The introduction of the Goods and Services Tax (GST) in India marked a significant reform in the country’s indirect taxation system. GST replaced a complex web of taxes levied by both the Central and State Governments with a single tax that is levied uniformly across the country. The GST regime is built on the principles of “one nation, one tax” and aims to create a unified market, reduce tax evasion, and simplify compliance for businesses. Within the GST framework, CGST, SGST, and UTGST are key components. Each plays a distinct role in the collection and distribution of tax revenue. In this article, let us discuss the levy and collection of GST in India

Levy and Collection of GST in India

GST is levied on the supply of goods and services in India and operates under a dual tax system. This dual structure ensures both the Central and State Governments have the authority to levy and collect taxes. The primary taxes under GST include Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), and Integrated Goods and Services Tax (IGST). For Union Territories without legislatures, Union Territory Goods and Services Tax (UTGST) is applied.

Levy of GST

• GST is levied on all taxable supplies of goods and services, except alcoholic liquor for human consumption. Petroleum products like crude oil, petrol, diesel, natural gas, and aviation turbine fuel are temporarily excluded from GST.
• The charging provisions for GST are found in Section 9 of the CGST Act, 2017, Section 5 of the IGST Act, 2017, and corresponding state GST Acts.
• The supply of goods or services is the taxable event under GST. Supply includes sales, transfers, barters, exchanges, leases, and rentals made for consideration in the course of business.
• GST liability arises at the time of supply, which determines when goods or services are deemed to be provided. This timing helps calculate tax liability accurately.

Collection of GST

• For supplies within a state, GST is collected in two parts: CGST (central component) and SGST (state component). Both are levied at equal rates on the taxable value of the transaction.
• For supplies between states, IGST is levied, combining the rates of CGST and SGST. IGST is collected by the Central Government and distributed to the destination state after adjustments.
• In Union Territories without legislatures, CGST and UTGST are levied on intra-union territory supplies.
• In specific cases, the recipient of goods or services is liable to pay GST instead of the supplier. This is known as the reverse charge mechanism.

GST Compliance and Payment

• Registered taxpayers must issue tax invoices for every supply of goods or services, clearly mentioning the applicable CGST, SGST, or IGST.
• Taxpayers are required to file GST returns periodically, reporting their sales, purchases, and tax liabilities. Examples of returns include GSTR-1, GSTR-3B, and GSTR-9.
• GST payments are made electronically through the GST portal, enhancing transparency and efficiency.
• Businesses can claim ITC on the GST paid for inputs used in the production or supply of goods and services. This ensures that tax is levied only on value addition.

Central Goods and Services Tax (CGST)

Definition and Applicability

The Central Goods and Services Tax (CGST) is a tax levied by the Central Government on intra-state supplies of goods and services. It is governed by the Central Goods and Services Tax Act, 2017. CGST is applicable when the supplier and the recipient of goods or services are located within the same state or union territory.

Revenue Sharing

Revenue collected under CGST goes directly to the Central Government. It constitutes one-half of the GST charged on intra-state supplies, with the other half being collected as SGST or UTGST.

Key Features

• Uniform Rates: Rates under CGST are consistent across the country.
• Input Tax Credit (ITC): Businesses can claim ITC on CGST paid for inputs, which can be utilized against their CGST liability.
• Compliance Requirements: Filing CGST returns is mandatory for registered businesses, ensuring transparency and accountability.

Provisions Related to Levy and Collection of GST as per CGST Act, 2017

• Under Section 9(1) of CGST Act, 2017 there shall be levied a tax –
  • Called the Central Goods and Services Tax(CGST);
  • On all the intra-state supplies of goods or services or both, except on supply of alcoholic liquor for human consumption;
  • On the value determined u/s 15; and
  • At such a rate (maximum 20%,) as notified by the Central Government on recommendation of GST Council; and
  • Collected in such a manner as may be prescribed; and
  • Shall be paid by the taxable person.
• Under Section 9(2) of CGST Act, 2017 the CGST of following supply shall be levied with the effect from such date as notified by the Central Government on recommendation of GST Council
  • Petroleum crude
  • High speed diesel
  • Motor spirit (commonly known as petrol)
  • Natural gas
  • Aviation turbine fuel
• Under Section 9(3) of CGST Act, 2017 CGST is to be paid on reverse charge basis by the recipient on notified goods/ services or both (liability to pay tax by the recipient of supply of goods / services rather than supplier of goods/ services under forward charge)
• Under Section 9(4) of CGST Act, 2017 CGST on taxable supply of goods/ services to registered supplier from unregistered supplier is to be paid on reverse charge basis by the recipient.

