CGST, SGST and IGST

Also called: CGST, SGST, UTGST, IGST, CGST, SGST and UTGST, Central GST, State GST, Union Territory GST, Integrated GST · Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Class 12, Ch 5 "Government Budget and the Economy"

Meaning

CGST (Central GST) and SGST (State GST) are two equal parts of GST. The Centre and the state charge them together on every intra-state supply (a sale that starts and ends inside one state). In union territories without a legislature, UTGST (Union Territory GST) takes the place of SGST. IGST (Integrated GST) is charged by the Centre alone on inter-state supplies (sales that cross a state border) and on imports. IGST revenue is then split between the Centre and the destination state, which is the state where the goods or services are consumed.

This split is how India's dual GST works in practice. The Centre and the states tax the same sale, but their money stays in separate accounts. IGST is also the tool that makes GST destination-based: the tax follows the buyer, not the factory.

• Intra-state sale: Total GST = CGST + SGST (or UTGST), with CGST = SGST
• Inter-state sale or import: Total GST = IGST (= CGST rate + SGST rate)

Explanation

Which tax applies to which sale

Type of supply	Tax charged	Who levies	Who gets the revenue
Intra-state (inside one state)	CGST + SGST (or CGST + UTGST in UTs)	Centre and state, together	Centre and that state, in equal shares
Inter-state and imports	IGST	Centre	Split between the Centre and the destination state

• Four laws put this into effect (from 1 July 2017):
• CGST Act: the Centre's share on sales inside one state.
• SGST Acts: one Act passed by each state.
• UTGST Act: for union territories that have no legislature.

• IGST Act: for sales between states and for imports.

• Why it is called "dual": the Centre and the state tax the same sale at the same time. Each has its own law and its own tax officers.

Worked example: same bill, different route for the money

Take a ₹1,000 sale at the 18% standard rate.

Route	Tax charged	Total paid by buyer
Seller and buyer both in Tamil Nadu	₹90 CGST + ₹90 SGST	₹180
Seller in Tamil Nadu, buyer in Uttar Pradesh	₹180 IGST	₹180

• The buyer pays ₹180 in both cases. Only the route of the money changes.
• How the IGST gets settled:
• The Tamil Nadu seller pays ₹180 IGST to the Centre.
• The UP buyer uses this ₹180 as input tax credit (ITC: credit for tax already paid on inputs, which is subtracted from the tax the business owes on its own sales) when it pays its own tax in UP.
• The Centre sends the state's share to UP, the consuming state.
• Tamil Nadu gets nothing on this sale. This is destination-based taxation at work.

Input tax credit: the rules that keep the two treasuries apart

• Basic formula: GST payable = Output tax − Input tax credit
• Order in which credit is used:
• IGST credit goes first: against IGST, then against CGST, then against SGST.
• CGST credit and SGST credit are used after that.

• CGST credit cannot pay SGST, and SGST credit cannot pay CGST.

• Why this rule matters:

• If CGST credit could pay SGST → the state would lose revenue that belongs to it → the Centre's money and the state's money would get mixed up.
• IGST can pay any head because the Centre can settle the accounts afterwards, sending money to whichever side is owed.

The same split across the rate structure

• The 56th GST Council meeting (3 September 2025) replaced four main slabs (5%, 12%, 18%, 28%) with two main rates: 5% (merit rate) and 18% (standard rate) [2][4].
• A 40% special rate now applies to sin and luxury goods such as pan masala, aerated drinks, high-end cars, yachts and private aircraft [2][4].
• The new rates came into force on 22 September 2025 [2][3].
• Whatever the rate, the logic is the same. At 18%, an intra-state sale carries 9% CGST + 9% SGST, and an inter-state sale carries 18% IGST.

In India

• Constitutional base: 101st Amendment Act, 2016 (assent on 8 September 2016):
• Art. 246A: Parliament and state legislatures get the same power at the same time to make GST laws. Parliament alone makes laws on inter-state supply. This is the legal root of CGST + SGST.
• Art. 269A: GST on inter-state supply is levied and collected by the Centre and then shared between the Union and the states. This is the legal root of IGST.

• Art. 279A: sets up the GST Council, which recommends the rates.

