tax
CGST is an Indirect Tax that is levied on the supply of goods and services within the state (intra-state). This tax is levied by as well as payable to the Central Government. This tax has paved the way towards one of the goals of GST to become “one nation, one tax”.
All Indirect Taxes that were previously levied by the Central Government have now been replaced by the Central GST. Some of those Indirect Taxes are service tax, central excise duty, additional customs duty and excise duty, etc.
The CGST falls under the Central Goods and Service Tax Act 2016. CGST is mainly charged on movement or sale of goods and services, commodities but they can be amended from time to time.
2. State Goods and Services Tax
SGST is one among the three tax components of the Goods and Services Tax (GST) in India. This tax comes under the State Goods and Service Tax Act 2016. Like CGST, this tax is also levied on intra-state transfer of goods.
The revenue collected from the SGST belongs to the State Government. State taxes such as Value Added Tax (VAT), entry tax, entertainment tax, taxes on lottery, taxes on betting and gambling, state surcharges, luxury tax, etc. are merged into SGST.
3. Integrated Goods and Services Tax
IGST or Integrated Goods and Services Tax is a tax that is distributed between the Central and the State Governments. The GST Rates are specified by the government. This tax is levied on goods and services that are transferred from one state to another.
IGST is also levied on imported goods. Both the State and the Central Government share the tax revenue collected from the Integrated GST. It is a destination-based tax there it is accrued to the importing states.
4. Union Territories Goods and Services Tax (UTGST)
This is a specialized taxation under the Goods and Services Tax regime. The prominent Union Territories in India are Delhi, Chandigarh, Andaman and Nicobar Islands, Lakshadweep Islands, Pondicherry, Daman and Diu, Dadra and Nagar Haveli. UTGST accounts for the taxation in these Union Territories.
Features of Central Goods and Service Act 2016
1. It aims at levying tax on all intra-state transfer of goods and/or services.
2. CGST Act aims at providing a registered person the self-assessment on the payable taxes.
3. It has aimed at broadening the base of Input Tax Credit. It is doing so by making the Input Tax Credit available with regard to taxes that are paid on supply of goods and services.
4. The Act has put obligation on e-commerce operators to collect tax at a rate which does not exceed 1% of the total value of supplies and to collect the tax at source.
5. The Act provides the officers the power of inspecting, seizing or arresting.
6. It provides taxpayers the benefit of a smooth transition from the previous tax regime to the GST rime.
7. It has brought all the Indirect Taxes previously levied by the Central Government into one single umbrella.
8. It is a dual-structures tax and is one of the major tax components of the Goods and Services Tax (GST).
The CGST Act is extended to the entire country of India except the state of Jammu and Kashmir. The main differences between the three components of GST- CGST, SGST and IGST lie in the manner they are individually governed. GST has made quite a few groundbreaking alterations since its implementation.
Most importantly it has eliminated the cascading effect by subsuming seventeen Indirect Taxes which had made the previous tax regime really difficult to manage. Especially with the State and Central Government acting individually as governing bodies for the CGST, SGST and IGST, the tax structure in India is much more organized and transparent.