SGST CGST IGST UTGST: 4 GST Tax Components Explained (2026)

The Goods and Services Tax (GST) replaced a fragmented web of central and state indirect taxes — including Excise Duty, VAT, Service Tax, CST, and Octroi — with a unified tax system effective 1 July 2017. However, despite being called a single tax, GST is actually a dual tax structure designed to respect India's federal fiscal architecture, where both the Centre and States have the constitutional right to levy taxes on goods and services.

This dual structure means that every GST invoice in India must identify the correct tax components among four possible types: CGST, SGST, IGST, and UTGST. Applying the wrong tax type is one of the most common compliance errors — it creates mismatches in GSTR-1 and GSTR-3B, triggers ITC reversal demands, and in severe cases requires the supplier to pay the correct tax while also initiating a refund of the incorrectly paid tax.

The Constitutional Basis: India's Dual GST Structure

India's Constitution (post the 101st Amendment Act, 2016) grants both Parliament and State Legislatures the concurrent power to levy GST on supplies of goods and services. To implement this:

• Parliament enacted the CGST Act, 2017 — which levies Central GST on all intra-state supplies and authorizes IGST on inter-state supplies.
• Each State Legislature enacted its own SGST Act (e.g., Maharashtra GST Act, Karnataka GST Act) — which mirrors the CGST Act and levies State GST on intra-state supplies within that state.
• Parliament enacted the IGST Act, 2017 — which levies Integrated GST on all inter-state supplies, imports, and exports.
• Parliament enacted the UTGST Act, 2017 — which applies to Union Territories without their own legislature, substituting SGST for those territories.

CGST: Central Goods and Services Tax

CGST is levied by the Central Government on all intra-state supplies of goods and services. It is always charged alongside SGST or UTGST — never alone — and is always exactly half the total GST rate. Revenue collected under CGST goes entirely to the Consolidated Fund of India (the Central Government's treasury).

For example, on a supply taxable at 18% GST within the same state: the invoice shows 9% CGST + 9% SGST. The 9% CGST goes to the Centre. The 9% SGST goes to the State. Both are collected by the supplier and remitted separately.

SGST: State Goods and Services Tax

SGST is levied by the State Government on intra-state supplies. It is governed by the individual state's SGST law but mirrors the CGST Act in structure and rate. Revenue collected under SGST goes to the State Consolidated Fund of the state where the supply is made.

SGST applies in all 28 States and 3 Union Territories with their own legislature: Delhi, Puducherry, and Jammu & Kashmir.

IGST: Integrated Goods and Services Tax

IGST is levied by the Central Government on:

• Inter-state supplies (supplier and Place of Supply are in different states)
• Imports of goods and services into India
• Exports (zero-rated — IGST is either not charged or refunded)
• Supplies to SEZ units (zero-rated)

The IGST rate equals the full combined GST rate (e.g., 18% IGST = 9% CGST + 9% SGST combined). The Centre collects the entire IGST amount and then distributes the SGST portion to the destination state through the IGST settlement mechanism under Section 17 of the IGST Act. This ensures that GST revenue is earned by the state where consumption occurs — not where production occurs.

UTGST: Union Territory Goods and Services Tax

UTGST functions identically to SGST but applies in the five Union Territories that do not have their own legislature:

• Chandigarh
• Dadra and Nagar Haveli and Daman and Diu (merged UT)
• Andaman and Nicobar Islands
• Lakshadweep
• Ladakh

Revenue from UTGST goes to the UT administration. The three UTs with their own legislature — Delhi, Puducherry, and Jammu & Kashmir — use their own SGST laws and collect SGST (not UTGST). This distinction is important: a supplier making an intra-UT supply in Chandigarh charges 9% CGST + 9% UTGST, while a supplier in Delhi charges 9% CGST + 9% SGST (Delhi GST).

