Different Types of GST in India Explained with Examples

GST is one of the biggest tax reforms India has seen, but for many business owners and consumers, understanding its types can still feel confusing. Introduced to replace a maze of indirect taxes, GST in India now provides a uniform and structured system. But GST isn’t just one tax, it’s a combination of four different types depending on where the transaction occurs. If you’re unsure how GST applies to your business or daily purchases, this blog explains each type in simple terms.

What is GST and Why Was It Introduced?

The Goods and Services Tax (GST) was introduced on July 1, 2017, as an indirect tax to unify India’s tax system. Before GST, businesses had to comply with various taxes, like VAT, excise duty, and service tax, each with its own rules.

The goal of GST in India was to simplify the tax structure, eliminate cascading taxes (tax on tax), and make compliance easier for businesses. It benefits consumers as well by creating transparent pricing and eliminating hidden taxes.

Types of GST in India

There are four main types of GST in India, each applicable based on the location of the transaction.

1. Central Goods and Services Tax (CGST)

The Central Government levies (CGST) on the supply of goods and services within a single state (intra-state). It applies alongside SGST, and the revenue is used for central initiatives and projects.

2. State Goods and Services Tax (SGST)

SGST is charged by the state government on intra-state supplies. It is the state’s share of the GST collected, used to fund state-level infrastructure and public services.

3. Integrated Goods and Services Tax (IGST)

IGST is imposed on the supply of goods and services between states or from India to abroad. Collected by the Centre, this tax is then divided between the Centre and the consuming state.

4. Union Territory Goods and Services Tax (UTGST)

UTGST replaces SGST in union territories that don’t have legislatures. It’s applied along with CGST on intra-UT transactions, and the revenue supports union territory development.

Also Read: GST State Code List and Jurisdiction Details

Practical Examples to Understand Different GST Types

Let’s break it down with real-life scenarios using different types of GST with examples.

Example 1 – Intra-State Transaction (CGST + SGST)

A shop in Gujarat sells goods worth ₹10,000 to a customer in the same state.

• GST rate: 18%
• CGST: ₹900
• SGST: ₹900
• Total bill: ₹11,800

The central and Gujarat governments each receive ₹900.

Example 2 – Inter-State Transaction (IGST)

A trader in Delhi sells goods worth ₹10,000 to a buyer in Haryana.

• GST rate: 18%
• IGST: ₹1,800
• Total bill: ₹11,800

The Centre collects the full ₹1,800 and distributes the appropriate share to Haryana.

Example 3 – Union Territory Transaction (CGST + UTGST)

A seller in Lakshadweep supplies goods worth ₹10,000 locally.

• GST rate: 18%
• CGST: ₹900
• UTGST: ₹900
• Total bill: ₹11,800

CGST goes to the Centre, and UTGST goes to the Lakshadweep administration.

Also Read: Understanding GST for Home Buyers in India

How Businesses Can Ensure GST Compliance

For smooth operations, businesses must:

• Register under GST if turnover exceeds ₹40 lakh (₹20 lakh for services)
• File regular GST returns as per schedule
• Maintain proper invoices and GST records
• Keep updated with rate changes and exemptions

Missing deadlines or filing incorrect returns can lead to penalties. Use tools or consult professionals to stay compliant. Check our GST Return Filing Deadlines to avoid last-minute stress.

Conclusion

Understanding the different types of GST is essential for every entrepreneur, retailer, and service provider in India. Whether you’re making local sales or delivering across states, GST plays a vital role in pricing, billing, and tax filing.

Each type—CGST, SGST, IGST, and UTGST—serves a specific purpose in ensuring revenue is fairly shared between governments. If you’re managing a business, staying GST-compliant helps you avoid penalties and builds your credibility. Whether you're applying for a business loan or simply planning finances, a little knowledge can go a long way in making smarter financial decisions under India’s unified tax regime.

FAQs

Q.1. What are the 4 types of GST in India?

A. The four types are CGST, SGST, IGST, and UTGST. They apply based on whether the transaction is intra-state, inter-state, or within a union territory.

Q.2. How is CGST different from SGST?

A. CGST is collected by the Centre, and SGST by the State. Both are charged together on intra-state sales, typically split equally.

Q.3. When is IGST applicable?

A. IGST is levied on inter-state sales or transactions between two states, or between a state and a union territory. It also applies to imports and exports.

Q.4. What is UTGST and where is it used?

A. UTGST applies in union territories without legislatures, like Lakshadweep and Andaman & Nicobar. It is charged alongside CGST on local supplies.

Q.5. Can GST rates vary across states?

A. No, GST is uniform across India. The tax rate for a product or service remains the same in every state and union territory.

Q.6. Do I need to register separately for each type of GST?

A. No. A single GST registration covers all types of businesses. The system automatically applies the correct type (CGST, SGST, IGST, or UTGST) based on the transaction location.

Q.7. Are there GST exemptions for small businesses?

A. Yes. Businesses with annual turnover below ₹40 lakh (₹20 lakh for services) are exempt. However, they can register voluntarily to avail input tax credit.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com