The Goods and Services Tax system in India has three main components, SGST, UTGST, and IGST. Each one applies to different kinds of transactions. Businesses and buyers must know which tax applies, who pays it, and where the revenue goes.
Who Pays Under SGST
SGST applies to transactions that take place within a state. The state government levies this tax. The buyer pays SGST along with CGST when goods or services are supplied within the same state. The revenue goes directly to the respective state government. For example, when a seller in Mumbai sells goods to a customer in Mumbai, SGST applies.
Who Pays Under UTGST
UTGST applies to supplies within Union Territories that do not have their own legislatures. The Union Territory administration levies and collects this tax. Buyers in these Union Territories pay CGST along with UTGST on intra-UT supplies. The revenue stays with the concerned Union Territory. For example, when a business in Chandigarh sells goods to a customer in Chandigarh, UTGST applies.
Who Pays Under IGST
IGST applies to transactions that cross state or Union Territory borders. The Central Government levies and collects this tax. Buyers pay IGST on interstate supplies, imports, and exports. The Central Government later shares the revenue with the destination state or Union Territory. For example, when goods move from Maharashtra to Tamil Nadu or when goods are imported into India, IGST applies.
For Simple Understanding
UTGST works just like SGST but applies only in Union Territories without legislatures such as Chandigarh, Lakshadweep, Andaman and Nicobar Islands, Ladakh, and Dadra and Nagar Haveli and Daman and Diu. States and Union Territories with legislatures such as Delhi, Puducherry, and Jammu & Kashmir follow SGST instead. IGST covers all interstate transactions, whether they occur between states, between states and Union Territories, or between two Union Territories.
Both SGST and UTGST usually have the same tax rates. The difference lies in the authority that collects them. GST is always destination-based, which means the revenue goes to the state or Union Territory where the goods or services are consumed.
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Conclusion
SGST applies within states, UTGST applies within Union Territories without legislatures, and IGST applies across states or Union Territories and on imports and exports. This structure ensures fair distribution of revenue between the Centre, the states, and the Union Territories.