India is a federal country where both the Centre and the States have assigned the powers to levy and collect taxes through appropriate legislation.
Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.
Centre will levy and administer CGST & IGST while respective states will levy and administer SGST
In case of Intra State supplies of goods and/or services in India then seller collects both CGST & SGST from the buyer, CGST needs to be deposited to Central Government and SGST with State Government.
The Central GST and the State GST levied simultaneously on every transaction of supply of goods and services except
- exempted goods and services,
- goods which are outside the purview of GST and
- the transactions which are below the prescribed threshold limits.
Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT.
While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State
Inter state Supplies
IGST levied & collected by the Centre applicable to
- Inter-State supplies of goods/services in India
- Inter-State stock transfers of goods
- Import of goods/services
- Export of goods/services (if made on payment of GST under claim of rebate)
Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters.
Credit of GST
Credit of adjusted with
Examples explaining both laws
A(Delhi) sold goods to B(Delhi) amounting to Rs.1,500 on which he charged VAT @ 10% on Rs. 1,500 i.e. RS.150. Cost of goods to B Rs.1,650. B(Delhi) sold goods to C(UP) amounting to Rs.1,900 on which he charged CST @10% on Rs.1,900i.e. Rs.190. Cost of goods to C is Rs.2090. he will not get the credit of VAT against CST
A(Delhi) sold goods to B(Delhi) amounting to Rs.1,500 on which he charged CGST @ 5% on Rs. 1,500 i.e. RS.75 and SGST @ 5% on RS.1,500 i.e. Rs.75. Cost of goods to B Rs.1,650. B(Delhi) sold goods to C(UP) amounting to Rs.1,900 on which he charged IGST @10% on Rs.1,900i.e. Rs.190 and get credit of CGST and SGST (as credit of CGST and SGST can be set off against IGST) therefore IGST=190-75-75=40 is given to Govt . Cost of goods to C is Rs.1,940.