What are the components of GST? Aster Billing

Aster Billing

What are the components of GST?

There are 3 taxes applicable under this system: CGST, SGST & IGST.

• CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within Maharashtra)
• SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within Maharashtra)
• IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)

In most cases, the tax structure under the new regime will be as follows:

Transaction	New Regime	Old Regime
Sale within the State	CGST + SGST	VAT + Central Excise/Service tax	Revenue will be shared equally between the Centre and the State
Sale to another State	IGST	Central Sales Tax + Excise/Service Tax	There will only be one type of tax (central) in case of inter-state sales. The Center will then share the IGST revenue based on the destination of goods.

Illustration: 

• Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.

In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the Central Government.

• The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on the good is 12%. This rate comprises of  CGST at 6% and SGST at 6%.

The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the Central Government and Rs. 3,000 will go to the Gujarat government as the sale is within the state.

Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and center. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Interstate sale of goods was taxed by the Center. CST (Central State Tax) was applicable in case of interstate sale of goods.  Other than above there were many indirect taxes like entertainment tax, octroi and local tax that was levied by state and center.

This lead to a lot of overlapping of taxes levied by both state and center.

For example, when goods were manufactured and sold Excise Duty charged by the center was charged by the center. Over and above Excise Duty, VAT was also charged by the State. This lead to a tax on tax also known as cascading effect of taxes.

The following is the list of indirect taxes in the pre-GST regime:

• Central Excise Duty
• Duties of Excise
• Additional Duties of Excise
• Additional Duties of Customs
• Special Additional Duty of Customs
• Cess
• State VAT
• Central Sales Tax
• Purchase Tax
• Luxury Tax
• Entertainment Tax
• Entry Tax
• Taxes on advertisements
• Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST has replaced all the above taxes.

However, the chargeability of CST for Inter-state purchase at a concessional rate of 2%, by issue and utilisation of c-Form is still prevalent for certain Non-GST goods such as:

(i) Petroleum crude;

(ii) High-speed diesel;

(iii) Motor spirit (commonly known as petrol);

(iv) Natural gas;

(v) Aviation turbine fuel; and

(vi) Alcoholic liquor for human consumption.

in respect of following transactions only:

• Resale
• Use in manufacturing or processing
• Use in the telecommunication network or in mining or in the generation or distribution of electricity or any other power