CGST, SGST and IGST: How GST’s Dual Structure Works

Place of supply and ITC utilisation can be fact-specific and consequential to get right. This article is for general information and does not constitute tax advice.

The Taxes, and Who Levies Them

CGST is levied by the Centre on intra-state supply; SGST by each state alongside CGST; UTGST functions identically to SGST in the five UTs without their own legislature (Chandigarh, Ladakh, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu, Andaman and Nicobar); IGST is levied by the Centre on inter-state supply, imports, and exports, set equal to CGST plus SGST combined, with revenue apportioned to the destination state.

Which One Applies: Place of Supply

Intra-state supply (supplier and place of supply in the same state) gets CGST + SGST/UTGST, usually splitting equally: an 18% supply is 9% + 9%. Inter-state supply, imports, exports, and SEZ supplies get IGST at the full rate. The deciding factor is “place of supply” under Sections 10–13 of the IGST Act, not where the parties are registered. Note: the place of supply for intermediary services shifted from the supplier’s to the recipient’s location effective 30 March 2026, letting many such services qualify as zero-rated exports.

Getting this wrong is not a paperwork technicality — tax paid under the wrong head does not satisfy the correct liability. The correct tax must be paid separately and the wrong amount claimed back under Section 77 of the CGST Act, a slower path than getting it right the first time.

Cross-Utilisation of Input Tax Credit

Fixed by Sections 49A/49B of the CGST Act and Rule 88A: IGST credit clears IGST liability first, then any leftover can go to CGST and/or SGST in any proportion. CGST credit clears CGST first, then IGST only once IGST credit is exhausted — never SGST. SGST/UTGST credit clears SGST first, then IGST once exhausted — never CGST. The rule that matters most: IGST credit must be fully used before CGST or SGST credit is touched, and CGST/SGST can never cross-utilise against each other.

Worked example: ITC available — IGST ₹1,00,000, CGST ₹30,000, SGST ₹30,000. Output liability — IGST ₹40,000, CGST ₹40,000, SGST ₹40,000. IGST credit clears IGST liability, leaving ₹60,000; the taxpayer applies ₹40,000 to CGST and ₹20,000 to SGST; the ₹30,000 CGST credit carries forward unused (CGST already nil); the ₹30,000 SGST credit clears the remaining ₹20,000 SGST, leaving ₹10,000 SGST credit carried forward. Net cash outflow: nil.

Who Actually Receives the Money

CGST goes to the Centre, SGST/UTGST to the relevant state or UT, and IGST is collected centrally then settled to the destination state — GST being a destination-based tax, the state of consumption is entitled to the SGST-equivalent portion, even on a transaction that started elsewhere.