Place of Supply Rules: The Core Determinant of Tax Type

The Place of Supply (PoS) is the legally defined location where a supply is deemed to occur. It determines whether a transaction attracts CGST/SGST or IGST. The rules are defined in:

• Section 10 of the IGST Act — Place of Supply for goods in domestic transactions.
• Section 12 of the IGST Act — Place of Supply for services in domestic (India-to-India) transactions.
• Section 13 of the IGST Act — Place of Supply for services involving import or export (cross-border services). export const dynamic = 'force-static';

For most B2B transactions involving goods:

• If goods are delivered within the same state: PoS = location of delivery → Intra-state → CGST + SGST
• If goods are delivered to another state: PoS = destination state → Inter-state → IGST
• For services (Section 12): PoS is generally the location of the registered recipient for B2B transactions. For B2C services (unregistered customers), PoS is the location of the service provider.

GST Tax Calculation Examples

How Tally Prime Auto-Determines CGST/SGST vs IGST

One of Tally Prime's most valuable GST features is automatic tax type determination based on GSTIN state codes. Here is how it works:

1. Company GSTIN state code: The first two digits of your company's GSTIN represent your state. For example, a Maharashtra GSTIN starts with 27, a Karnataka GSTIN with 29, and a Delhi GSTIN with 07.
2. Supplier/Customer GSTIN state code: When you enter a vendor or customer ledger with a GSTIN, Tally reads the first two digits and identifies their state.
3. Automatic comparison: When you create a sales or purchase voucher, Tally compares the company's state code with the counterparty's state code. If they match → CGST + SGST. If they differ → IGST.
4. UTGST handling: For suppliers/customers with GSTINs starting with UT state codes (e.g., 04 for Chandigarh, 35 for Andaman & Nicobar), Tally applies CGST + UTGST instead of CGST + SGST when the supplier and buyer are both within that UT.

This means that correct GSTIN entry in every ledger master is not just good practice — it is the mechanism by which Tally Prime ensures tax compliance automatically. A missing or incorrect GSTIN will result in the wrong tax being applied, leading to mismatches in GSTR-1 and GSTR-3B.

Common GST Tax Split Errors and How to Avoid Them

• Applying CGST/SGST on an inter-state invoice: This is the most common error. It results in state receiving tax that belongs to the destination state. Correction requires issuing a credit note (CGST/SGST) and a revised invoice (IGST), which must be declared in GSTR-1 amendments.
• Applying IGST on an intra-state supply: This means the Centre collects tax that the State was entitled to. The State must file a refund claim for its SGST share, and the taxpayer must amend the invoice and GSTR-1.
• Using SGST for UTGST UTs: If your supplier is in Lakshadweep or Chandigarh, their applicable tax is CGST + UTGST, not CGST + SGST. Applying SGST in such cases will fail the GSTIN validation check on the portal.
• Place of Supply misidentification in services: For services, the PoS rules are more nuanced than for goods. Always verify using Section 12 or Section 13 of the IGST Act before raising a service invoice to an out-of-state customer.

Automate GST-Correct Purchase Invoice Entry with TrulyInvoice

On the purchase side, the risk of incorrect CGST/SGST/IGST recording is highest when manually entering vendor invoices. A typographic error in the supplier GSTIN, or a failure to update the GSTIN in the vendor ledger master, causes Tally to apply the wrong tax split. This results in ITC being recorded under the wrong ledger — creating reconciliation problems when the GSTR-2B data (which reflects the correct tax split from the supplier's GSTR-1) is imported into Tally.

TrulyInvoice eliminates this risk:

• TrulyInvoice's OCR engine reads the supplier's GSTIN directly from the invoice PDF, along with the CGST, SGST, and IGST amounts as printed on the invoice.
• It validates the GSTIN's structure (including the embedded state code) using a checksum algorithm before importing to Tally.
• The extracted tax amounts (CGST, SGST, or IGST) are mapped to the correct Tally ledgers based on the invoice's actual tax split — not inferred, but read directly from the source document.
• The result is a purchase register in Tally Prime where every invoice's tax split exactly matches what the supplier has declared in GSTR-1 — making GSTR-2B reconciliation seamless.

TrulyInvoice is available for plans starting at ₹399/month. For any business that wants to eliminate GST tax split errors in its purchase bookkeeping and streamline GSTR-2B reconciliation in Tally Prime, TrulyInvoice is the most direct and cost-effective solution.