CGST vs SGST vs IGST: When Does Each Apply?
India's GST system has three types of tax — CGST, SGST, and IGST. Which one applies to any given transaction depends on where the seller and buyer are located. Applying the wrong GST type on an invoice is a common and costly mistake.
The Three Types Explained
| Tax | Full Form | Who Gets the Revenue | When Does It Apply? |
|---|---|---|---|
| CGST | Central Goods and Services Tax | Central Government | Intrastate transactions (seller and buyer in same state) |
| SGST | State Goods and Services Tax | State Government | Intrastate transactions (alongside CGST, same rate) |
| IGST | Integrated Goods and Services Tax | Centre, later divided | Interstate transactions (seller and buyer in different states), or imports/exports |
Intrastate (Same State): CGST + SGST
If you're a Mumbai-based consultant (Maharashtra GSTIN) billing a Mumbai-based company: charge CGST 9% + SGST 9% (total 18% GST). Each half goes to Central and Maharashtra state governments respectively.
Interstate (Different States): IGST
If the same Mumbai consultant bills a Bangalore-based company (Karnataka GSTIN): charge IGST 18%. The Central government collects the full IGST, then shares the state portion with Karnataka (the place of supply state).
Common GST Rates for IT/Services
| Service | GST Rate |
|---|---|
| IT services, software development, consulting | 18% (SAC 998313/998314) |
| Accounting, auditing | 18% |
| Legal services (to business) | 18% |
| Medical services (hospital) | Exempt |
| Export of services (foreign billing) | 0% (Zero-rated) |
What About Export of Services?
Services provided to foreign clients (zero-rated supply) attract 0% GST. However, you must be GST registered and file returns. You can claim a refund of any GST paid on inputs (like Adobe, AWS, software purchased).
ITC (Input Tax Credit) Between Types
ITC can be set off in a specific order:
- IGST ITC can offset CGST, SGST, or IGST liability (any order)
- CGST ITC can only offset CGST or IGST liability
- SGST ITC can only offset SGST or IGST liability
- CGST cannot be set off against SGST and vice versa