The Central Goods and Services Tax (CGST) serves as a crucial part of India’s Goods and Services Tax (GST) framework, which the government officially implemented on July 1, 2017. This tax system unifies various indirect taxes previously imposed by the central and state governments into a single, streamlined structure. Here’s a detailed look at CGST, including its features, historical context, and operational details.
CGST stands for Central Goods and Services Tax. It represents the central government’s share of the tax on goods and services for transactions that occur within a single state. CGST applies to the intrastate movement of goods and services, meaning transactions that occur within the same state.
For example, if a manufacturer in Maharashtra sells products within Maharashtra, CGST and State Goods and Services Tax (SGST) will be levied. The central government allocates the revenue collected from CGST.
To understand CGST in context, it’s essential to recognize the three components of GST:
The government introduced CGST to replace various central indirect taxes, including:
Its primary goal is to streamline and simplify the tax system by eliminating multiple overlapping taxes and reducing the tax burden on businesses.
In the context of intrastate transactions:
The government introduced the Central Goods and Services Tax (CGST) as part of India’s Goods and Services Tax (GST) system to create a unified tax structure across the country. CGST is levied by the Central Government on the intra-state supply of goods and services, meaning transactions that take place within a single state.
The government structures GST into various tax slabs, and it includes CGST in these slabs. Here are the main slabs:
| Slab Rates | Details |
| 5% | The most commonly used products that are subjected to a 5% GST rate are cream and yogurt, paneer, cashew nuts, raisins, fruit, and nuts, and a few others. Now for these products, 2.5% goes to the state government, and the rest 2.5% goes to the CGST. Many household items are covered in this section. |
| 12% | 6% GST rate is the second slab of rates under GST. Citrus fruits, jams, sausages, 20l drinking water, statues, pots and jars, geometry box, cutlery, railway coaches, printer ink, wooden toys and more. Here for every product, 6% goes towards CGST and 6% goes towards SGST. This section covers processed food to a great extent. |
| 18% | Examples of products being taxed at 18% are bindis, chocolates, fountain pens, tripods, soap, toothpaste, and industrial intermediate products are therein this slab. Here 9% goes towards SGST, and 9% goes towards CGST. The central goods and services tax act 2017 has a full list of items. |
| 28% | Examples of products being taxed at a GST rate of 28% are cigarettes, caffeinated beverages, pan masala, motor cars and motorcycles, air conditioners, refrigerators etc. Mainly luxury items are covered in this sector. In this, 14% goes towards SGST, and 14% goes towards CGST. |
| 3% | Coins, gold, silver, platinum, imitation jewellery, etc, are taxed at 3%. Here 1.5% goes towards SGST and 1.5% towards CGST. |
| 0.25% | Precious stones are taxed at 0.25%, where 0.125% goes towards CGST and 0.125% goes towards SGST. |
| 0% | Some products are taxed at 0%. Basically, they are tax-free. Mammals, live swine, live bovine mammals, birds, insects, fish, curd, lassi, buttermilk, bananas, apples, grapes, human hair, and sanitary napkins, among others. |
The introduction of CGST marked a significant shift in India’s taxation system. Prior to GST, there were multiple indirect taxes such as Excise Duty, Service Tax, and Central Sales Tax levied by the Central Government. Here’s a brief look at the history and objectives:
The government implemented the Goods and Services Tax (GST) Act on July 1, 2017, to replace the old multi-layered taxation system. The GST framework aimed to simplify indirect taxation by merging various central and state taxes into a unified system. CGST replaced several central-level taxes, including Central Excise Duty and Service Tax, thus streamlining the tax structure.
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The government applies CGST when the supply of goods or services occurs within a single state. For example, a shop in Tamil Nadu selling goods to a customer in Tamil Nadu will charge CGST along with SGST.
Businesses can claim ITC on CGST paid on inputs, which means they can offset the CGST paid on raw materials against the CGST payable on the final product. This reduces the tax burden and encourages transparency.
Unlike the old system where different central taxes had varied rates, CGST ensures a single rate across India for a particular category of goods or services. This uniformity simplifies pricing and compliance for businesses.
CGST, as part of the GST system, is fully digitized. Businesses can file returns, make payments, and claim ITC online through the GST portal. This reduces paperwork and speeds up processes.
The GST law requires all businesses engaged in the supply of goods or services (above the prescribed turnover threshold) to register under GST and comply with CGST regulations. Small businesses can opt for a composition scheme, which offers simplified compliance at a lower tax rate.
CGST covers almost all goods and services, except for certain exempted goods and services like petroleum products and alcohol for human consumption, which the government taxes separately.
As the name suggests, the Central Government collects CGST. The system ensures efficient revenue collection, allowing the government to allocate funds towards national projects and development.
Despite the goal of “One Nation, One Tax,” the federal structure of India necessitates multiple GST categories. Both central and state governments need the ability to levy taxes, leading to:
CGST plays a vital role in the GST system by streamlining indirect tax collection and ensuring that central and state governments fairly distribute the revenue. It helps in eliminating the complexity of multiple taxes and creating a more efficient taxation system.
By unifying multiple taxes into one, CGST has not only simplified the indirect tax structure but also fostered a more streamlined and business-friendly environment across India. It ensures that businesses can operate more efficiently, with fewer tax-related hurdles and greater clarity.
CGST stands for Central Goods and Services Tax. It is the tax collected by the central government on intrastate transactions of goods and services.
CGST is collected by the central government, while SGST is collected by the state government. Both taxes are applied together on intrastate transactions.
CGST follows the same slabs as GST, including 5%, 12%, 18%, 28%, 3%, 0.25%, and 0%, depending on the product or service.
Different types of GST—CGST, SGST, and IGST—exist to accommodate the federal structure of India, allowing both central and state governments to levy taxes and manage revenues.
CGST simplifies tax compliance by replacing multiple central indirect taxes, reducing the overall tax burden and streamlining the taxation process for businesses.
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