Understanding the Types & Structure of GST in India
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.
Objective of GST
The primary objectives of GST in India go beyond simplifying the structure of GST; they aim to build a transparent and efficient taxation system.
1. One Nation, One Tax
- Simplifies the complex tax structure into a unified system.
- Creates a single, integrated market across India.
2. Eliminates Cascading Effect of Taxes
- Prevents the burden of “tax on tax” under the earlier system.
- Allows Input Tax Credit (ITC) to reduce overall tax liability.
3. Boosts Economic Growth
- Improves logistics and supply chains by removing state-level barriers.
- Enhances the competitiveness of Indian businesses globally.
4. Enhances Tax Compliance & Transparency
- Widens the tax base and makes tax administration more efficient.
- Reduces tax evasion and corruption through digitized processes.
- Simplifies compliance with streamlined online procedures.
5. Regulates the Unorganized Sector
- Brings small and unorganized businesses into the formal economy.
- Increases accountability and ensures fair taxation.
Types of GST in India
The structure of GST in India is designed to divide tax revenues fairly between the Centre and the States. Depending on whether a transaction happens within a state or across states, different types of GST are applied.
1. Central Goods and Services Tax (CGST)
- Definition: CGST is levied by the Central Government on the supply of goods and services within a state (intra-state transactions).
- Example: If a seller in Maharashtra sells goods worth ₹1,00,000 to a buyer in Maharashtra, and GST is 18%, then 9% CGST (₹9,000) will go to the Central Government.
2. State Goods and Services Tax (SGST)
- Definition: SGST is levied by the State Government on the same intra-state transaction where CGST is also applicable.
- Example: Continuing the above example, the same 9% GST (₹9,000) will be collected as SGST and go to the Maharashtra State Government.
3. Integrated Goods and Services Tax (IGST)
- Definition: IGST is levied by the Central Government on inter-state supply of goods and services, i.e., when the transaction happens between two states or union territories.
- Example: If a seller in Maharashtra sells goods worth ₹1,00,000 to a buyer in Gujarat at 18% GST, IGST of ₹18,000 is charged, which goes to the Centre and later shared with the destination state.
4. Union Territory Goods and Services Tax (UTGST)
- Definition: UTGST applies to intra-territory supply of goods and services in Union Territories without their own legislature (e.g., Chandigarh, Andaman & Nicobar Islands, Lakshadweep).
- Example: If a business in Chandigarh sells goods worth ₹1,00,000 locally at 18% GST, then 9% CGST and 9% UTGST will be levied.
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
Difference Between Types of GST in India
The structure of GST in India is designed to share tax revenue fairly between the Centre and States/UTs. The table below explains the key differences across GST categories.
| Basis of Difference | CGST | SGST | IGST | UTGST |
| Jurisdiction | Central Government | State Government | Central Government (for inter-state) | Union Territory Government (without legislature) |
| Applicability | On intra-state supply of goods/services (within the same state) | On intra-state supply of goods/services (within the same state) | On inter-state supply of goods/services (between two states/UTs) | On intra-territory supply of goods/services (within Union Territories) |
| Authority Benefited | Revenue goes to the Centre | Revenue goes to the respective State Government | Revenue shared between Centre and destination State | Revenue shared between Centre and UT Government |
| Priority of Input Tax Credit (ITC) Use | ITC of CGST can be used for CGST, then IGST | ITC of SGST can be used for SGST, then IGST | ITC of IGST can be used for IGST, CGST, then SGST | ITC of UTGST can be used for UTGST, then IGST |
Taxes Replaced by GST
Before the introduction of GST in July 2017, India had a complex indirect tax structure involving multiple Central and State-level taxes. GST subsumed these taxes into a unified system, making compliance easier and eliminating the cascading effect of “tax on tax.”
| Level | Earlier Taxes (Now Replaced) |
| Central Taxes | - Central Excise Duty - Service Tax - Additional Duties of Excise - Additional Duties of Customs (CVD & SAD) - Special Additional Duty of Customs - Central Surcharges & Cesses related to supply of goods/services |
| State Taxes | - State Value Added Tax (VAT) - Central Sales Tax (levied by Centre but collected by States) - Purchase Tax - Entry Tax (all forms) - Luxury Tax - Entertainment Tax (except levied by local bodies) - State Surcharges & Cesses related to supply of goods/services |
Different Types of GST Tax
India’s GST structure is designed to ensure a fair distribution of tax revenue between the Central and State Governments. Depending on whether a transaction takes place within a state or across states/UTs, different GST categories are applied.
List of GST Types in India
- Central Goods and Services Tax (CGST) – Levied by the Central Government on intra-state supply of goods and services.
- State Goods and Services Tax (SGST) – Levied by the respective State Government on intra-state supply of goods and services.
- Integrated Goods and Services Tax (IGST) – Levied by the Central Government on inter-state supply of goods and services, including imports and exports.
- Union Territory Goods and Services Tax (UTGST) – Levied on intra-territory supply of goods and services in Union Territories without their own legislature.
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
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