In the GST bill, what is the meaning of SGST, IGST and CGST when there should be just one kind of tax to be levied?

In the context of the Goods and Services Tax (GST) in India, the division into Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), and Integrated Goods and Services Tax (IGST) is designed to streamline tax collection and ensure a balanced distribution of revenue between the central and state governments.

Central Goods and Services Tax (CGST)

• CGST is levied by the central government on the intra-state supply of goods and services, meaning transactions that occur within the same state245.
• The revenue collected from CGST goes directly to the central government.
• It is governed by the Central Goods and Services Tax Act, 2017.

State Goods and Services Tax (SGST)

• SGST is levied by the state governments on intra-state transactions, similar to CGST, but the revenue collected goes to the respective state government245.
• It is governed by the State Goods and Services Tax Act, 2017.
• Both CGST and SGST are applied simultaneously on intra-state transactions, with each tax not exceeding a combined rate of 14% for each type13.

Integrated Goods and Services Tax (IGST)

• IGST is levied on inter-state transactions, meaning the supply of goods and services across different states, as well as on imports into India245.
• It is collected by the central government but is later apportioned between the central and state governments based on a predetermined formula.
• IGST also applies to supplies made by Special Economic Zones (SEZs) and to exports, although exports are zero-rated4.

Why Multiple Types of Tax?

The reason for having multiple types of GST is to ensure that both the central and state governments receive their share of revenue. This system helps in maintaining the federal structure of India's governance, where both central and state governments have the authority to levy and collect taxes.

• Intra-State Transactions: For transactions within the same state, both CGST and SGST are levied to ensure that the central and state governments receive their respective shares.
• Inter-State Transactions: IGST is levied to facilitate seamless trade across states and to avoid the complexity of multiple state taxes. The revenue from IGST is then distributed between the central and state governments.

This multi-tiered system aims to create a unified market across India while respecting the fiscal autonomy of both central and state governments.