Goods & Service Tax (GST) – One Question A Day by CA Sudhir Halakhandi – PART 2  

Q.2:There will be two Taxes under proposed Goods and Service tax in India, First State Goods and Service Tax (SGST) and Second one is CGST and as I understand If X of Mumbai sells Goods to Y of Mumbai (or any other city of Maharashtra) will have to pay State Goods and Service Tax (SGST) and if X of Mumbai sells Goods to Y of Jaipur (or any other city outside Maharashtra) will Pay Central Goods and Service Tax (CGST). Am I right Sir? If not then please explain the proposed system with the help of suitable example.


Goods and Service tax which is going to be introduced in India is a Tax to be collected by states and centre both on a single transaction so if X of Mumbai sells Goods to Y of Mumbai then both SGST and CGST will be applicable on this transaction

Try to understand this with the help of an Example:-

If X of Mumbai sells Goods to Y of Mumbai for Rs. 10 Lakhs and suppose the rate of Tax under SGST is 12% and CGST is 14% then X will collect and deposit Rs. 1.20 as SGST and Rs.1.40 Lakhs as CGST from Y.

Now take this sale to second stage of sales:-

If Y of Mumbai sells the same Goods to Z of Mumbai for Rs. 10.50 Lakhs then he will collect a sum of Rs. 1.26 Lakhs as SGST and Rs. 1.47 as the CGST. Now he will deposit Rs. 6000.00 as SGST (Rs. 1.26 collected from Z – Rs.1.20 input credit from his purchases from X) and Rs. 7000.00 as CGST (Rs.1.47 Collected from Z – Rs. 1.40 Lakhs input credit from his purchases from X).

Now you can cross check the total tax collected by State is Rs. 1.26 Lakhs i.e. 12% of Rs. 10.50 Lakhs and by centre is Rs. 1.47 Lakhs i.e. 14% of Rs. 10.50 Lakhs. Rs. 10.50 is the cost to the consumer and he has paid Rs.1.26 Lakhs as SGST and Rs. 1.47 as CGST which was collected and deposited by X and Y at different stage of sales. It is also clear from this example that the input credit of SGST can be taken against the SGST and input credit of CGST can be taken against the CGST.

This Example is sufficient to show that how both the Centre and State will collect tax on a same transaction of Sale but this is given here for very basic knowledge of GST and we will take it to more complicated transactions in coming days to understand the proposed Goods and service tax in a better way.

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22 responses to “SGST & CGST – Can both be levied on same Transaction?”

  1. ANAND PRIYA says:

    Its worst then the LAGAAN , our ancestors used to pay….as they have to just pay once in a year……GST (HOW FOOLISHLY WE ARE COMPELLED TO PAY ALMOST DOUBLE THE AMOUNT) is being charged on every thing every second every where……it is purely a LOOT BY THE GOI.

  2. SAmpath says:

    I think that if x&Y are from same state then they should be collecting SGST/CGST and if It is from Different states Then they should be collecting IGST But Why they are levying Two taxes when they only one tax is to be paid under GST

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