CGST, SGST and IGST Explained with Examples

The difference between CGST, SGST and IGST confuses many new business owners, yet it shapes every invoice they raise. India's GST is a dual tax: both the centre and the states tax the same supply. For a sale within a state, the tax is split into Central GST (CGST) and State GST (SGST). For a sale across states, a single Integrated GST (IGST) is charged and later shared between the centre and the destination state. This explainer covers when each applies, how the current rate slabs split, how credits are set off and the errors that cost businesses money.

The four GST components

Component	Levied by	When it applies
CGST	Central Government	Intra-state supplies, together with SGST or UTGST
SGST	State Government	Intra-state supplies within a state (or a UT with legislature such as Delhi, Puducherry, Jammu and Kashmir)
UTGST	Central Government for UTs	Intra-UT supplies in union territories without a legislature, such as Chandigarh, Ladakh, Lakshadweep
IGST	Central Government, shared with destination state	Inter-state supplies, imports, exports and supplies to SEZ

Whether a supply is intra-state or inter-state depends on the location of the supplier and the place of supply. If you are unsure how to decide that, read our explainer on place of supply under GST.

How the current rate slabs split

From 22 September 2025, GST rates were rationalised into two main slabs of 5% and 18%, with a special 40% rate for a short list of sin and luxury goods. Most items earlier taxed at 12% and 28% moved into these slabs, and compensation cess was largely phased out. The split between centre and state stays equal:

Total GST rate	Intra-state: CGST + SGST	Inter-state: IGST
5%	2.5% + 2.5%	5%
18%	9% + 9%	18%
40%	20% + 20%	40%

Special rates such as 0.25% and 3% for certain stones and precious metals continue. Always confirm the rate for your HSN code in the latest rate notification.

Worked examples

Example 1: intra-state sale of goods

A Jaipur electronics dealer sells goods worth ₹50,000 to a customer in Jodhpur. Both are in Rajasthan. At 18%: CGST at 9% is ₹4,500 and SGST at 9% is ₹4,500. Invoice total: ₹59,000.

Example 2: inter-state sale of goods

The same dealer sells goods worth ₹50,000 to a buyer in Ahmedabad. At 18% IGST, tax is ₹9,000 and the invoice total is still ₹59,000. The customer pays the same total; only the tax head changes.

Example 3: 5% item

A Lucknow trader sells packaged food items taxed at 5% worth ₹1,20,000 within Uttar Pradesh. CGST at 2.5% is ₹3,000 and SGST at 2.5% is ₹3,000. Total tax ₹6,000.

Example 4: Chandigarh

A Chandigarh consultant bills a local client ₹80,000 at 18%. Chandigarh is a UT without a legislature, so the invoice shows CGST ₹7,200 and UTGST ₹7,200.

How input tax credit is set off

When you pay GST, the credit of tax you paid on purchases is used against output tax in a strict order. IGST credit must be fully used first, then CGST and SGST credit.

Credit of	First used against	Then against	Never against
IGST	IGST	CGST and SGST/UTGST, in any order or proportion	None
CGST	CGST	IGST	SGST/UTGST
SGST/UTGST	SGST/UTGST	IGST	CGST

Set-off example

A Bhopal firm has output liability of IGST ₹30,000, CGST ₹40,000 and SGST ₹40,000. Its credit ledger shows IGST ₹60,000, CGST ₹10,000 and SGST ₹5,000.

1. IGST credit of ₹60,000: ₹30,000 used against IGST liability. The remaining ₹30,000 can be split, say ₹20,000 against CGST and ₹10,000 against SGST.
2. CGST liability left: ₹40,000 minus ₹20,000 = ₹20,000. CGST credit ₹10,000 is used, leaving ₹10,000 to be paid in cash.
3. SGST liability left: ₹40,000 minus ₹10,000 = ₹30,000. SGST credit ₹5,000 is used, leaving ₹25,000 to be paid in cash.

Total cash outflow: ₹10,000 + ₹25,000 = ₹35,000. Check: total liability ₹1,10,000 less total credit ₹75,000 equals ₹35,000. A different split of the IGST surplus (₹15,000 to CGST and ₹15,000 to SGST) would leave CGST cash of ₹15,000 and SGST cash of ₹20,000, also ₹35,000 in total, but with a different division between the centre and the state. The portal suggests a split and lets you change it within the rules. For more on the monthly return where this happens, see how to file GSTR-3B.

