CGST is the acronym for Central Goods and Services Tax, which includes all the previous central indirect taxes. It is a tax imposed by the central government on the movement of goods and services within a state. In simpler terms, if you’re buying or selling something within your state, you’ll have to pay CGST.
If you’ve ever wondered why there are so many different taxes in India, you’re not alone! In the past, there were a lot of different taxes for different things, making it really complicated and confusing. But then the government came up with a solution – the Goods and Services Tax (GST).
GST was officially introduced on July 1, 2017, and it’s all about simplifying the tax system. The idea is to have just one tax for the whole country, making things easier for everyone.
Now, instead of having to deal with a bunch of different taxes, there are just three categories: Central Goods and Services Tax, State Goods and Services Tax, and Integrated Goods and Services Tax. It’s a big change, but it’s designed to make things simpler and more efficient for everyone.
What is CGST?
CGST, short for Central Goods and Services Tax, is a tax levied by the central government on the movement of goods and services within a state. It replaces all previous central indirect taxes. It applies to the entire country except for Jammu and Kashmir.
Both CGST and State GST apply to intrastate movement of goods and services. The revenues from CGST go to the central government, while SGST revenues go to the respective state government. For instance, if a manufacturer sells a product within Maharashtra, SGST goes to the state government’s funds and CGST goes to the central government’s funds.
Maharashtra has consistently been the highest collector of GST, followed by Karnataka. In most cases, the total tax liability is split in half and distributed equally between the state and central government. The GST Council sets the tax rates. It meets as needed for specific items a few times a year, without a regular schedule. The last meeting was in September 2019, and the rates mentioned are as of October 1, 2019.
| GST Slab Rate | Examples of Products | Distribution of Tax (SGST/CGST) |
| 5% | Cream, paneer, yoghurt, cashew nuts, fruit and nuts, raisins, and other household items | 2.5% / 2.5% |
| 12% | Citrus fruits, sausages, jams, drinking water, pots and jars, statues, geometry boxes, wooden toys, railway coaches, cutlery, printer ink, and processed food | 6% / 6% |
| 18% | Bindis, fountain pens, chocolates, tripods, toothpaste, soap, industrial intermediate products, and others listed under the Central Goods and Services Tax Act 2017 | 9% / 9% |
| 28% | Cigarettes, pan masala, caffeinated beverages, motor cars, air conditioners, motorcycles, refrigerators, and luxury items | 14% / 14% |
| 3% | Coins, silver, gold, imitation jewellery, platinum, and others | 1.5% / 1.5% |
| 0.25% | Precious stones | 0.125% / 0.125% |
| 0% | Mammals, live bovine mammals, live swine, birds, fish, insects, curd, buttermilk, lassi, bananas, grapes, sanitary napkins, apples, human hair, and others | N/A (tax-free) |
What Are the Benefits of Central Goods and Service Tax?
The implementation of this tax system simplifies the existing tax regime by replacing several taxes such as central excise duty, service tax, and VAT. This streamlined approach eases the compliance process for businesses, thereby reducing their expenses.
Moreover, this new system encourages economic efficiency by creating a unified national market for goods and services. This, in turn, enables businesses to take advantage of economies of scale and increases competition, which leads to a decline in prices, benefiting consumers.
Furthermore, this tax system expands the base of taxable transactions, increasing the government’s revenue. This additional revenue can be used for development expenditure and alleviates the burden of indirect taxes on taxpayers.
Finally, the new tax system aids in curbing inflation by decreasing the cost of production inputs. This, in turn, fuels overall economic growth.
