CGST – Central Goods and Services Tax

Goods and Services Tax was introduced in India several times by different governments before it was actually implemented from July 1, 2017, onwards. The idea of bringing about GST was to have a ‘One Nation One Tax’. GST subsumed all the taxes that prevailed in the country earlier and are now categorised under:-

• Central Goods and Services Tax

Central Goods and Services Tax (CGST) subsumed all the taxes levied by the central government. For example, central excise duty, central surcharges and cess and other such central indirect taxes that were earlier applicable.

• State Goods and Services Tax

State Goods and Services Tax (SGST) subsumes all taxes levied by the state government, that’s, state indirect taxes. For example, VAT, sales tax, state cesses and surcharges, etc.

• Integrated Goods and Services Tax

Integrated Goods and Services Tax or (IGST) levied on the interstate movement of goods and services.

There are a few products that still do not come under the ambit of GST, and sales tax/VAT is still applicable to them.

For example, alcohol, petrol, diesel, natural gas, airline fuel and a few others. Examples of services where GST is not applicable are wages and salary, electricity and a few others. While the government wants to limit the price of alcohol and limit consumption, and hence alcohol has not been brought under the GST ambit, petrol continues to bring high amounts of revenue for the states.

Let’s understand CGST in a bit more detail.

What is CGST?

CGST stands for Central Goods and Services Tax. It subsumes all the taxes that were earlier applicable as central indirect taxes. They are levied by the central government for the intrastate movement of goods and services. Intrastate means within one state. The Central Goods and Services Tax Act 2017 states that CGST applies to the whole of India except Jammu and Kashmir.

Actually, on intrastate movement, both Central Goods and Service Tax and State GST are applicable.

CGST revenues go to the central government, and SGST revenues go to the respective state government.

For example, if a manufacturer makes a product in Maharashtra and sells it within the state only, SGST and CGST both will be applicable, wherein SGST will go to the Maharashtra state government’s coffers and Central Goods and Service Tax will go to the central government’s kitty.

Maharashtra has been topping the list of highest GST collections by a state for a long, followed by Karnataka.

In almost all cases, the total tax liability is divided into two equal halves and distributed equally between the state and central government.

These rates are decided by the GST Council. The GST Council meets for a couple of items in a year as and when required however, there is no regular fashion. The last time the GST Council met was in September 2019. These rates are as of October 1, 2019.

There are around six slabs of rates.

The central GST Act 2017 has a fully updated list of all items under all GST tax slabs.

History of CGST

CGST was introduced under the Central Goods and Services Tax Act 2017. It was formulated in order to eliminate multiple indirect taxes such as service tax, central excise duty, central sales tax, etc.

CGST's revenue is collected by the Central Government of India.

Objectives of the CGST Act, 2017

The primary objective of the CGST Act is to curb multiple problems associated with the taxation system.

To overcome issues like double taxation, heavy tax duties (such as octroi, entry tax, and check posts) and introduce a simplified compliance system, the act was introduced in India.

Features of the CGST Act, 2017

The primary features of CGST are-

• Central Goods and Services Tax is levied on the supply of all intra-state goods and services.
  
• It enables self-assessment by taxpayers on taxes that are liable to be paid by them.
• CGST assists to reduce the tax burden on multiple goods and services.
• Penalties and fines can be levied under CGST provisions on violation of taxation regulations.
• To restrict tax defaulters from selling goods or services, tax recoveries can be made through tax arrears via provisions under the CGST Act.

CGST Rules

• A supply bill must be issued if registration falls under the GST composition scheme.
  
• An invoice of tax must be issued to each of the taxable goods and services (in case you are already registered for GST).
• All the invoices should carry a unique serial no. and be noted in sequential order.
• CGST and SGST are filed in equal amounts. For example, if the GST rate is 18%, the CGST will be 9%, and SGST will also be 9%.

Documents Required for CGST Registration

• Applications form
• PAN Card
• Aadhaar Card
• Cancelled Cheque Leaf
• Address Proof

Why are there three categories in GST?

If the main aim of GST is 'One Nation, One Tax', then why do we have three categories of GST? The reason is that India is a federal country. We have too many layers and levels of business. The federal system, in this context, means that both state governments and central governments are allowed to levy and collect taxes. In the old system, we had varying indirect taxes that were levied on the state level and central government level. Now all the taxes are subsumed under one.

So for business services and goods sold and bought within a state, there is a different system where state GST and central GST are applicable, and both take their share. For transactions between states, for goods sold and services rendered, IGST is levied.

IGST, numerically, is always a combination of CGST and SGST. In the case of IGST, it is the seller that deposits the tax at the IGST rate with the central government, after which the tax s shared with states

For example, in the 18% GST rate slab:

• IGST for inter-state movement is 18%
• CGST: 9%
• SGST: 9%

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