CGST vs SGST: What is the Difference?
taxDefinition
CGST (Central GST) is the portion of GST collected by the Central Government, while SGST (State GST) is collected by the State Government on intra-state supply of goods or services. Both are charged at equal rates that together make up the total GST rate. For inter-state transactions, IGST (Integrated GST) is charged instead, which combines both CGST and SGST.
Detailed Explanation
When you buy a product within the same state (intra-state), you pay both CGST and SGST, with each being half of the total GST rate. For example, at an 18% GST rate: 9% goes to the Central Government as CGST and 9% goes to the State Government as SGST.
When a business sells to a buyer in a different state (inter-state), IGST applies at the full rate. The IGST revenue is then shared between the Central and State governments based on the destination state.
From a business owner's perspective, the tax names on your invoice matter: correctly classifying CGST + SGST (intra-state) vs. IGST (inter-state) is legally required for GST compliance and affects your Input Tax Credit (ITC) eligibility.
Side by side: intra-state and inter-state sales
A shop in Hyderabad sells a ₹50,000 laptop at 18% GST to a customer in Hyderabad. GST is ₹9,000: ₹4,500 CGST goes to the Centre and ₹4,500 SGST goes to Telangana. If the shop ships the same laptop to a customer in Bengaluru, the invoice shows ₹9,000 IGST instead.
The customer pays the same total either way. What changes is which tax heads appear on the invoice and which government account the money first reaches. The GST Calculator splits any amount into CGST and SGST for you.
The place of supply decides it
Whether a sale is intra-state or inter-state depends on the 'place of supply' rules, not just where the seller sits. For goods it is generally where delivery ends. For services the rule varies by type, for example the location of the recipient for many B2B services. Getting this wrong means charging the wrong tax head and can delay your customer's input credit.
Union territories without a legislature use UTGST in place of SGST, but the principle of splitting the rate in half is the same.
How input credit flows between CGST, SGST and IGST
Credit of IGST can be used first against IGST and then against CGST and SGST. Credit of CGST can be used against CGST and IGST, and credit of SGST against SGST and IGST. CGST credit cannot be used to pay SGST and vice versa. This is why businesses that sell across state lines need tidy records of the tax head on every purchase invoice.
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