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Before the implementation of Goods and Services Tax (GST) on July 1, 2017, multiple attempts were made to introduce this tax system in India. GST aimed to consolidate the multitude of taxes into a singular tax structure, representing the ethos of “One Nation, One Tax.” Under GST, the old taxes are now three: CGST, SGST, and IGST. They are the Central, State, and Integrated Goods and Services Taxes.
What is Central Goods and Services Tax (CGST)
The Central Goods and Services Tax replaced central indirect taxes. These include central excise duty, surcharges, cess, and other similar taxes. The central government previously levied them. CGST applies to intrastate supplies of goods and services. This means transactions within a single state. The Central Goods and Services Tax Act, 2017, mandates CGST. It applies across India except Jammu and Kashmir. For intrastate transactions, both CGST and SGST are levied. CGST revenues go to the central government.
For example, if a product is made and sold in Maharashtra, then both CGST and SGST would apply. SGST proceeds go to the Maharashtra government. CGST proceeds go to the central government.
Rate Slabs Under GST
GST features multiple rate slabs to address different product categories:
| Tax Rate | Description | SGST | CGST |
|---|---|---|---|
| 5% | Essential household items like cream, yoghurt, paneer, and nuts | 2.5% | 2.5% |
| 12% | Processed food items, cutlery, and certain utilities | 6% | 6% |
| 18% | Toiletries like soap, toothpaste, and cosmetic products like bindis | 9% | 9% |
| 28% | Luxury goods and some consumables, like cigarettes and cars | 14% | 14% |
| 3% | Precious metals and imitation jewelry | 1.5% | 1.5% |
| 0.25% | Precious stones | 0.125% | 0.125% |
| 0% | Essential items like grains, live animals, and sanitary napkins | 0% | 0% |
The Inception and Objectives of CGST
CGST was created by the Central Goods and Services Tax Act, 2017. It aims to simplify the tax system. It seeks to end double taxation and high taxes, like octroi and entry tax. It also aims to make tax compliance easier.
Features of the CGST Act:
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CGST is levied on all intrastate supplies of goods and services.
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It authorizes self-assessment for taxpayers.
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Helps to alleviate the tax burden from multiple goods and services.
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Allows for penalties and fines in case of regulatory non-compliance.
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Enables recovery of taxes from defaulters through taxing arrears.
CGST Registration Documents:
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Application form
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PAN Card
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Aadhaar Card
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Canceled Cheque
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Address Proof
Understanding the Three Categories in GST
Despite GST's unifying goal, we need three taxes: CGST, SGST, and IGST. They are essential due to India's federal structure. This allows both the central and the state governments to levy and collect taxes. For intrastate trade, SGST and CGST are applicable. IGST is for interstate transactions and is the sum of CGST and SGST. In the case of the 18% GST rate slab, both CGST and SGST would be 9%.
Conclusion
GST has reformed Indian taxes. Understanding CGST is vital for all. It has streamlined the tax system. It has also provided clarity and uniformity to the procedures and rates across India's diverse markets.
