CGST (Central Goods and Service Tax)
CGST (Central Goods and Service Tax)
Under the pre-GST system, several taxes existed, including Service Tax, Central Excise, and State VAT. However, the GST law consolidates these into a single tax framework with three distinct parts: central GST (CGST), State GST (SGST), and Integrated GST (IGST).
Various Indian governments proposed the Goods and Services Tax (GST) multiple times before it was officially acted on July 1, 2017. The goal of implementing GST was to establish a unified tax system nationwide, known as 'One Nation One Tax.'
Categories of GST
GST replaced all earlier taxes in the country, now grouping them under the following classifications:
Central Goods and Services Tax
CGST’s full form refers to the Central Goods and Services Tax. CGST absorbed all taxes previously imposed by the central government. This includes central surcharges, central excise duty, and cess, as well as other central indirect taxes that were in place before.
State Goods and Services Tax
SGST encompasses all taxes previously imposed by state governments. This includes state indirect taxes such as sales tax, VAT, and state cesses and surcharges, among others.
Integrated Goods and Services Tax
IGST is charged for the transport of goods and services across state lines.
Certain products remain outside the scope of GST, with sales tax or VAT still applicable. These include petrol, alcohol, natural gas, diesel, and airline fuel.
Regarding services, GST does not apply to salaries, wages or electricity. Alcohol remains outside GST to control costs and consumption, while petrol remains a significant revenue source for state governments.
We will further understand CGST in detail.
What is CGST?
CGST, meaning Central Goods and Services Tax, is the portion of GST that goes to the central government when goods and services are supplied within a state.
CGST tax encompasses all previous central indirect taxes and is imposed by the central government on transactions within a single state's boundaries. The Central Goods and Services Tax Act of 2017 specifies that CGST applies nationwide, excluding Jammu and Kashmir as union territories have their own GST laws.
In practice, SGST and CGST are levied on transactions within a state. "Intrastate" refers to movements taking place within a single state.
The revenue from CGST goes to the central government, while SGST revenue is allocated to the state government.
For instance, an example of CGST would be a manufacturer creating goods in Maharashtra and selling them within the state. This trade would be subject to both SGST and CGST.
The revenue from CGST would go to the central government, while SGST profits would benefit Maharashtra's state government. Maharashtra has consistently led the states in GST collections, with Karnataka in second place.
In most situations, the total tax burden is evenly split. One half goes to the state government and the other to the central government. The GST Council determines these rates and meets as needed throughout the year, although not on a fixed schedule.
CGST Tax Slab Rates
| Slab Rates | Details |
|---|---|
| 5% | A 5% GST rate applies to various everyday items such as yoghurt, paneer, raisins, cashew nuts, and other nuts and fruits. The state government collects 2.5% of the tax on these goods, and the other 2.5% is designated as CGST. This tax rate encompasses many common household products. |
| 12% | A 6% rate represents the second GST bracket. It applies to various goods such as jams, citrus fruits, sausages, statues, 20-litre water containers, pots, geometry kits, jars, cutlery, printer ink, railway coaches, and wooden toys. This rate is divided evenly, with 6% allocated to SGST and CGST for each product. This category encompasses a significant portion of processed foods and other items. |
| 18% | Products like chocolates, bindis, soap, tripods, fountain pens, toothpaste, and some industrial intermediates fall within the 18% GST bracket. This rate is evenly split, with 9% directed to SGST and 9% to CGST. The Central Goods and Services Tax Act of 2017 contains a comprehensive list of items subject to this rate. |
| 28% | The 28% GST rate applies to caffeinated drinks, cigarettes, pan masala, motorcycles and cars, refrigerators, and air conditioners. This rate targets mainly luxury goods. The tax is evenly divided, with 14% allocated to SGST and 14% to CGST. |
| 3% | A 3% GST rate is applied to items like gold, coins, platinum, silver, and imitation jewellery. This tax is divided equally, with 1.5% allocated to both SGST and CGST. |
| 0.25% | Precious stones are subject to a 0.25% GST rate, split equally between SGST and CGST at 0.125% each. |
| 0% | Some goods are not subject to any tax, making them tax-free. This includes live animals such as cattle and swine, insects, birds, curd, fish, lassi, bananas, buttermilk, grapes, apples, sanitary napkins, human hair, and other similar items. |
CGST Rules
1. Supply Bill: If registered under the GST composition scheme, you must issue a supply bill for your transactions. This document details the transaction and is essential for proper accounting and tax compliance.
2. Tax Invoice: If registered for GST, you must issue a tax invoice for every taxable good or service you provide. The invoice is proof of the transaction and includes details like the buyer and seller's GSTIN, product description, and tax amounts.
3. Sequential Invoices: All invoices must be sequentially numbered and have a unique serial number. This helps maintain a clear record of all transactions and ensures proper tracking and compliance with GST regulations.
4. Equal CGST and SGST: CGST and SGST must be reported equally when filing taxes. For instance, if the GST rate is 12%, CGST would account for 6% and SGST for 6%. This ensures an even split of the tax burden between the central and state governments.
Conclusion
CGST was introduced to simplify the tax system by eliminating numerous indirect tax categories, such as service tax, luxury tax, VAT, central sales tax, etc. – bringing them all under one simplified compliance system.
About Tata AIG
It's important to understand that the CGST can significantly impact the cost of your health insurance plan. This is due to the tax applied to premiums, which can make a policy more or less affordable.
However, there's a silver lining: you can claim tax benefits under section 80D of the Income Tax Act for payments made for medical insurance policies.
A suitable health insurance policy is especially important for people with a pre-existing disease, as it helps cover the cost of ongoing treatments and medical care.
To secure a medical insurance policy that offers protection in unexpected medical emergencies, you can visit the Tata AIG website to explore various medical insurance plans.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
What are the documents required for CGST registration?
What are the documents required for CGST registration?
The documents required for CGST registration are: PAN Card Address Proof Aadhar Card Application forms Cancelled cheque
What is the objective of the CGST Act 2017?
The CGST Act aims to address several issues in the taxation system, including: Eliminating double taxation Removing the need for check posts Reducing heavy tax duties like octroi and entry tax Implementing a simplified compliance system The act was introduced to create a more efficient and unified taxation process.
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