Topic Name – How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)
The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.
Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT.
While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.
Illustration I:
Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Bihar supplies steel bars and rods to a construction company which is also located within the same State for, say INR. 100, the dealer would charge CGST
of INR. 10 and SGST of INR. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a central government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay INR. 20 (INR. 10 + INR. 10) in cash as he would be entitled to setoff this liability against the CGST or SGST paid on his
purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II:
Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us
say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State
Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc.). But for paying
CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST
Bihar Tax Consultant is among the best and experienced tax consultant in Bihar. Having the years of experience in handling corporate law matters rights from beginning. We provide our guidance on various issue of Company Law , GST Act , Income Tax Act and other corporate Area.
About Tabish Ahmad
Tabish Ahmad is an Advocate at Patna High Court works in the area of Corporate Law and Corporate Litigations. Tabish represented many clients in complex legal issues focusing on corporate compliance. As An Advocate it is the duty towards nations to make the citizen and businessmen aware about laws and compliances in order to comply as law abiding citizens.
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