When you look at a GST invoice in India, you will see tax split into two or three components: CGST, SGST, or IGST. Many business owners, students, and even accountants find this confusing at first. Why are there three different tax names when it is all "GST"? The answer lies in India's federal structure — both the central government and state governments share the revenue from GST, and the type of tax applied depends entirely on whether the transaction crosses a state border. This article explains each component clearly, with real examples and a complete rate table.
When India introduced GST on 1 July 2017, it replaced a patchwork of central and state taxes (excise duty, VAT, service tax, entry tax, etc.). But because India is a federal republic, both the Parliament and state legislatures have concurrent jurisdiction over GST. This led to a dual GST model unique to India:
The total tax burden on the consumer is the same regardless of whether CGST+SGST or IGST is applied. The difference is only in who collects it and how it is distributed.
CGST stands for Central Goods and Services Tax. It is levied by the Central Government of India on intrastate (within the same state) supply of goods and services. The revenue collected under CGST goes entirely to the central government's consolidated fund.
The CGST Act, 2017 governs this tax. CGST is always equal to half the standard GST rate for a product or service. So if the total GST rate is 18%, the CGST component is 9%.
SGST stands for State Goods and Services Tax. It is levied by the respective state government on intrastate transactions. SGST revenue goes entirely to the state government. The SGST Acts were individually enacted by each state and Union Territory (with legislature) — so Maharashtra has Maharashtra SGST Act, Tamil Nadu has Tamil Nadu SGST Act, and so on.
Like CGST, SGST is always equal to half the total GST rate. On an 18% GST item, SGST is 9%.
IGST stands for Integrated Goods and Services Tax. It applies when goods or services are supplied from one state to another (interstate supply), or on imports into India. IGST is levied by the Central Government under the IGST Act, 2017.
The full IGST amount is collected by the Centre. However, when the buyer (in the destination state) claims Input Tax Credit on IGST and the goods or services are consumed in that state, the Centre transfers the state's share to the destination state. This ensures the consuming state gets the revenue, not the producing state — which was a major political achievement of the GST reform.
IGST rate = CGST rate + SGST rate = full GST rate (e.g., 18%)
A Mumbai-based software company invoices a Pune-based client for ₹1,00,000 in IT services at 18% GST. Since both are in Maharashtra:
The same Mumbai company invoices a Bengaluru-based client for ₹1,00,000 at 18% GST. Since the supplier is in Maharashtra and the buyer is in Karnataka:
Note: The total tax is identical — ₹18,000 either way. Only the collection mechanism changes.
| Total GST Rate | CGST (Intrastate) | SGST (Intrastate) | IGST (Interstate) | Common Items |
|---|---|---|---|---|
| 0% | 0% | 0% | 0% | Fresh vegetables, milk, eggs, books, salt |
| 5% | 2.5% | 2.5% | 5% | Packed food, household LPG, economy hotels |
| 12% | 6% | 6% | 12% | Butter, cheese, smartphones, construction services |
| 18% | 9% | 9% | 18% | IT services, restaurant (AC), hair salon, most manufactured goods |
| 28% | 14% | 14% | 28% | Cars, cement, tobacco, luxury items, casinos |
Union Territories without their own legislature (Andaman & Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep, and Chandigarh) cannot levy SGST since they don't have a state legislature. Instead, the central government levies UTGST (Union Territory GST) alongside CGST for intrastate supplies in these UTs. UTGST functions exactly like SGST in terms of rates and ITC rules. Delhi, Puducherry, and Jammu & Kashmir have their own legislatures, so they levy SGST (or J&K SGST) rather than UTGST.
Follow these three steps when raising an invoice:
Input Tax Credit (ITC) can be used to offset your GST liability, but there are strict rules about which credit can be used against which liability:
| ITC Available | Can be used to pay IGST? | Can be used to pay CGST? | Can be used to pay SGST? |
|---|---|---|---|
| IGST credit | Yes (first) | Yes (remaining) | Yes (remaining) |
| CGST credit | Yes | Yes | No |
| SGST credit | Yes | No | Yes (same state only) |
The key rule to remember: CGST credit cannot directly offset SGST liability, and vice versa. However, IGST credit is the most flexible — it can be used to pay any of the three taxes. This is why exporters and businesses making large interstate purchases benefit from accumulating IGST credits.
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Try the Free Tool →IGST applies. Even though Delhi and Gurgaon are geographically adjacent, they are in different states (Delhi is a UT/state, Haryana is a separate state). Any supply crossing a state boundary attracts IGST. The supplier in Delhi will charge IGST at the applicable rate, and the buyer in Haryana can claim that IGST as Input Tax Credit.
This is a common error. If you charge CGST+SGST on what should have been an IGST transaction, you have paid the wrong type of tax to the wrong government. The Central GST Law (Circular No. 92/11/2019-GST) allows correction in such cases — you can adjust the wrongly paid CGST/SGST and issue a revised invoice with IGST. However, the process involves filing amendments in GSTR-1 and may require paying IGST interest if there is delay. It is best to get the tax type right at the invoice stage.
Yes. Imports into India are treated as interstate supplies under the IGST Act. IGST is levied on the customs value of imports (assessable value + basic customs duty + any other applicable duties), in addition to Basic Customs Duty. The importer can then claim this IGST as ITC in their GSTR-3B, which significantly reduces the tax cost for businesses importing raw materials or capital goods.
SGST is levied by state governments (like Maharashtra, Karnataka, Tamil Nadu, etc.) on intrastate transactions within their territory. UTGST is levied by the Central Government in Union Territories that do not have their own legislative assembly — such as Andaman & Nicobar, Chandigarh, and Lakshadweep. The rates, ITC rules, and filing procedures for UTGST are identical to SGST. Taxpayers in these UTs simply replace "SGST" with "UTGST" on their invoices and returns.