GST is a single tax collected in components. Which components appear on an invoice depends on one thing: whether the supply is within a state or between states.
The four names
- CGST — Central GST, the Centre's share of an intra-state supply.
- SGST — State GST, the state's share of an intra-state supply.
- UTGST — Union Territory GST, the equivalent of SGST for union territories without a legislature.
- IGST — Integrated GST, charged on inter-state supplies, imports and supplies to or from SEZs.
The rule
Intra-state supply — supplier and place of supply in the same state. The rate splits in half: CGST at half, SGST or UTGST at half. An 18% supply appears as 9% CGST plus 9% SGST.
Inter-state supply — supplier and place of supply in different states. IGST is charged at the full rate. The same 18% supply appears as 18% IGST.
The total the customer pays is identical. Only the presentation and the distribution between governments differ.
A worked example
A supplier in Karnataka sells goods with a taxable value of Rs 1,00,000 at 18%.
To a customer in Karnataka:
- CGST 9% = Rs 9,000
- SGST 9% = Rs 9,000
- Invoice total = Rs 1,18,000
To a customer in Tamil Nadu:
- IGST 18% = Rs 18,000
- Invoice total = Rs 1,18,000
Same money, different components.
Reading it on an invoice
The supplier's state comes from the first two digits of their GSTIN. Compare that against the place of supply, and the split on the invoice should follow. Two mistakes are common enough to look for every time:
- CGST and SGST shown on an inter-state supply. The supplier has treated an inter-state transaction as local.
- IGST shown on a local supply. The reverse error.
Both create real problems. Tax paid under the wrong head does not simply transfer, and the buyer's credit is affected. Raise it with the supplier and ask for a corrected document rather than absorbing it.
Place of supply is the deciding factor
The split does not depend on where the goods were dispatched from alone, nor on the billing address alone. It depends on the place of supply, which is determined by rules that vary with the type of supply — delivery location for most goods, and a set of specific rules for services, some keyed to the recipient's location and some to where the service is performed.
Bill-to-ship-to arrangements, where the invoice goes to one state and the goods to another, are the classic case where intuition fails. If your business does these regularly, get the rules right once and document them.
Imports, exports and SEZs
- Imports attract IGST, along with customs duties.
- Exports are treated as zero-rated, with mechanisms to recover input tax.
- Supplies to and from SEZ units and developers are treated as inter-state and attract IGST, with zero-rating available in defined circumstances.
Credit
Input tax credit rules govern how credit of each component can be used against liability of each component, and the order in which it must be applied. The rules have been amended, so confirm the current position rather than relying on a remembered hierarchy.
Where to go next
- Read how to calculate GST.
- Read GST inclusive vs GST exclusive pricing.
- Read GST state codes explained.
- Use the GST calculator.