Understanding the Different Types of GST in India: A Guide to Types of GST Returns

To replace several other indirect taxes, including state VAT, customs duties, central excise duty, and entertainment tax, the government introduced a new indirect tax regime known as the Goods and Services Tax (GST) on July 1, 2017. People often find it confusing to comprehend this new tax system and how it affects businesses. Therefore, we have thoroughly explained GST and its categories to make it easier for you to grasp.

Overview

Simply said, GST is a tax that is applicable on the value added to services and goods at every point along the supply chain. GST comes in four forms: CGST, SGST, IGST, and UTGST. Each category has a different tax rate applicable at the buyer’s end.

Check out the following sections if you are curious about how many different types of GST there are in India.

Types of GST in India

1. CGST (Central Goods and Services Tax.)
2. SGST (State Goods and Services Tax)
3. IGST (Integrated Goods and Services Tax)
4. UTGST (Union Territory Goods and Services Tax)

Lets understand one by one in detail below.

What is CGST?

CGST stands for Central Goods and Services Tax. It took the place of all prior taxes under the Central Government. Central surcharges & cess and central excise duty are a couple of examples of these taxes. The tax authorities levy CGST on the transportation of goods within a state.

Let us use an example to grasp further what CGST means. A firm manufactures a good in Telangana and sells it within the state. Both SGST and CGST apply to this case. The SGST goes to the Telangana Government and the CGST goes to the Central Government. As the GST council mandates, both State and Central Governments divide this tax equally. 

What is SGST?

The SGST, or State Government GST, is a form of GST that the State Government collects and applies it on transactions that occur entirely within its boundaries geographically. Previous state taxes such as the value-added tax, state sales tax, and entertainment tax became non-functional.

State Goods and Services Tax, SGST, is a single tax on intrastate supplies of goods and services, excluding alcoholic beverages. The government can also charge it solely on a product’s transactional value, a sum the buyer needs to pay.

Since each State Government has its laws, SGST features may differ from state to state. However, the classification of products and services, taxable events, valuation, and measurement practices are uniform across the country.

The goal of this new tax system is therefore represented by this tax: one nation, one tax.

What is IGST?

Integrated Goods and Services Tax, IGST, is a tax that is typically applicable for interstate transactions or transactions that involve two separate states. IGST is imposed on a variety of transactions, including exports and imports (IGST + customs) and supplies of services and products.

According to the IGST Act, the Central Government must collect it. Let us use an example to clarify this.

Assume a West Bengal manufacturer sells goods to a Maharashtra consumer. The Central Government will collect IGST on the transaction value. The Central Government and the consumer state, in this case, Maharashtra, will later split this money.

Why is the consumer state the recipient of the tax rather than the manufacturing state? Because the buyer pays the tax.

What is UTGST?

Union Territory Goods and Services Tax, UTGST, is a tax on selling goods and services inside Union Territories. It applies to the supply of goods in Andaman and Nicobar Islands, Daman Diu, Lakshadweep, Chandigarh, and Dadra and Nagar Haveli.

The UTGST only applies to Union Territories without a legislature.

Delhi, Puducherry, and even the recently created UTs of Jammu and Kashmir do not have UTGST but SGST. Understanding the meaning of UTGST alone is insufficient. You must know the applicable rates.

In UTs, this tax, which the central government collects, takes the place of the State Goods and Services Tax. As a result, the UTGST percentage is comparable to the SGST rates of 2.5%, 6%, 9%, and 14%.

In addition, it is critical to realize that some goods attract 0% taxation. Meat from fish, birds, and mammals does not attract this tax. Bananas, apples, grapes, and sanitary napkins are other tax-free goods.

Types of GST Returns: A Brief Guide

Under the GST regime in India, businesses are required to file periodic tax returns to report their sales and purchases. These returns are used to calculate the amount of tax due and to claim input tax credit. There are several types of GST returns that businesses may be required to file, depending on their size and type of activity. Let’s take a look at some of the most common types of GST returns:

1. GSTR-1: This return is used to report details of outward supplies of goods or services made during the reporting period. Registered taxpayers with a turnover of more than Rs. 1.5 crore are required to file GSTR-1 on a monthly basis, while those with a turnover of up to Rs. 1.5 crore can file it quarterly.

2. GSTR-3B: This is a summary return that must be filed by all registered taxpayers on a monthly basis. It includes details of both outward and inward supplies, as well as the amount of tax due and paid.

3. GSTR-4: This return is designed for composition scheme taxpayers, who are subject to a lower rate of tax but cannot claim input tax credit. GSTR-4 is filed on a quarterly basis and includes details of the taxpayer’s turnover and tax paid.

4. GSTR-5: This return is used by non-resident taxpayers who conduct business in India. It must be filed on a monthly basis and includes details of the taxpayer’s outward supplies and tax paid.

5. GSTR-9: This is an annual return that must be filed by all registered taxpayers. It provides a summary of all the monthly or quarterly returns filed during the financial year and includes details of the taxpayer’s turnover, tax paid, and input tax credit claimed.

6. GSTR-10: This is a final return that must be filed by taxpayers who have canceled their GST registration. It includes details of the taxpayer’s final turnover, tax paid, and input tax credit claimed.

Benefits of GST

• The State and Central Governments imposed several taxes before introducing the GST. It was difficult to regulate these taxes.
• The GST tax system is easy-to-follow and convenient.
• It reduces the likelihood of tax misunderstandings between the Central and State Governments.
• The taxation system became more uniform as a result.