SGST Full Form: A Detailed Guide on State Goods and Services Tax

State Goods and Service Tax, or SGST for short, is one of the three primary types of goods and service tax, along with CGST, IGST, and SGST. It operates under the principle of one tax, one country. The State Goods and Service Tax Act of 2016 regulates the SGST. Human-consumed alcohol is not in the supplies covered by SGST. Additionally, this tax is governed by and falls under the State Goods and Services Tax (SGST) Act, 2017. Section 15 of the SGST Act stipulates that this type of tax gets imposed on the transaction value of the goods or services provided. The transaction value is the price paid or payable for the specified supply of goods or services. In summary, the state where the goods or services get consumed, not the state where they get manufactured, is the one that receives this tax, as the name suggests.

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Table of Content

What is SGST?

How is SGST Calculated?

Features of SGST

Benefits of SGST

Applicability of SGST

Steps to File and Pay SGST

Conclusion

FAQs

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What is SGST?

State Goods and Services Tax, or SGST for short, is a component of India's Goods and Services Tax (GST) system. The state government imposes the SGST tax on intrastate supplies of goods and services. The SGST grants state governments the authority to spend on various development-related initiatives separately. In contrast to IGST (Integrated Goods and Services Tax) and CGST (Central Goods and Services Tax), which are levied by the central government and apply to interstate transactions, SGST deals with intrastate transactions.

How is SGST Calculated?

The taxable value (Original Cost), which comprises the price of the goods or services and any extra fees like packing, freight, insurance, and other taxes (but not GST), is used to compute SGST.

Illustration: To demonstrate how SGST operates, consider the following example:

Assume that A in Madhya Pradesh purchases goods from B, a Raipur-based dealer, for Rs. 40,000. Assume that the applicable GST rate is 18%, which includes 9% SGST and 9% CGST. In this case, B will get Rs. 7,200 in taxes from A. The following summarizes the areas and methods in which SGST is applicable:

• CGST: 9% of the transaction value, or Rs. 3,600, will be collected by B as CGST. The Central Government will receive this sum.

• SGST: B will be paid Rs. 3,600 in SGST, equivalent to 9% of the total transaction value. The state government of Madhya Pradesh will receive this portion of the tax.

In conclusion, B will collect Rs. 7,200 in GST from A, of which Rs. 3,600 must paid to the Central Government as CGST, and the remaining Rs. 3,600 must lodged with the state government of Madhya Pradesh as SGST.

Features of SGST

The following are some of SGST's key characteristics:

• Intrastate Tax: Since the supplier and the supply location are in the same state or union territory, SGST applies to intrastate supplies. It guarantees that the state in which the consumption occurs collects taxes.

• Basis of Transaction Value: The price paid or due for the goods or services rendered provides the basis for SGST tax calculations. This method offers a simple way to figure out your tax liability.

• State-Specific Law: Every Indian state has its own SGST Act that regulates the levy and collection of SGST, such as the Telangana GST Act. States can modify their SGST legislation to meet their unique needs.

• Digital Compliance: By mandating that companies file returns and keep records electronically, the SGST system concentrates on digital compliance. This digital strategy streamlines the tax administration process, increases transparency, and decreases paperwork.

• State Tax Merger: The SGST unifies different state-level taxes into a single tax structure as the higher GST implementation. This consolidation creates a more business-friendly environment, streamlines the tax system, and lowers the complexity of compliance.

Benefits of SGST

The following outlines the advantages of SGST:

• Simplified Taxation: By removing the tax cascade effect, SGST streamlines the tax system. In the past, the same goods or services were subject to several taxes at various points in the supply chain, which resulted in a tax on tax. By guaranteeing that taxes get paid on the value addition, SGST simplifies and facilitates business dealings with the tax system.

• Revenue Sharing: The Central and State Governments receive an equitable share of tax revenue thanks to the SGST. The state where the goods or services get consumed keeps the tax collected under the SGST. This revenue-sharing system helps local development projects and supports state funding.

• Elimination of Multiple State Taxes: Multiple state-level taxes, including entry tax, entertainment tax, luxury tax, value-added tax, and others, were combined under the SGST after being introduced.  Businesses no longer have to worry about managing several state taxes thanks to this tax structure simplification.

• One Nation, One Tax: The "one nation, one tax" concept, which seeks to standardize and unify taxes nationwide, is aided by SGST. It implies that the tax code is uniform regardless of the state where a transaction occurs, which lessens the difficulty of compliance for companies operating across several states.