Under Section 9(5) of CGST Act, 2017 E-Commerce operator is liable to pay CGST on notified intra-state supplies.

State Goods and Services Tax (SGST)

Definition and Applicability

State Goods and Services Tax (SGST) is levied by individual state governments on intra-state supplies of goods and services. It is governed by the respective State GST Acts. SGST is collected alongside CGST on intra-state transactions.

Revenue Sharing

The revenue from SGST is retained by the state where the supply occurs. This arrangement ensures that states receive their fair share of tax revenue to fund development activities and public services.

Key Features

• State-Specific Laws: While the framework is uniform, states can enact their SGST laws to address local requirements.
• Input Tax Credit: ITC on SGST paid can only be utilized against SGST liabilities.
• Support for Federalism: SGST empowers states to maintain their financial autonomy while adhering to a unified GST framework.

Provisions Related to Levy and Collection of GST as per SGST Act, 2017

Basis of charge as per respective SGST Act, 2017 (Most of the provisions are same as CGST Act, 2017)

Union Territory Goods and Services Tax (UTGST)

Definition and Applicability

Union Territory Goods and Services Tax (UTGST) is levied by the Central Government on intra-union territory supplies of goods and services. It applies in Union Territories without a legislature, such as Lakshadweep, Andaman and Nicobar Islands, Dadra and Nagar Haveli, Daman and Diu, and Chandigarh.

Revenue Sharing

Revenue collected under UTGST is retained by the respective Union Territory. In territories with a legislature, such as Delhi and Puducherry, SGST is applicable instead of UTGST.

Key Features

• Exclusive Application: UTGST is only applicable in Union Territories without legislatures.
• ITC Provisions: ITC on UTGST paid can only be utilized against UTGST liabilities.
• Uniform Framework: UTGST aligns with the principles of GST to ensure consistency in taxation across the country.

Provisions Related to Levy and Collection of GST as per UTGST Act, 2017

Basis of charge as per respective UTGST Act, 2017 (Most of the provisions are same as CGST Act, 2017)

Integrated Goods and Services Tax (IGST)

Definition and Applicability

The Integrated Goods and Services Tax (IGST) is levied by the Central Government on inter-state supplies of goods and services. It is governed by the Integrated Goods and Services Tax Act, 2017. IGST applies when the location of the supplier and the place of supply are in different states, union territories, or a state and a union territory. It also applies to imports and exports of goods and services.

Revenue Sharing

Revenue collected under IGST is shared between the Central Government and the state or union territory where the goods or services are consumed. This ensures that the destination state or union territory receives its share of tax revenue.

Key Features

• Single Tax for Inter-State Transactions: IGST eliminates the need for multiple taxes on inter-state transactions, simplifying the taxation system.
• Input Tax Credit (ITC): ITC on IGST paid can be utilized against IGST, CGST, and SGST/UTGST liabilities, providing flexibility to taxpayers.
• Cross-Border Transactions: IGST applies to imports and exports, ensuring seamless taxation for international trade.
• Destination-Based Taxation: IGST revenue is allocated to the destination state, promoting fairness in tax distribution.

Collection Mechanism

• Inter-State Supplies: IGST is collected by the Central Government and subsequently apportioned to the destination state or union territory.
• Imports: IGST is levied on imported goods and services along with applicable customs duties.
• Exports: Exports are zero-rated under IGST, allowing exporters to claim refunds for taxes paid on inputs.

