IGST vs CGST vs SGST: Difference, Meaning & Examples

Confused about the GST tax breakdown India on your invoices? Knowing when to apply IGST, CGST, and SGST is critical for compliance.

If you are a freelancer who has recently completed GST Registration Online, in this complete guide on IGST vs CGST explained India, we'll break down the differences, give you clear examples, and show you exactly what to put on your invoices.

What is IGST, CGST and SGST?

When the Goods and Services Tax was introduced in India, it replaced a complex web of older indirect taxes. To ensure both the Central and State governments receive their fair share of revenue, the system was divided into three primary components:

• CGST (Central Goods and Services Tax): Revenue collected by the Central Government.
• SGST (State Goods and Services Tax): Revenue collected by the State Government where the transaction takes place.
• IGST (Integrated Goods and Services Tax): Revenue collected by the Central Government for inter-state transactions, which is later apportioned to the destination state.

What is the Difference Between IGST and CGST?

The core CGST SGST IGST difference comes down to the location of the buyer and the seller.

CGST is always charged alongside SGST when you sell to someone in your own state. IGST is charged by itself when you sell to someone in a different state. You will never charge CGST and IGST on the same invoice item.

Intra-State Supply: CGST + SGST

An intra-state supply occurs when the location of the supplier and the place of supply are in the same state or union territory.

When CGST and SGST apply: If your business is registered in Maharashtra and you provide consulting services to a client also located in Maharashtra, this is an intra-state supply. You must split the total GST rate equally between CGST and SGST.

Inter-State Supply: IGST

An inter-state supply occurs when the supplier and the place of supply are in different states.

When is IGST applicable: If your business is in Karnataka and you sell software to a client in Delhi, this is an inter-state supply. Instead of splitting the tax, you charge the entire GST amount under a single head: IGST.

IGST vs CGST vs SGST Example

Let’s look at a practical intra-state vs inter-state GST example. Suppose you are a web developer based in Bangalore (Karnataka) offering a service worth ₹10,000. The standard GST rate for your service is 18%.

Scenario A: Client is in Karnataka (Intra-state)

• If seller and buyer are in the same state, GST is split into CGST + SGST.
• Base Value: ₹10,000
• CGST (9%): ₹900
• SGST (9%): ₹900
• Total Invoice Value: ₹11,800

Scenario B: Client is in Mumbai (Inter-state)

• If seller and buyer are in different states, IGST applies.
• Base Value: ₹10,000
• IGST (18%): ₹1,800
• Total Invoice Value: ₹11,800

Notice that the total amount the customer pays (₹11,800) remains exactly the same. Only the classification changes.

How GST Appears on an Invoice

When setting up your GST invoice IGST CGST SGST columns, you must clearly distinguish the taxes.

If you are using a GST Invoice Format in Excel, you should ideally have separate columns for CGST, SGST, and IGST. For intra-state bills, leave the IGST column blank. For inter-state bills, leave the CGST/SGST columns blank.

How to Calculate IGST, CGST and SGST

To summarize the calculation rules:

1. Determine the Base Price of your goods or services.
2. Determine the applicable GST slab (e.g., 5%, 12%, 18%, 28%).
3. Determine the Place of Supply.
4. If State = State, apply (GST Rate / 2) as CGST and (GST Rate / 2) as SGST.
5. If State ≠ State, apply the full GST Rate as IGST.

(Note: Businesses enrolled in the GST Composition Scheme cannot collect these taxes from their customers on invoices.)

What is UTGST (Union Territory GST)?

While most Indian states apply SGST for intra-state sales, Union Territories without their own legislature apply UTGST (Union Territory Goods and Services Tax) instead.

Union Territories applying UTGST:

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

(Note: Delhi and Puducherry have their own legislatures, so they apply SGST, not UTGST).

If you are located in Chandigarh and sell to a client in Chandigarh, you will charge CGST + UTGST instead of CGST + SGST. The rates and rules remain identical.

The Destination-Based Tax Principle

Understanding IGST vs CGST becomes much easier when you understand the fundamental principle of the GST system: GST is a destination-based consumption tax.

This means that the tax revenue must ultimately go to the State where the goods or services are consumed, not where they are manufactured or originated.

When an inter-state sale occurs (e.g., from Gujarat to Rajasthan), the seller in Gujarat charges IGST. They pay this IGST to the Central Government. The Central Government then keeps its share (equivalent to CGST) and transfers the remaining share (equivalent to SGST) to the destination state (Rajasthan). This ensures that the state consuming the goods gets the tax revenue.

Input Tax Credit (ITC) Set-off Rules

When you pay GST on your business expenses, you accumulate Input Tax Credit (ITC). You can use this ITC to pay off your outward GST liability (the tax you collected from your clients). However, the government has strict rules on how ITC can be cross-utilized between IGST, CGST, and SGST.

The ITC Utilization Hierarchy

You must follow this specific order when setting off your tax liabilities:

1. IGST Credit First: If you have IGST credit, you must use it completely before touching CGST or SGST credit.

   • Use IGST credit to pay off IGST liability first.
   • Use remaining IGST credit to pay off CGST liability.
   • Use remaining IGST credit to pay off SGST liability.

2. CGST Credit:

   • Use CGST credit to pay off CGST liability first.
   • Use remaining CGST credit to pay off IGST liability.
   • CRITICAL RULE: CGST credit CANNOT be used to pay SGST liability.

3. SGST Credit:

   • Use SGST credit to pay off SGST liability first.
   • Use remaining SGST credit to pay off IGST liability.
   • CRITICAL RULE: SGST credit CANNOT be used to pay CGST liability.

This cross-utilization block between CGST and SGST exists because they represent the revenues of two completely different government entities (Central vs State).

Common Mistakes to Avoid

• Charging IGST within your own state: This will cause mismatches in the government portal and your client will not be able to claim Input Tax Credit (ITC).
• Using SGST for a Union Territory: If you operate in a Union Territory without a legislature (like Chandigarh or Andaman), you apply UTGST instead of SGST.
• Rounding Errors: Make sure your fractional paise are rounded correctly to avoid filing discrepancies.

Frequently Asked Questions

What is the difference between IGST and CGST?
IGST (Integrated GST) is collected by the Central Government on inter-state sales (between two different states). CGST (Central GST) is collected by the Central Government on intra-state sales (within the same state) alongside SGST.

What is the difference between CGST and SGST?
Both apply to intra-state sales. CGST is the central government's share of the tax revenue, while SGST is the state government's share. They are always charged together at equal rates.

When is IGST applicable?
IGST is applicable on inter-state supply of goods or services, meaning the supplier and the place of supply are in different states or union territories. It also applies to imports and exports.

When do CGST and SGST apply?
They apply when the supplier and the place of supply are in the same state or union territory (intra-state supply).

Is IGST used for inter-state supply?
Yes, IGST is the only tax used for inter-state supply.

How is GST split in the same state?
If the total GST rate is 18%, it is split equally into 9% CGST and 9% SGST for transactions within the same state.

How do I calculate IGST, CGST and SGST?
Determine your state and your buyer's state. If they are the same, divide the total GST rate by 2 for CGST and SGST. If they are different, apply the full rate as IGST. You can use KaroTools' GST Calculator to do this instantly.

Which tax should be shown on a GST invoice?
If selling within your state, show both CGST and SGST columns on your invoice. If selling to another state, show only the IGST column. KaroTools Invoice Generator does this automatically.