Applicability of SGST

Within the borders of each Indian state and Union Territory, the State Goods and Services Tax (SGST) is in effect. Since it is a state-level tax, the administrations of the individual states and Union Territories are responsible for enforcing it. The supply of goods and services that take place solely within a particular state or Union Territory is subject to the SGST. The state or Union Territory where the goods or services get consumed is responsible for collecting and administering the SGST in these situations. It guarantees that the state or Union Territory where the economic activity occurs keeps the taxes on intrastate supplies. It is important to remember that only IGST is collected for interstate transactions, whereas both SGST and CGST apply for intrastate transactions. Nonetheless, the SGST and CGST combined rates are always equivalent to the IGST rate.

The table below outlines a list of different products and associated SGST (State Goods and Services Tax) rates.

Goods	SGST
Tea	2.5%
Coffee (except instant)	2.5%
Edible oil	2.5%
Spices	2.5%
Sugar	2.5%
Coal	2.5%
Life-saving drugs	2.5%
Indian Sweets	2.5%
Processed food	6%
Computers	6%
Hair oil	9%
Soaps	9%
Toothpaste	9%
Capital goods	9%
Industrial intermediaries	9%
Luxury items	14%
Premium cars	14%
Consumer durables (AC, refrigerators)	14%

Steps to File and Pay SGST

It is a broad summary of the procedure. Note that particular steps may differ slightly based on the type of return you're filing (GSTR-1, GSTR-3B, etc.) and your state's GST portal.

Step 1: Open the GST Portal and login. Visit your state's GST portal, usually found as a subdomain of gst.gov.in. To log in, enter your GSTIN and password.

Step 2: Get to the Dashboard for Returns. After logging in, locate the dashboard or "Returns" section.

Step 3: Choose the Return Type. Select the appropriate return type depending on your business and the filing period. Typical return formats include:

• GSTR-1: Outgoing Supply Details.

• GSTR-3B: Incoming and outgoing supply summary return.

• GSTR-4: Taxpayer for composition levy.

• GSTR-9: Annual Report.

Step 4: Get the return data ready. Compile the required data, including purchase orders, invoices, and tax computations. To prevent inconsistencies, make sure that data entry is accurate.

Step 5: Complete the Return Form. Fill out the online return form with the necessary information. It comprises:

• Purchases and sales

• Credit for input taxes

• Liability for output taxes

• Additional necessary information

Step 6: Verify and submit the return. Check the completed return for any mistakes. When you are content with it, go ahead and submit the return. You might need to create an Electronic Verification Code (EVC) or a Digital Signature Certificate (DSC) for verification purposes.

Step 7: Create a Payment Challan. Make a challan to remit the payment if you have a net tax obligation. Use approved banking methods to complete the transaction.

Conclusion

The state government imposes the SGST tax on intrastate supplies of goods and services. The SGST grants state governments the authority to independently spend on a range of development-related initiatives. In contrast to IGST (Integrated Goods and Services Tax) and CGST (Central Goods and Services Tax), which are charged by the central government and apply to interstate transactions, SGST deals with intrastate transactions. Understanding the basics of SGST and the filing rules applicable to it will keep you on the right side of the law. 

FAQ

Q1. What is the full form of SGST?

SGST stands for State Goods and Services Tax.

Q2. Who is liable to pay SGST?

SGST must paid by companies and individuals who transact in intrastate goods and services.

Q3. What are the different types of supplies under SGST?

Taxable supplies of goods and services, exempt supplies, and zero-rated supplies within the same state are all considered types of supplies under the SGST.

Q4. What are the deadlines for filing SGST returns?

SGST return filing deadlines differ according to the type of return. GSTR-1, for instance, needs to be filed by the eleventh of the subsequent month, whereas GSTR-3B is due by the twentieth.

Q5. Can I utilize SGST credit for CGST liability?

To offset SGST liabilities, the SGST credit can only be applied to CGST liabilities.

Q6. How frequently are SGST rates revised?

The Goods and Services Tax (GST) rates have numerous revisions since instated. The most recent rate change was enacted at the 39th GST Council Meeting on March 14, 2020. Subsequent Council meetings discussed additional rate revisions. The Central Board of Indirect Taxes and Customs, Government of India, has an official website where you can follow any changes to rates or GST.  

Q7. Is SGST compulsory?

Businesses can pay the standard GST rate instead of the Composition Scheme, which is optional. CGST and SGST must paid at a reduced rate of 1% each under the Composition Scheme.

Q8. Is SGST given to the state government?

Both CGST and SGST must collected from the buyer in intrastate transactions. The Central Government collects the CGST, whereas the State Government collects the SGST. An interstate supply occurs when the supplier and the point of supply are in different states.