Goods and Service Tax (GST) is an indirect tax that is charged on the supply of goods and services or both in India. It replaced the previously existing indirect taxes such as Value Added Tax (VAT), Service Tax, Sales Tax etc. Earlier, VAT was charged on goods and Service Tax was charged on services. With the introduction of GST, both; goods and services are taxed under one.
The Goods and Service Tax Act, 2017, came into effect from 1st July 2017 in India. It was brought into effect with the main vision of One Nation One Tax, eliminating the cascading effect, i.e. tax on tax, caused by the previously existing indirect taxes.
Types of GST & CGST Full Form:
The Central Government introduced the following acts under The Goods and Service Tax Act, namely,
- The Central Goods and Service Tax Act, 2017 (CGST)
- The States Goods and Service Tax Act, 2017 (SGST)
- The Integrated Goods and Service Tax Act, 2017 (IGST)
- The Union Territory Goods and Service Tax Act, 2017 (UTGST)
- The Goods and Service Tax (Compensation to States) Act, 2017
The CGST and IGST acts extend to the whole of India, including the union territory of Jammu and Kashmir.
What is CGST?
The Central Goods and Service Tax (CGST) is regulated by the Central Goods and Service Tax Act, 2017.
It provides for the levy and collection of tax on intra-state supply of goods or services or both; by the Central Government and any matters connected to it.
In the case of an intrastate transaction, CGST is charged along with SGST, whereas in the case of an intrastate transaction in a union territory, CGST is charged along with UTGST.
CGST applies to the whole of India, including Jammu and Kashmir.
Tax Rates Under CGST
At present, there are seven rates of tax under CGST. Different rates are charged on goods and services, depending upon their type. Generally, necessities have a lower tax rate as compared to expensive luxury items. The rates of tax under CGST are as follows.
|Serial No.||GST Rates||Examples of Goods and Services|
|1.||5%||Applicable to commonly used or necessary products such as edible oil, paneer, yoghurt, sugar, spices, tea etc|
|2.||12%||Applicable to processed foods such as jams, citrus fruits, drinking water etc.|
|3.||18%||Applicable to products such as hair oils, toothpaste, soaps, chocolates, fountain pens, industrial intermediate products and capital goods.|
|4.||28%||Applicable to luxury items, premium cars, air conditioners, aerated drinks, motorcycles and pan masala.|
|5.||3%||Applicable to imitation jewellery, coins and noble metals such as gold, silver, platinum.|
|6.||0.25%||Applicable to precious stones|
|7.||0%||Applicable to products such as bananas, mammals, apples, grapes, sanitary napkins etc.|
Table for CSGT article
One should note that zero-rated is not the same as exempt.
Key Terms To Understand Under CGST Act, 2017
According to the CGST Act, ‘goods’ means every kind of movable property, other than money and securities but includes actionable claims, growing crops, grass, and things attached to or forming a part of the land that is agreed to be severed before or under the contract of supply.
‘Services’ means anything other than goods, money and securities, but it does include activities relating to the use of money, or its conversion by cash or by any other mode, from one form, currency, or denomination, to another form, currency or denomination for which a separate consideration is charged.
According to the CGST Act, business means,
- Any trade, commerce, manufacture, profession, vocation, wager or any other similar activity, whether or not it is for any financial benefit.
- Any activity in connection to the above
- Supply or acquisition of goods, including capital goods and services in connection with the closure of business
- Provision by a club, association, society or organisation; whether for a subscription or any other consideration, of the facilities or benefits to its members
- Admission, for consideration of persons to any premises
- Services supplied by a person as the holder of an office which he accepts in the course of furtherance of his trade, profession, or vocation
- Services provided by a race club by way of the totalisator, or a license for a bookmaker in such club
- Any activity that is undertaken by the Central Government, state government or any local authority in which they engage as public authorities
Manufacture means the processing of raw materials in any manner that results in creating a new product, having a unique name and nature.
- Electronic Commerce
Under the CGST Act, it means the supply of goods or services or both, including digital products over a digital or electronic network.
- Electronic Commerce Operator
An electronic commerce operator means any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce.
To sum up, CGST is charged when a transaction is made within a state or within a union territory. A portion of the tax charged goes to the centre and another portion goes to the respective state or union territory. While a portion of IGST also gets apportioned to the centre, it is always charged as a whole, unlike CGST along with SGST or UTGST.