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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  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

  3. palash says:

    you have shown in your example that sgst is 12% n cgst is 14%. id like to know how and when one will get to know of the bifuircation of the central n state gst percentage.

  4. S Joshi says:

    As per explanation/example one has to bear both sgst & cgst then how gst will reduce price ?? sure fooling the people and not only that trader has to pay double tax for one transaction, very complex gst formality !!

  5. pratik says:

    easy example…
    before this you buy let’s say silver for Rs.40000/- per k.g. and you pay 1% of Rs. 40000/- extra on as tax which is 400 so the cost of that 1 k.g. Silver is Rs.40400/-
    But now according to GST you are supposed to pay 4% as tax on the same thing. So now you pay 4 times more tax than you paid earlier.
    40000 X 4 /100 = 1600
    So you pay 40000+1600 = Rs.41600/- for the same amount of silver.

    Please tell me how is GST reducing the load on us.

  6. pratik says:

    This thing only helps the imposers to reduce their paper work.
    this doesn’t do any good to the regular people, we will be paying even more taxes than before and then “slaughtered like a chicken”.


    Hello Sudhir Sir,
    Thanks for clearing concept with example.
    But now there is one big confusion in my mind that simultaneously one has to bear both taxes as SGST and CGST as per your example ‘X’ and ‘Y’. and how rate will decided for both…

  8. Venkat Srinarayana Addanki says:

    In your example the end user Z is ultimately paying the more taxes than earlier or equal to previously paid then how GST is useful and how rates come down??

  9. Ajay M Pujara says:


    A very good article -with ‘useful’ information in a very illustrative & detailed manner, with ‘simplest’ expamples.

    Ajay M Pujara
    Baroda, Gujarat

  10. Ashok Aggarwal says:

    Yes Mr Shiv Kumar. The product value will be Rs 126/- with taxes if rates of SGST & CGST are 12% & 14% respectively.
    In case of sale to other state IGST will be charged.


    Yes Rajiv and the same is also given in the article also. I have taken the cost to consumer as rs.10.50 to explain the tax effect. Final cost will the same as mentioned by you.

  12. rajiv says:

    a nice explanation of CGST AND SGST, HOWEVER, THE COST TO FINAL CONSUMER WILL NOT BE RS1050000 RATHER IT WILL BE 1323000 i.e. inclusive of tax. Am i right? please clarify.
    thanks and regards

  13. Shiv Kumar says:

    Is that So ?????, than it will be more complicated……….you mean to say Rs. 100/- Basic Product Value + 12% Rs. 12/- SGST + 14% Rs. 14/- CGST and bill value will be 100+12+14 = 126/- ??

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September 2020