• Before 2016: the Centre taxed manufacturing (excise) and services, and the states taxed sales (VAT). Art. 246A ended this split, so both levels can now tax one "supply".

• What IGST replaced: the old Central Sales Tax (CST) on inter-state sales, which was origin-based. The producing state kept the tax. CST is now subsumed in GST.
• Who gains: big consuming states such as Uttar Pradesh and Bihar gain. Big manufacturing states lose the tax they used to collect on production.
• Imports and exports:
• Imports attract IGST.

• Exports and supplies to SEZs (Special Economic Zones) are zero-rated (no GST, but input credit is kept). Exporters either claim a refund or export under a Letter of Undertaking (LUT) without paying IGST.

• Latest revenue figure: gross GST collection hit a record ₹22.08 lakh crore in 2024-25, growing 9.4% year-on-year, with a monthly average of ₹1.84 lakh crore [5].

• Taxpayer base: over 1.51 crore active GST registrations as of 30 April 2025 [5].

Don't confuse with

• IGST vs Central Sales Tax (CST): both applied to inter-state sales. But CST was origin-based (the producing state kept it), while IGST is destination-based (the consuming state gets the share). CST is now subsumed.
• UTGST vs SGST: UTGST is used in union territories that have no legislature, under the UTGST Act. SGST comes from the SGST Act passed by each state. Both are always paired with CGST.
• IGST vs basic customs duty: imports attract IGST, which is part of GST. Basic customs duty stays outside GST.
• CGST vs compensation cess: CGST is the Centre's regular half of GST on intra-state sales. Compensation cess was an extra levy on some goods, used to pay states for revenue they lost when they moved to GST. For tobacco, the old GST and cess rates continue until the compensation loans and interest are fully repaid [3].

Prelims Hooks

• Intra-state supply → CGST + SGST (or CGST + UTGST in UTs), split equally between the Centre and the state. Inter-state supply and imports → IGST, levied by the Centre.
• Trap: IGST is shared between the Centre and the destination (consuming) state, not the origin state.
• Art. 269A covers GST on inter-state supply (levied and collected by the Centre). Art. 246A gives concurrent power, but inter-state supply is for Parliament alone. Both came through the 101st Amendment (assent 8 September 2016).
• ITC order: IGST credit is used first (IGST → CGST → SGST). CGST credit cannot pay SGST, and SGST credit cannot pay CGST.
• Worked example: a ₹1,000 sale at 18% means ₹90 CGST + ₹90 SGST inside a state, or ₹180 IGST across states. The buyer pays the same total either way.
• GST 2.0: two main rates of 5% and 18%, plus a 40% special rate. Recommended at the 56th Council meeting (3 September 2025) and in force from 22 September 2025 [2].

Mains Points

• IGST as the engine of the destination principle and fiscal federalism:
• Tax moves to the consuming state → UP and Bihar gain, and manufacturing states lose tax on production.
• States stop cutting taxes to attract factories, because production no longer brings them the tax.

• But this makes states depend on the Centre to collect and settle IGST fairly. It is a test of cooperative federalism, and the Mohit Minerals (2022) ruling, which said GST Council recommendations are persuasive, not binding, shows that this balance can be fragile.

• Separate CGST and SGST credit protects each government's revenue, but makes compliance more complex:

• Rules against cross-use keep the Centre's and the states' money apart.

• But businesses must track several credit ledgers. Where input tax is higher than output tax (inverted duty structure), credit piles up, and the 2025 rate cuts may widen some of these gaps. A refund mechanism exists, and process changes are meant to speed up refunds [3].

• Common market vs gaps in the chain:

• Replacing CST and entry taxes with IGST supports one national market: check posts are gone and goods move more freely.
• But the five petroleum products (not yet notified) and electricity remain outside GST. So neither CGST/SGST nor IGST credit flows on fuel and power, and cascading (tax on tax) continues in transport and manufacturing. Bringing them in needs Centre-state agreement on sharing the revenue.

Related concepts

• Goods and Services Tax
• Destination-based taxation
• Input tax credit
• Reverse charge mechanism
• Composition scheme
• Zero-rated supply
• E-way bill
• E-invoicing
• Revenue neutral rate

Read more

• GST architecture: dual, destination-based, credit-linked