SGST, short for State Goods and Service Tax, is one of the three main categories of Goods and Service Tax, i.e. (CGST, IGST, and SGST) and carries a concept of one tax one nation. SGST falls under the State Goods and Service Tax Act 2016.
The supplies under SGST do not include alcohol for human consumption. Furthermore, this levied tax comes under the State Goods and Services Tax (SGST) Act, 2017 and is governed by the same. This kind of tax is levied on the transaction value of the goods or services supplied as per section 15 of the SGST Act.
The transaction value is actually the price that is paid or payable for the said supply of goods or services. In a nutshell, as the name implies this tax is received by the State in which the goods or services are consumed and not by the state in which the goods are being manufactured.
- Before the concept of GST was introduced on 1st July 2017, several indirect taxes were levied both by the state and the center.
- Interstate sale of goods was taxed in the form of Central State Tax (CST) by the center.
- Different states used to follow different rules and regulations which was a big problem.
- Furthermore, there were some additional taxes as well such as entertainment tax, local tax, and octroi.
All these scattered taxes resulted in the lack of uniformity in taxation and became a major impediment to interior trade within the country. It also resulted in the mixing of taxes by the Centre and state government all of which often featured different tax rates.
Features of SGST
- SGST is levied and collected by the states on all goods and services supplied for consideration.
- The tax collected is deposited to the accounts of the respective state
- Each state has its separate SGST act under its State Goods and Service Tax Department. However, the basic features of the GST law for all the states like the charges, valuation, taxable event, measure, classification, etc would remain the same across the respective act of each state
- SGST is not applicable to the exempted goods and services as they do not come under the influence of GST. Furthermore, SGST is also not applicable where the aggregate annual turnover is less than the prescribed limit.
What is State Goods and Services Tax (SGST) with Example
Under GST, SGST is a type of tax levied on Intra State supplies of both goods and services by the State Government and will be regulated by the SGST Act.
An example of CGST and SGST
Let’s suppose Ayan is a dealer in Gurgaon who sold goods to Mahesh in Bangalore worth Rs. 20,000. The GST rate is 18% inclusive of the CGST rate of 9% and SGST rate of 9%. In such a case, the dealer collects Rs. 3600 of which Rs. 1800 will go to the Central Government and Rs. 1800 will be deposited to the Haryana Government.
Where SGST is Applicable?
The SGST/UTGST and other tax components like IGST and CGST applicability under GST depend on the supply nature of a given transaction. Talking about transactions, there can be two types of supply, viz. Intra-State Supply and Inter-State Supply.
Intra-State Supply is referred to any supply where the supplier and the place of supply reside in the same State or Union Territory. In such a case of supply of goods and services, a seller must collect both CGST and SGST. Once both the taxes are collected, the CGST part gets deposited with the Central Government. And the SGST gets deposited with the respective State Government.
Let’s understand this with an example: Gunjan Enterprises, a manufacturer in Rajasthan, supplies goods to Madhur Traders, a dealer in Rajasthan. Goods worth Rs 2,00,000 are supplied by Gunjan Enterprises after adding GST @ 18%. Since it is an intra-state supply, GST gets deposited to both Central and State Governments. But the total GST amounting to Rs 36,000 gets deposited equally into separate heads. This means Rs 18,000 gets deposited into the CGST account. And another Rs 18,000 gets deposited into the SGST part.
Well, Inter-State Supply happens in the of supply where the location of the supplier and the place of supply falls in these:
- Two different States
- 2 Different Union Territories
- A-State and a Union Territory
Furthermore, any supply taking place in a taxable territory, and which is not an Intra-State supply is also referred to as an Inter-State supply. The below-given are also treated as Inter-State supplies:
- Supplies to or by Special Economic Zones (SEZs)
- Goods or services imported to India
- Services or goods exported outside India
- Supply of goods or services to international tourists
- Hence, only IGST is levied and collected on the Inter-State supply of goods or services by the Central Government.
For instance, Satya Ltd, a manufacturer in MP, manufactures and supplies goods to Bhatia Traders, a dealer in Punjab. Goods worth Rs 1,00,000 are supplied by Satya Ltd after adding GST @ 18%. As it is a type of inter-state supply, GST gets deposited only to the Central Government. Therefore, the entire GST of Rs 18,000 gets deposited into the CGST head only.
SGST, CGST and IGST rates of some daily use items
|Daily usage items like tea, coffee (except instant), spices, edible oil, and sugar. Charcoal, necessary drugs, and Indian Sweets are also covered under this GST slab.||2.50%||2.50%||5%|
|Processed food and computers||6%||6%||12%|
|Hair oil, body soaps and toothpaste, capital goods, and industrial intermediaries.||9%||9%||18%|
|Luxury items, including luxury and posh cars, consumer durables like Air Conditioners and refrigerators, cigarette packs, aerated drinks, and high-end motorcycles||14%||14%||28%|
How Frequently are SGST rates revised?
The GST rates have been revised a number of times since the implementation of the Goods and Services Tax (GST). The latest rate revision came into effect in the 39th GST Council Meeting held on 14 March 2020. There have been a number of GST Council Meetings regarding certain rate revisions that were introduced later. You can keep an eye on the details of all types of GST and the rate revisions by visiting the official website, i.e. https://cbic-gst.gov.in/