Many countries in the world have a single unified GST system, i.e. a single tax applicable throughout the country. However, in federal countries like Brazil and Canada, a dual GST system is prevalent, whereby GST is levied by both the federal and the state or provincial governments. India will also adopt a dual GST. Dual GST means GST where the centre and the states will simultaneously tax goods and services. The Centre will have the power to tax intrastate sales and states will be empowered to tax services. GST will extend to whole of India except the state of Jammu & Kashmir.
GST is a destination – based tax applicable on all transactions involving supply of goods and services. GST in India will comprise of:
1. Central Goods and Service Tax (CGST):
This GST is levied and collected by the Central Government.
2. State Goods and Service Tax (SGST):
This GST is levied and collected by the State Governments.
3. Union Territory Goods & Service Tax (UTGST):
This GST is levied and collected by the Union Territories.
4. Integrated Goods and Service Tax (IGST):
Inter state supplies of taxable goods/ services will be subject to Integrated Goods and Service Tax (IGST). IGST will approximately be a sum total of CGST and SGST/UTGST and will be levied by the centre on all inter-state supplies.
Input Tax Credit (ITC) of CGST and SGST/UTGST will be available throughout the supply chain, but cross utilization of credit of CGST and SGST / UTGST will not be possible, i.e. CGST credit cannot be utilized for payment of SGST / UTGST, and SGST / UTGST credit cannot be utilized for payment of CGST. However, cross utilization will be allowed between CGST / SGST/ UTGST and IGST, i.e. credit of IGST can be utilized for the payment of CGST / SGST / UTGST and vice versa.