What Are the Types of GST in India?

In a country as vast and diverse as India, managing taxes used to be a tangled web of multiple levies imposed at different stages by different authorities. But in 2017, everything changed. The introduction of the Goods and Services Tax (GST) redefined how India approached indirect taxation - bringing in simplicity, transparency, and uniformity.

Think of GST as the CEO of all indirect taxes - a single, decisive leader that replaced a complex array of state and central taxes like VAT, excise duty, service tax, and octroi. This new system has made tax compliance easier not only for large enterprises but also for startups, freelancers, and small business owners who are the backbone of India’s economy.

For aspirational professionals and responsible citizens, GST isn’t just a policy change - it’s a financial literacy tool. It empowers consumers and businesses alike to understand what they’re being charged for, claim credits accurately, and make smarter financial decisions in a fast-evolving economy.

At its core, GST is a value-added tax applied to the supply of goods and services meant for domestic consumption. It’s a destination-based tax, meaning the revenue goes to the state where the end user resides - bringing a more equitable system for tax collection. This not only helps avoid tax-on-tax but also facilitates the creation of a single national market.

But here's the catch: While GST is unified in its goal, India’s federal structure still requires a mechanism to share tax revenue between the Centre and the States. This has led to the introduction of different types of GST, each designed to account for where and how a transaction takes place.

So, if you’ve ever looked at an invoice and wondered why it includes CGST, SGST, or IGST - this article will demystify it all.

Let’s dive into the different types of GST, understand how they work, when they apply, and why it matters to you as a young Indian professional, entrepreneur, or taxpayer

Overview of GST and Its Key Components

GST stands for Goods and Services Tax – a destination-based tax levied on every value addition across the supply chain. This means the tax revenue goes to the state where the goods or services are finally consumed, not where they are produced.

Instead of having a single uniform tax, GST in India is structured into four distinct components to accommodate the federal nature of our country. These are:

1. CGST (Central Goods and Services Tax)
2. SGST (State Goods and Services Tax)
3. IGST (Integrated Goods and Services Tax)
4. UTGST (Union Territory Goods and Services Tax)

Each component has a specific use-case and implication depending on the transaction’s geography.

Additional Read: EPF vs EPS – Key Differences Explained for Better Retirement Planning | m.Stock

What Is IGST and When Does It Apply?

IGST or Integrated Goods and Services Tax is levied on interstate transactions, when goods or services are supplied from one state to another or in the case of imports and exports.

For example, if a Bangalore-based clothing brand sells a bulk order to a retail store in Mumbai, IGST will apply. The collected IGST is then split between the Centre and the destination state (in this case, Maharashtra), ensuring fair revenue sharing.

Why IGST Matters to You:

• If you're a freelancer offering services to clients across India or abroad, you might be charging IGST.
• E-commerce sellers need to understand IGST since goods are often sold across state borders.
• All imports into India attract IGST, which directly impacts pricing for businesses and consumers alike.

Understanding SGST, CGST & Their Differences

Whenever a transaction takes place within a single state, CGST and SGST come into play. These two taxes are levied simultaneously and equally on intrastate sales.

Let’s say you run a graphic design studio in Delhi, and you provide services to a client also based in Delhi. The invoice you raise will include:

• CGST – collected by the Central Government
• SGST – collected by the Delhi state government

If the applicable GST rate is 18%, then 9% will be CGST and 9% will be SGST.

Difference Between CGST and SGST:

Why it matters:

Understanding the split between CGST and SGST is crucial for:

• Filing accurate GST returns
• Claiming input tax credit (ITC)
• Avoiding penalties during audits

Point to Note: You cannot use CGST credit to pay SGST liability and vice versa. However, IGST credit can be used to pay either CGST or SGST, making it more flexible.

What Is UTGST and Where Is It Applicable?

While most of us are familiar with Indian states, Union Territories (UTs) operate differently. UTGST, or Union Territory Goods and Services Tax, is applicable to intra-UT transactions – when both buyer and seller are in the same Union Territory.

It works similarly to SGST but is used in the following Union Territories:

• Andaman and Nicobar Islands
• Chandigarh
• Dadra & Nagar Haveli and Daman & Diu
• Lakshadweep
• Ladakh

For instance, if you run a digital marketing firm in Chandigarh serving local businesses, CGST and UTGST will be applicable to your invoices, instead of SGST.

Why it matters:

If you’re setting up operations or clients in UTs, you need to register under UTGST and understand its compliance requirements.

Pro Tip: For the purposes of GST, Delhi and Puducherry, despite being UTs, have legislatures and hence follow the SGST model instead of UTGST.

Why Understanding Types of GST Is a Financial Skill You Should Master

As a young, smart working Indian or business owner, understanding what different types of GST are – CGST and SGST, IGST, and UTGST – is not just about tax compliance; it’s about financial literacy. Whether you're launching a startup, selling handmade crafts on Instagram, or offering tech services to clients abroad, being GST-smart gives you a competitive edge.

Here's a quick recap:

Take Action:

• Register for GST if your turnover exceeds ₹40 lakh for goods or ₹20 lakh for services (₹10 lakh for NE states).
• Use digital tools to automate filing and calculations.
• Understand input credit mechanisms to avoid paying more tax than necessary.

Stat Snapshot: According to official data released by the Ministry of Finance, India's Goods and Services Tax (GST) collections in April 2025 reached a record high of ₹2.37 lakh crore, marking a 12.6% increase compared to April 2024. This shows increasing compliance and integration of businesses into the formal economy.

As India's economy becomes increasingly digital and interconnected, knowledge about the types of GST is no longer optional - it’s essential. Start small, ask questions, and take the time to understand your tax responsibilities. It’s the first step to managing and growing your wealth responsibly.

Additional Read: Tax Guide for Investors & Traders in India | Mirae Asset