What happens to IGST after you pay it

IGST collected by the centre is apportioned to the destination state through a settlement mechanism. If the buyer uses IGST credit to pay SGST, the centre transfers that amount to the state. This is why IGST makes inter-state trade credit-neutral: the buyer in another state can use IGST against its own liabilities.

Paying the wrong tax head

If you charge CGST and SGST on what was actually an inter-state supply (or the reverse), the tax paid is not adjusted automatically. You must pay the correct tax and claim a refund of the wrong tax under section 77 of the CGST Act or section 19 of the IGST Act. Interest is not charged on the correct tax in this case, but the buyer's ITC is disrupted until you issue corrected documents. Prevention is far cheaper than correction.

Common mistakes

• Applying SGST in union territories that should get UTGST, or the reverse.
• Splitting IGST into CGST and SGST because the customer is "nearby" across a state border.
• Using old 12% or 28% rates after the September 2025 change.
• Assuming that a supply to an SEZ in the same state is intra-state. It is inter-state and zero-rated.
• Paying cash while IGST credit is still unused, which can result in idle credit and wrong set-off.

How each tax head appears in your books

Accountants keep separate ledgers for each tax head so that returns and reconciliations are easy. A typical chart of accounts for a business registered in one state includes:

Ledger	Type	Used for
Output CGST	Liability	CGST charged on intra-state sales
Output SGST	Liability	SGST charged on intra-state sales
Output IGST	Liability	IGST charged on inter-state sales and exports with tax
Input CGST, Input SGST, Input IGST	Asset	Credit on purchases and expenses
RCM payable (CGST, SGST, IGST)	Liability	Tax payable under reverse charge
Electronic cash ledger	Asset	Cash deposited with the government through PMT-06

Journal entries for Example 1

For the Jaipur dealer's intra-state sale of ₹50,000 at 18%, the entry is: debit customer ₹59,000; credit sales ₹50,000; credit Output CGST ₹4,500; credit Output SGST ₹4,500. If the dealer bought the same goods for ₹40,000 within Rajasthan, the purchase entry would be: debit purchases ₹40,000; debit Input CGST ₹3,600; debit Input SGST ₹3,600; credit supplier ₹47,200. At month end, CGST payable is ₹4,500 less ₹3,600, that is ₹900, and SGST payable is also ₹900.

Journal entries for Example 2

For the inter-state sale of ₹50,000, the entry is: debit customer ₹59,000; credit sales ₹50,000; credit Output IGST ₹9,000. With the same intra-state purchase, the dealer has Input CGST of ₹3,600 and Input SGST of ₹3,600 but an IGST liability of ₹9,000. CGST credit of ₹3,600 and SGST credit of ₹3,600 can both be used against IGST, leaving ₹1,800 to pay in cash. The total tax paid on value addition of ₹10,000 is therefore ₹1,800, or 18%, which is the same outcome as the intra-state case. This is the core design of GST: tax is collected only on value added at each stage, whichever tax head applies.

Multiple registrations and distinct persons

A business with offices in several states takes a separate GSTIN in each state where it makes taxable supplies. Each registration is a distinct person under GST. Supplies between them, such as stock transfers or shared services, are taxable, usually at IGST, and must be invoiced. This is why credit cannot simply be moved from a Maharashtra registration to a Karnataka registration. Services bought centrally for all branches can be distributed through an Input Service Distributor registration, which has been mandatory for such common input services since April 2025.

How Fininvo helps

Fininvo ERP calculates CGST, SGST, IGST and cess on each transaction based on the supply type and location, using a central tax rate master with HSN and SAC mapping. That means a rate change is updated in one place instead of in every invoice template. Read more on tax compliance, accounting and pricing.

General information, not tax advice. Confirm rates in the latest CBIC rate notifications and consult your CA.

Frequently Asked Questions

Is IGST more expensive than CGST plus SGST?

No. IGST equals the sum of CGST and SGST for the same item. An 18% item attracts 18% IGST inter-state or 9% CGST plus 9% SGST intra-state.

Can I use SGST credit of one state in another state?

No. SGST credit is tied to the registration in that state. Each state registration of the same PAN is a separate taxable person for this purpose.

Why does the portal force me to use IGST credit first?

The law requires full use of IGST credit before CGST and SGST credit. This keeps the inter-state settlement between centre and states clean and prevents IGST credit from piling up.

Which GST applies on imports?

Imports of goods attract IGST collected by customs along with customs duty. Imports of services attract IGST payable by the recipient under reverse charge.

Do composition dealers charge CGST and SGST?

No. Composition dealers cannot collect tax from customers. They pay tax at the composition rate from their own funds, split equally between CGST and SGST.