Goods and Services Tax (GST) is an indirect tax. Under GST, a uniform tax is levied on goods and services. Where GST is not applicable, different taxes are levied on goods and services. In this, a provision was made to levy only one tax on every goods and every service, that is, to impose only one tax instead of taxes like VAT, excise and service tax. It was introduced on July 1, 2017. Collected by both the central and state governments. We will tell about the GST share between the center and the state.
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What is IGST?
IGST, or Integrated Goods and Services Tax represents an important aspect of the Goods and Services Tax (GST) system in India. This tax is specifically levied on interstate transactions involving the supply of goods and/or services, as well as imports and exports. Governed by the IGST Act, collecting taxes under this regime is the responsibility of the central government. The revenue collected is later distributed among various states. For example, when a trader from West Bengal sells goods worth Rs 5,000 to a consumer in Karnataka, IGST is applicable due to the interstate nature of the transaction. If the GST rate on the goods is 18%, the trader will charge ₹ 5,900 as the final price for the goods sold.
What is UTGST?
UTGST stands for Union Territory Goods and Services Tax. It is a component of the Goods and Services Tax (GST) system in India. UTGST is applicable to the Union Territories of the country. Similar to the State Goods and Services Tax (SGST), UTGST is levied in addition to the Central Goods and Services Tax (CGST) on intra-Union Territory transactions. The revenue collected through UTGST contributes to the financial resources of the respective Union Territories. UTGST, CGST and SGST together form the three-tier structure of GST, which aims to create a unified and harmonized tax system across the country, including Union Territories.
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GST sharing between centre and states
The Goods and Services Tax Act provides for two types of GST – Central GST (CGST) and State GST (SGST). The central government collects CGST, and the respective state governments collect SGST. GST revenue for most goods and services is shared in a 50:50 ratio between the central and state governments. For example, if a supplier of goods or services sells a product worth ₹100, he has to pay a total of 18% GST, which is divided into 9% CGST and 9% SGST. Out of ₹18, ₹9 goes to the central government, and the remaining ₹9 goes to the respective state government. Sometimes, the GST rate may vary for different goods and services. For example, the GST rate for some essential goods, such as food and health services, is lower than the GST rates for luxury goods and services. In such cases, GST revenue is shared in a ratio decided by the GST Council.