Provisions Related to Levy and Collection of GST as per IGST Act, 2017

• Under Section 5(1) of IGST Act, 2017 there shall be levied a tax –
  • Called the Integrated Goods and Services Tax (IGST);
  • On all the inter-state supplies of goods or services or both, except on supply of alcoholic liquor for human consumption;
  • On the value determined u/s 15 of CGST Act, 2017; and
  • At such a rate (maximum 40%,) as notified by the Central Government on recommendation of GST Council; and
  • Collected in such a manner as may be prescribed; and
  • Shall be paid by the taxable person. Provided further that IGST will be imposed on goods/ services imported into India.
• Under Section 5(2) of IGST Act, 2017, the CGST of following supply shall be levied with the effect from such date as notified by the Central Government on recommendation of GST Council
  • Petroleum crude
  • High speed diesel
  • Motor spirit (commonly known as petrol)
  • Natural gas
  • Aviation turbine fuel
• Under Section 5(3) of IGST Act, 2017, IGST is to be paid on reverse charge basis by the recipient on notified goods/ services or both (liability to pay tax by the recipient of supply of goods / services rather than supplier of goods/ services under forward charge).
• Under Section 5(4) of IGST Act, 2017, IGST on taxable inter-state supply of goods/ services to registered supplier from unregistered supplier (agriculturist) is to be paid on reverse charge basis by the recipient.
• Under Section 5(5) of IGST Act, 2017, E-Commerce operator is liable to pay CGST on notified inter-state supplies

Taxes on Excluded Items

GST on Alcohol for Human Consumption

• GST not applicable
• VAT applicable as usual
• State Excise Duties applicable as usual

GST on Petroleum

• GST not applicable
• VAT applicable as usual
• State Excise Duties applicable as usual

Differences between CGST, SGST, IGST, and UTGST

Feature	CGST	SGST	IGST	UTGST
Governing Authority	Central Government	State Governments	Central Government	Central Government
Applicability	Intra-state transactions	Intra-state transactions	Inter-state transactions	Intra-union territory transactions
Revenue Beneficiary	Central Government	Respective State	Central and Destination State/UT	Respective Union Territory
ITC Utilization	Against CGST and IGST	Against SGST and IGST	Against IGST, CGST, and SGST/UTGST	Against UTGST and IGST
Legislation	CGST Act, 2017	Respective State GST Acts	IGST Act, 2017	UTGST Act, 2017
Focus Area	Central revenue	State revenue	Seamless inter-state transactions	UT revenue in absence of SGST

Interaction between CGST, SGST, UTGST and IGST

In the GST framework, CGST, SGST, IGST and UTGST work in tandem to ensure smooth taxation of intra-state and intra-union territory transactions. For example:

• If a good is sold within a state, both CGST and SGST are levied. Each tax component is calculated on the taxable value of the supply and credited to the respective government.
• In Union Territories without legislatures, UTGST replaces SGST to fulfill the same purpose.
• Businesses can use IGST credit to offset liabilities under IGST, CGST, and SGST/UTGST in a specified order.

The dual GST model ensures that the Centre and the states/union territories have access to revenue from intra-state supplies while avoiding double taxation.

Compliance and Filing

To ensure proper implementation of CGST, SGST, IGST and UTGST, the GST regime mandates:

• Registration: Businesses exceeding the prescribed turnover threshold must register for GST.
• Invoice Generation: Tax invoices must include details of CGST, SGST, IGST or UTGST as applicable.
• Filing Returns: Regular filing of GST returns (GSTR-1, GSTR-3B, etc.) is required to report tax liability and claim ITC.
• Payment of Tax: Payments are made online through the GST portal, ensuring transparency and accountability.
• Audit and Reconciliation: Annual reconciliation ensures consistency between reported turnover and tax payments.

Conclusion

The Levy and Collection of GST in India represent a comprehensive taxation framework that aims to simplify and streamline the country’s indirect tax system. GST, which came into effect on July 1, 2017, is a destination-based consumption tax applied on the supply of goods and services. The GST system replaced multiple indirect taxes like VAT, excise duty, service tax, and others, thereby reducing cascading taxes and creating a unified tax structure. The Levy and Collection of GST in India has fundamentally transformed the country’s tax structure, enhancing transparency, simplifying the taxation system, and promoting a unified market. The input tax credit mechanism and dual structure make the system more business-friendly and efficient in theory. However, it is still evolving, with the government making periodic adjustments to address operational challenges, particularly for SMEs and technical issues. While GST has led to a reduction in cascading taxes and streamlined interstate trade, its implementation continues to face challenges such as compliance costs, tax evasion, and the burden on small businesses. The future of GST in India will depend on improving the system’s efficiency, addressing implementation challenges, and ensuring effective enforcement to make it a more inclusive and growth-oriented taxation framework.